Dimon. Before we get to all of this, why dont we get to some of the headlines. Lets get to the headlines, ibm reported quarterly revenues below wall street consensus for the fourth straight quarter. Steep drop in demand for servers storage products. Earnings topping analyst expectations. Also on the list texas instruments, they posted better than expected Fourth Quarter earnings and revenues, company also announcing that its cutting about 3 of its Global Workforce or about 1,100 jobs. The Corporate Restructuring program aimed to save 130 million by the end of the year. Keep an eye on shares of advanced microdevices coming under pressure and extended trading after the chipmaker forecast a steeper than expected drop in Current Quarter revenue. Analysts now saying the news suggesting that sales of gaming consoles were not growing fast enough to offset slowing pc sales. Shares have risen 15 in the last month. Thanks. Something in the water in california. Mohammed el erian is stepping down at pimcos ceo and cocio. Back and forth last night. I got a generic one that said dear friends, thank you for everything. Like its thanking all of us. I wanted personal. In fact he didnt even clear the whole idea. With you first. With me first. Do we know i wept back and forth, trying to understand a little bit about, i couldnt tell was this a good thing, bad thing . Pushed out . Unclear. He didnt fully explain it. I did see a memo that went out internally inside of pimco that was very lauditory bill saying nice things. Bill saying lauditory things about mohammed. And mohammed about bill. It was like a lovefest. The more lauditory, the more forced out . Hes continuing some role with the parent company. I couldnt make sense of what was happening. I havent gotten a sense either but there are people speculating this would clear him to run for elections in egypt. Rex ryan resigned, right . Mohammed that role is not available. Probably not. And then neel kashkari. Hes not functioning, already gone from pimco. Maybe they could run against each other in california. Mohammed versus neel. Neel kashkari plans to run for california governor as republican, hell challenge governor jerry brown for the states top job. Jerry brown is not going to run for president , we saw that. Is he governor moonbeam anymore or has he graduated . I think hes grown out of that, i think. Im not in california. The former governor of california is wearing a wig and playing pingpong stuff on the commercials. Have you seen it . You have not seen no. I saw that. I thought you would have seen it. It was on the playoff games for football. I thought you would have seen it. How did you see it . I watch enough tv. You saw a series of ads with schwarzenegger with a wig and head band playing pingpong and warming up. Something for the super bowl. Ing acy maybe coming back . Markets up or down . If you look at the futures they are indicated a little bit lower. The dow futures are down by about 27 points, down by about 42 points below fair value. You look at the s p this morning theyre down by 2. 5 points and the nasdaq is off by close to five points below fair value. You look at the Energy Markets at least right now wti picked up 43 cents, 95. 40, stuck in the range tweebetween 90 and 100, t tenyear note the yield at this point is 2. 852 , well below 3 . Youve been right on that call. I know it gets old. Lets look at whats happening in the 4x markets the dollar is up against the yen and euro, euro at 1. 3543, dollar yen at 104. 32 and gold prices for now are indicated or looking like theyre down 2. Why is this guy doing Global Markets . I was going to say were here. If anybodys global its us. Were across the pond. Bob westgate is standing by Russ Westgate is standing by in london. You guys look good there. Joe, how is it . Are you all right . Im fine. Ive been avoiding, i havent talked politics at this point with too many people but were good. In fact its so warm here are you going to take the coat on . You know what i have on under this . I have a sorkin zipper sweater. Can you believe that . Are we getting new animation . I joined the sorkins letter of the month. Excellent. Im not withearing my sweater. There it is. Sorkins sweater of the month. Were. More cosmo european than you are today, ross. You are, looking good. Temperature goes up dramatic when the sun hits the set. cooler for european equities. Were weighted to the downside and at the session low at the moment, decliners outpacing advancers 3 2. It was the other way around about an hour into the trade. This is the chart. The ftse 100 was up a mid two points. It was firmer this morning, now down 11 points. Come back to the uk in a second. Xetra dax off 0. 05. The uk unemployment a sharp fall in the Unemployment Rate from 7. 4 this morning to 7. 1 . Whats key is that the bank of england a bit like the fed has a threshold for where they said theyd reconsider monetary policy, 7 . Originally the bank when they launched their forecast was saying we probably wont hit 7 until the end of 2015 and a couple months ago saying maybe it would have been january 2015. We might hit that rate next month. Sterling sharp against the dollar, near the highest levels we hit in august 2011 and a big sell yourself for gilt yields as well, now the yield on that just around 2. 89 , tenyear treasury yields 2. 85. Abb, the Swiss Engineering Firm warning its Fourth Quarter results will be hit by 260 million charge, missed profit targets, asml, the chip equipmentmaker up 6. 8 , beat profit forecasts and Strong Demand for tablet and smartphones. Becky out to you and i hope the rapidly warming at sphere of the swiss mountains. It is so rapidly warming that while you were talking, ross, joe took his coat off. Wardrobe change, ripped off his coat. She didnt change as quickly. They run back and did you see that, people working on me. You have a good staff, got you all set up. Pretty good. Right there. You look very pretty. Handsome even. All right. In the meantime weve been wondering how Obamacare Exchange also affect the affordability of health care in the future. We have the goto guy with us right now on set to answer this question and much more. Joining us is mark bertolini, chairman, president and ceo of insurance jigiant aetna. Great to be here, becky. The obamacare question you recently raised revenue outlook for 2014 by 1 billion. Right. Is that because of whats happening with enrollments . No, it had to do with medicare. So we had a lot more medicare enrollment than we anticipated and so that revenue number approximately pretty much the medicare growth that we had that we didnt anticipate for 2014. What does that mean for earnings . Will you raise your earnings . I thought you kept it within guidelines. We did. Its too early. We dont have data where they enrolled, how old are they, what kind of comorbidities do they have. Until we get data on the individual its premature. Medicare revenue is going up. What does it say about the country at large . Medicare advantage. Its Medicare Advantage right so its our product within that set. I think theres movement in the industry, i think the overall industry is up about 1. 5 but if you look at cohorts of individuals retiring people are retiring now, more than likely to pick a Medicare Advantage plan because theyre used to working wi ing witing with mana versus people over 70 who old on to the red, white and blue card for dear life. Democrats tried to crush Medicare Advantage plans why, and now the rates are going up theyre blaming it on the insurance companies. Can you tell me exactly what happen happenedyou the sugar coating it . Medicare advantage is too big. What was the point of trying to crush it in the first place, impediment to single payer . Im not sure. There are different points of view about that across the demographic. Was it too good for people . It allowed the private sector too much weight in deciding health care . Four years ago medicare was paying 114 of medicare feeforservice to managed care plans to manage the population. What we were doing in essence is competing for older individuals because were getting a risk adjuster and the older individuals were caring for them better so they were jep ragener more march jgin as a result. They were wondering why they were paying so much. They tried to killed the goose that laid the golden egg. Now were down to 106 and headed toward 100. Once we get to that point and the Program Continues to grow the fodder for killing the program disappears. Well thats interesting. See the surroundings have not changed my viewpoint on socialism, andrew. I see that. Its in the air but i think it was a disgrace the way that worked out, no . We managed our way through it. Good. In spite of the government youre doing okay. What is your latest read on the website, if if you will that is obamacare. I think too much is being made of the website. We have failures from time to time, it was a particularly big problem but is the problem working behind the website. Right now we see only 11 of the population is people formerly uninsured now insured so we didnt really eat into the uninsured population. So is the program working . We saw people that were very adept at shopping and so economics always works and so if i can find a cheaper policy versus the one i already have in the individual market ill go buy that. We didnt see a whole lot of shift. Employers shied away from moving their employees into public exchanges because they didnt like the way it rolled out. And so we saw employers pull back from thinking about the public exchanges for employees. We saw a shift of the individual insured market on to the public exchanges where they could get a better deal on the subsidy. That sound like its not effective though if youre not getting people who werent insured before insured, do you think that changes with time . As our Companies Made the shift from b to b, business to business, consumer to consumer, Consumers Want more choice and flexibility. Employers offer health plans. You have your health plans from cnbc and you get how many choices . Two or three. Two or three so somebodys either chronically insured, overinsured or underinsured, never fully insured. If im an individual and i know the health care usage im going to have the kind of doctors i if to, i want to find the tolecy that,for me. The public exchanges have four options so they dont have the chance to really shop, all they do is have an opportunity to shop for better subsidy. Fundamentally broken or a way to fix it . Its in place now and we have to move forward. We need more flexibility in the program so we should have more options versus the four we have today, we need more rating flexibility in the program than we have today. Youve seen the problem with you know what is it, 26 , a number thats not sustainable, the subsidies are more than we thought. An economist that says it is currently in danger of collapsing under its own weight. This is much more expensive . The government will bail out any insurance companies. Who likes buying Health Care Insurance . Do you . No. It has to be sold. Its not like im waiting on the edge of my chair for the website to go up so i can go shopping. It needs to work in the in exyear. We need to make it sempler. We need to make it a lot more simpler for people. There needs to be more choice and when you go i have more choice and make it more of a market you get more people in the program. You think theyll be able to do this in. Whether or not theres the pl political will to make the changes to the program without creating a food fight in washington over what the changes are remains to be seen. If its not fixed will there be a government bailout . For us its 3 of our revenue. Whether or not theres a government bailout because we lose money on members is irrelevant to us from the standpont of our earnings. The real issue is can we make this program grow and will exchanges in the Public Sector grow . Theyre growing in the private sector. If you lose money will you stay in the program . Our big question is may 15th we have to submit rates for 2015. Right, will the rates go rapidly higher . Well get beat up because of double digit or pull out of the program . Those questions cant be answered inle we see the population we have today and we dont have a good finger on that. I assume Companies Like yours will not threaten but suggest to washington youre going to get out of it. How will that change the dynamic . Thats how this is going to happen. To move them. I think if we come forward with ways to make the Program Better and can see a line of sight that the practicement will be different in the foo you the i think we invest for the future. If its just more hammer and tong between the administration and congress and the health plans, then i think it gets difficult. So within ten years, how much of the average Health Dollars is covered by corporations and how much is around the individual or the government . I think the way the world is going to emerge is in 2020, 75 Million People will be buying Health Care Insurance as a consumer from exchanges. Okay. Some portion will be public exchanges, 20, 25 million, the rest will be private exchanges and i think the real question for us will be were going to have individuals buying health care with a subsidy from their government or a subsidy frommier employer and it will be a very different marketplace than the one were in today. The idea of double digit increases come may 15th, is that a real possibility, a 50 50 shot . What are the odds we see those increases in. I cant tell you. How many people are going to be basically paying for incidental health care because they dont get anywhere near their 2,000, 3,000 deductible . People are not going to be covered. Most people will be paying outofpocket up to 3,000 and when is the last time i had an emergency appendectomy, other than that youre paying for everything. Ive never gotten to 3,000. A couple years ago having a baby. That was your own fault. Mark, thank you so much for joining us. Really great talking to you. Well see you again. Its a parade. Its a veritable parade in the mountains of davos, just Getting Started. This vest work . Its working for you. Look at the zippers. I got zippers everywhere. Arnie sorenson, got to talk to him. Why dont they have a decent, not that my hotel is bad but it would be nice to have, i mean did they think of room service in europe . That is an unbelievable concept, isnt it, to have a kitchen in hotel or bellmen . Sorenson how is marriott reshaping the lodging industry. It may be colder back in engelwood cliffs, much colder because were warm. Were hot. Its nice, well you are hot because its hot on the set. It is. Lot of light. Im getting hots. The forecast from the weather channels Reynolds Wolf who probably doesnt look any better than us. Its good times we all look great. Davos 15 degrees. You might see some snowfall by friday but here back in the u. S. For the east coast its the snow today. This system winter storm janus strong air behind it going to set up cold air. Much of the snow will be moving out to sea. Boston may still see snow showers into the early afternoon hours, some spots like say plymouth, toward say well right near parts of the coast itself could see another three to five inches of snow and then the cold air sets up camp through the weekend. More on that coming up, folks youre watching squawk box. Enjoy. [ male announcer ] this is the story 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 marriott is a global brand of hotels all over the world, joining us is arnie sorenson, president and ceo of mare yat international, seems to think i dont get out much. I have stayed at the ven dome renaissance one of your properties in are pais, great boutique hotel, rooms werent large but maybe 10 or 11 times the size i have here, not that theres anything wrong with that, when i ski you know where i ski. I do. The greatest, its A Ritz Carlton and theres no ritz carlton here, dude. Theyre fired up because arnie said they let you out. Thats right. Number two this is a scenic, beautiful little town but kind of looks like veil not as new and kept up. Its beautiful. It is. The swiss alps has got so much character, thevillages are all great. Not enough to bring you to build a facility. Wed love to be at davos in some time. Ive heard from folks half of the lodging economics every year come this week. Literal i had in terms of revenue. Davos week. So theres really only two sort of highend hotels, theres the belvedere and the evercon. Its pretty new. I dont think we had a shot at that one but maybe the owners list it and give me a call. Everything in terms of occupancy is back for most hoe he tell changes. Rev par is below 07. You timely made it. Just about. Nominal. Youre not that back yet. Were not back to the same pound for pound profitability. I think thats another couple years away. Its not in the u. S. , all your International Expansion . The company as a whole is back to peak profitability now in 2013. I think you told me before. I never said that before but thats really Global Growth so thats the new unit since 2007 adding to the samestore sales. Well see that continue. We see the developing world continuing to provide better growth than the rest of the world and im wearing a South African scarf we announced finally selling the definnive agreements on our acquisition of protea, the largest South African Company this morning so were excited about that. In the u. S. We have to see another couple years of gdp growth and with it rev par growth bringing us back to pound for pound profitability in the u. S. One of the big things is global unemployment. Its almost like technology, this is a theme we have a lot, andrew, technology is outpacing the ability to provide good jobs for people unless youre really, really skilled. You continued to build out high end all through the crisis. I think that was a good move but will there come a time where you wonder whether the inequality from this problem becomes a social issue where people cannot go and lavishly spend money on themselves . I this i in a small way whats happening with luxury and upper middle class travel around the globe is helpful in terms of employment growth so i was on a panel this morning on wealth and employment and Global Trends and you see in places like rwanda well open a marriott. All the folks who are getting job bees its like winning the lottery, i got a regular job with predictable income, i can support my family, im so enthusiastic about the opportunity to go to work. In the developed world thats a little less the case but its still very much the case what were seeing is increasingly people travel around the globe, as they do, they have more jobs in the places and the jobs are by and large good jobs and helpful. Are those good jobs, andrew . I was going to ask you about the wages for the jobs and the margin for you. I assume in a developing orrwan the margin for you has to be incredible because the wage is so low. Is that wrong . It varies market to market. Youre generally right although the staffing models change a lot with the cost of labor. So if you look in the developing world well often have two employees per room. Wow. Stwl a and in the you state the average might be 0. 6 per game and the average in western europe might be the same. You ever take on the wage issue in the u. S. . Its an important discussion to be had. It can be overstated, if it is the single approach to solving income imequality well be disappointed. Why is it important to be discussed . A lot of people are working hard and trying to put their lives together and finding it difficult to make ends meet on minimum wage and so you can understand i think why that voice says i need to be paid more. Is the marketplace seeing for 97. 5 of the workplace it generates higher wages people can live on, 2. 5 , 1. 25 or 1. 5 are 16 to 22yearold, a second or third job. Youre down to 1. 5 of the too emthat might actually be family providers at that point and that almost seems like just thats what happens. And its not going to help if you help that 1. 5 . Youre not going to tackle the big issues. You do it symbolically. Just the idea that this is becoming an issue that is on the consciousness that is now politicians are using, how do you solve that problem . It obscures the problem of getting more jobs for everyone at the higher paying market price jobs. You know, were not focusing on that because were sitting here focusing on listening to the president talk about it. Theres no doubt that Economic Growth is a much more powerful driver of Jobs Creation than minimum wage and clearly we ought to be focused on that. I think its a good discussion to have. Some people have to give it lip service to look look theyre etch thet empathetic instead of tackling the issues what we need to get to 3. 5 to 4 growth. Were not running minimum wage programs. There are restaurant chains having a hard time dealing with 15 an hour. Getting it up to 10. Certain parts of states have gone to 15. In general wage and price controls are not the with a i to run an economy. I have a practical question for you before you go. I have one more point if i could. Go ahead. One of the things were seeing is i think out of 13 states that have moved independently on minimum wages. Right. Weve got in seattle, the airport area overnight an increase to 15. That was unhelpful there. I think there is enough Political Force around minimum wage that one of the things we have to watch for, are we better off with something which is more graduated, more thoughtful than each individual municipality moving more aggressively and potentially hurting those economies. At the end of their rope all right were doubling it. When i say its an important issue to discuss im not advocating a solution. Youre saying its better to go slowly and give them a little bit. There are things happening here and we ought to be engaged in the shall uinstead of sticking our head in the sand. Are you supposed to tip the haim cham we aremaid or cleaner of the room . Service is included with room service. We talk about wifi and otherer us. Practical question do you leave a tip . I do. Do you not . I do leave mine but ive had a lot of debates about it. What do you think the percentage should be . People say a couple bucks. I always do more than that. Usually ten. Per day. You leave it per day or at the end . At the end. Sometimes i think its a different person. Thats right, hopefully it comes out in a wash at the end of the day. Is that built into cha the chambermaid i dont know if its the right phrase. Unless youre dominique strausskahn. Its not viewed as a tipped position. If its not free wifi its how much should i tip. So cheap. There are people who want to know this stuff, we have the ceo of the company right here. You write jobs and books and movies. Is it going to kill you to give a couple dollars to the maid . Maria shriver came out with a report on women and economically and one of the points she makes, men tend to dominate the positions in hotels that are tipped. Thinking of bellmen and the women tend to dominate the positions like housekeeping which are almost invisible. And these women are absolute heroes. They are often diminutive immigrants who work diligently day of aday and year after year after year and to be able to give them something for to recognize them for their work i think is great. Im sure you figure we got to do that, too . We need to do imgraition reform, hopefully done this year. Thanks. Great to see you. Thanks, arne. You cant get one up by the end of the week like a hotel, with room service . The next half hour well talk to one of marriotts competitors, frits vap paasschen, no facility in the hundredmile radius. Still to come, with he go inside the highest altitude brewer why i in europe and by we i mean joe for a stein or two of the famous beer, a must see tourist spot when visiting davos. Come up at the top of the hour, ray dalio will give us his wisdom about the economy in davos. More squawk after this. There are trading opportunities1 tdd 18886486021 just waiting to be found. 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Tdd 18886486021 so you can take charge tdd 18886486021 of your trading. Hey, the new guy is loaded with protein really . 25 grams of protein. What do we have . All four of us, together . 24. Hes low fat too, and has five grams of sugars. Ill believe it when i [ both ] oooooh. Whats shakin . Oops. [ female announcer ] as you get older, protein is an important part of staying active and strong. Ensure high protein. 50 of your daily value of protein. Low fat and five grams of sugars. See . Hes a good egg. [ major nutrition ] ensure high protein. Ensure. Nutrition in charge just now seeing some of the vest, i wasnt paying attention. Welcome pack to squawk box here on cnbc. Im joe kernen along with Andrew Ross Sorkin and becky quick. Coming to you from davos, switzerland. It was cold but we have the hand warmers. Lovely. Mine havent warmed up yet. Is that the ohm place you have these andrew, in your pocket . Are you talking about the other ones in my shoes . In your shoes. Or elsewhere . In your shoes. We have so many great guests, ray dalio of bridgewater, tom from the u. S. Imchaber of commerce, james gorman and matt damon to name a few. The headlines were looking at, squawk market master, also known as someone from pimco, Mohamed El Erian is stepping down as the ceo and cocio. The company is not giving a reason for his farthdeparture. Hell stay on to consult for the parent company. People thought hed run that someday, thought he was the successor to bill gross. He will stay with allianz. Egypt has not figured out a leadership structure. I dont know whether this has anything to do with that but. It would clear the way for him to run for election in egypt. United technologist is among those set to release Quarterly Earnings today. We should get the numbers at the top of the hour. Analysts anticipating utx will report a profit of 1. 53 a share, revenue 17. 1, 1 billion. Only two on that beautiful 757 boeing, but two very good pratt whitney. Government officials are said to because youre over water. You ever think about that going over, you cant land. Most of the time youre going up the seaboard and then going up and you can go into greenland, over ireland and then get into europe. Youre not that over the water for too long. Tough to talk about general safety concerns, were set to propose tougher regulations for child car seats. The ntsb will announce proposals later today, new testing simulates side crash. Officials think the tougher standards would present about five deaths and dozens of injuries per year, prevent. Former treasury secretary tim geithner aparentally wants one of the chairman of standard a Standard Poors company theyd be held accountable to strip the u. S. Of its coveted aaa rating this comes from terry mcgraw in a Statement Part of the companys defense though against the governments 5 billion Fraud Lawsuit over its rating practices prior to the 2008 financial crisis. Geithner spokesman said the allegations that geithner threatened or even took any action to prompt retaliatory Government Action to s p is false. It doesnt ring completely true. I think fighter in was furious. They made a 2 trillion mistake in the numbers when they did that and the idea that geithner is somehow in cahoots then to bring a case like this is kind of impossible. Maybe im wrong but i dont think so. Why isnt he here . Once youre a former you have to come . Jack liu is here. I dont know that he isnt in town. Just by chance happened to are in davos . There are a lot of people in davos, he works for warburg futures. Yes the dealmaker. I did not know. Are you serious . I had no idea. What have you been doing . Shes a reporter, good stuff. When you come to davos one Tourist Destination is the highest altitude brewery in switzerland. Used to be in all of europe but i found out there is one higher in italy. I did trek up the mountain. No one seems to think about driving the vans and look to the right and a rick ety guardrail. I was up a mountain to visit it. Garetze, swiss german for hello. We are about ten kilometers south of davos, this Little Village of monstein, has a microbrewery. I thought id check it out. Carlo great to see you, thanks to have having us. Monstein how many different bores . We make five different beers and some seasonal. 110yearold house. Why not do a brewery . Why . For men who live here in monstein they wanted to do something about the village and bring the people up to see this beautiful village and very soft water here perfect for brewing. 10. 6 celsius in. Thats celsius. So its cold. Its cold fermentation. Stein box, capricorn. Capricorn, me. You are . I want to try this, not because its got 6. 5 . But because no, because its got 6. 5 . Does the whole area change in the Economic Forum . Yes, here in monstein its easy. Here it doesnt change much but down its completely different. President clinton was, you heard was at a place in davos and he enjoyed one of these. Yes. He liked it, right . Yes, he liked it. He didnt tell me personally but i heard about it. Cheers, that nk you. Thank you. There were 15 minutes of timeless tv, i think you see more of it on the web, i talked to the guy, it started 13 years ago, they have 350 this is for you. 350,000 at 6. 5 , we never get to drink on squawk that you know of. What are you talking about . This is the first time im still on east coast time feels like 6 30. Im not drinking peer for breakfast. In greek you cant even open, so many regulations, so much entrenched labor issues you cannot open. I heard that, too. Cheers. All of these shareholders, guys own one share. Cheers. They get two liters of the beer per year, come they have their own glasses on the wall, 180 people live in the village of monstein. And you found a compatriot with a green hat. I did. I have a green hat, his name is flo. Are you going to debut that hat live on the air . No, florian is an old davos name and his generation has been here 700 years. You are embracing it. Lets drempg think this. I dont want to drink it. Its new. Still to come this morning we have more headliners and newsmakers from davos, Starwood Hotels and resorts president and ceo Frits Van Paasschen gives us ideas of new expansion plans right after this. Mine was earned in korea in 1953. 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 back to squawk box. In just a moment well head back to davos where its apparently already happy hour. All morning its been an implied flat open right now. You can see the s p 500 would be down about a point, the dow would be down 27 points and the nasdaq which was in the green premarket now would have an imemployed open of down just about one point. The corporate earnings that have crossed the tape, electronic equipmentmaker t. E. Connectivity a former unit of tyco reported a quartert profit of 82 cents a share excluding certain items, five cents above estimates. Revenue above wall street consensus and those shares of tel rising slightly. Textron earned 60 cents per share, one cent above estimate. Textron did give a cautious outlook for the current year. Andrew we send it back to you, you had the ceo of aetna and marriott and a pretty big couple hours coming up. Thank you, kayla, yes we do. Well check with the coo of starwood, Frits Van Paasschen, talking about the world of hotels and having drank a little bit of beer were going to start with some pizza, a little room service before we begin. Were back in just a moment. 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. I nethats my geico Digital Insurance id card gots all my pertinents on it and such. Works for me. Turn to the camera. Ah, actually i think my eyes might ha. Next Digital Insurance id cards. Just a tap away on the geico app. Could save you fifteen percent or more on car insurance. Everybody knows that. Well, did you know that when a tree falls in the forest and no ones around, it does make a sound . Ohhh. Ugh. Geico. Little help here. 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 hotels and having drank a little welcome back to squawk box. Starwood hotels and resorts is a global brand with hotels all over the world and still growing with newly opened resorts here in switzerland. Joining us is Frits Van Paasschen, president and ceo of starwood resorts. We didnt think you had a hotel here there is one. You do. Marty steward speculated that 50 of revenue for hotels in this state happen this week. I dont think so. Its 2 of the year, in order for that to be true the hotels would have to be 25 times as expensive as they are the rest of the year. Rates are up but not that much. But youre packed. Every room is out. Arne. What did i say . Marty. We have a brand new sheraton in zurich as well i got to visit yesterday. Its a new part of its a new part of town in the sense its the industrial part thats being turned into an office park and residential. You dont see that from the airport, right . I dont remember seeing that. You dont, its about a five minutes drive. You guys have been on a tear, did you open 74 new hotels in 2013 . You guys are really knocking them off quite a cliff. Think whats happening, too, we signed 152 agreements to open hotels this year so the 74 still reflects the fact that three or four years ago when we signed most of the deals that were then opened last year, the world was slower than it is today. Well continue to see this acceleration because as weve been talking about it, there is this massive growth in infrastructure and urbanization all across the emerging markets around the world. I have a different question, my mike fell off, i dont know what happened. I talked to a research analyst, maybe two or three weeks ago said the Hotel Business will go the way of the Airline Business, which is to say over the past two or three years all of the addon prices, theres the base price for the seat and then you pay for your luggage and all the other things. Some hotels are scaling back on things, no more room service for example one of the hiltons announced they were doing that. Do you so he that as a real trend . No, i think theres a fundamental difference between the Airline Business and the Hotel Business, thats this. If there is a route thats profitable for an airline, other airlines will come in and buy that same route. You cant just keep moving hotels around the world wherever theres capacity. Fundamentally i think the Hotel Business remains profitable. The other thing, as you think about cities growing if you build a city in the center of a is it i in a good location that space is scarce, so theres always the opportunity to earn longer term returns as you go up market, i think well be offering more and more services and actually lower costs because of the availability of technology and what it does for people. We talked to arne sorenson, i dont think i say marty, did i . Grab the tape. Poll ji i apologize. Its okay with me. Perhaps were talking about minimum wage. What is your take on the issue . The real issue isnt so much minimum wage. If youre earning minimum wage getting more wage is clearly important. The real issue is the fact there is a supply of unskilled labor around the world that continues to grow, technology is taking away jobs and lets face it, even though weve been in this recovery for four, four and a half years its not been Strong Enough to generate job growth so we can talk about minimum wage but the real issue here is how we get jobs created in markets where theres demand so the wages go up all around. I wouldnt say that the administration is trying to oobc aught the shortcomings of job creation and failure. If you add people that arent working in the participate rate, 7 sounds good but it doesnt feel like 7, thats all ill say. To come out every two weeks and line up the good looking group of people behind him and talk about the minimum wage and income and and equality it does a disservice to what were trying to accomplish and its almost a class warfare again and i dont think its helpful as you just said we need growth. We dont need excuses for why were not getting it. We want to be a catalyst for growth. The interesting thing about the Hotel Business in the u. S. Right now were at record occupancies. I dont mean were at occupancies like they were before the crisis. Were at occupancies in our hotels weve never seen before largely because hotels have not been built at the same rite for the last decade as they were before. The reason for that largely there hasnt been sufficient construction lending and financing to build hotels. So we could create jobs especially with Interest Rates as low as they are now, if we could just get financing to build more hotels in the u. S. The banks say they want to make loans but they cant find people they can give those loans to. The reality is most barngz are still trying to delever and theyre generally not looking at trying to increase their exposure to real estate across the board. I wonder how it happened there. Weve been talking about it but it converged, and in i think it helped the president can set the tone for theer us that are front and center. Youve been talking about it. Right. Suddenly were not talking about the 2 growth. Were talking about this instead. By the way the issue that people talk about here. Global unemployment as well. Frits, thank you for being here. Pleasure. Glad to see you. We still have another two big hours to come with more rock stars of davos including ray dalio of bridgewater, william bradder of Hermitage Capital and tom donahue of the u. S. Chamber of commerce, james gorman and matt damon. Squawk in davos, well be right back. I always say be the man with the plan but with less energy, moodiness, and a low sex drive, i had to do something. I saw my doctor. A blood test showed it was low testosterone, not age. We talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. 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. Welcome back to squawk box. We are live in the swiss alps. We have a huge lineup of guests joining us this morning from the world Economic Forum. First, Bridgewater Associates ray dalio joins us. Plus, we talk about the future of Small Business with tom donohue. He is the ceo of the u. S. Chamber of commerce as the second hour of squawk box begins right now. Good morning and welcome to squawk box on cnbc. Reporting from switzerland. The futures have been down for most of the morning, i dont know, off about 42 as far as the dow goes. Theyve prepared the losses about 24 points. We got the helped earnings from united technology. Uqx, revenue was 16. 8 million compared to estimates of 17. 1. What is that, down 101 . No, its up 101. It is . Up. Good. Assessed revenues were postponed in 2013 due to the helicopter program, however, that delay also resulted in a benefit to earnings since the program is currently operating at a loss, so they put off recognizing some of that, but its not good anyways. Ibm under pressure in premarket trading, reported a profit, however, revenue was shy of expectations for the fourth straight quarter, thanks in part for flagging demand. I think they probably mean china. Down by 4 , too. I think it is china. Ron burgundy would say chia. We have a big guest right now, founder, president , chief Investment Officer of Bridgewater Associates. Bridgewater currently has 150 million in assets. Good morning. Good morning. You have been on our show several times now, and we have started the dialogue around what you call the economic machine, your theory of how you see the marketplace, the world, the economy. Praised by people like volcker, bill gates, people like that. Part of my understanding of the theory is there are shortterm cycle and longterm cycles. Longterm cycle i would argue is bad given the amount of debt were builds, but when you think about the shortterm cycles, u. S. , europe, asia, how do you see the economic machine applied to those markets . First thing, im going to get to answer your question in a minute in a second, but i do want to convey, i think we go so quickly to think whats the economy going to do next year without agreeing on how the machine works, and the economy works like a machine, and the only reason im doing this interview and that video, how the economic machine works, is to draw attention to, how does it work . Because if we can agree on how it works, so many other things come from that. Well talk about what i think is happening now, but within the context of that. The economic machine is nothing more than a transaction. A very simple thing. If i buy something from you, i can buy it for money or credit. And when i buy it for credit over a period of time, a credit is a promise to deliver money, so we begin a cycle. In that cycle, there are two cycles around income. At the end of the day, you can only spend what you earn, but thats not true over the short run, because you can borrow money, so around that Income Growth is our debt cycles, and theres a shortterm debt cycle, which we call the business cycle, were used to, expansions, recessions, tightening, and recessionss again. Id like to put where we are in the context of that. Sorry for that background, but at least we can then look at the world that way. Now where the u. S. Is, because it could print money, print money means the purchase of financial assets. Financial assets went up a lot and as a result of them going up a lot, future expected returns went down a lot, so the return of equities has gone down to probably about 4 , which is, by the way, in line with cash being about 1 , bonds being about 3 , return of equities about 4 . That liquidity has happened. We are now in the middle of the shortterm debt cycle. In other words, youre out of the recession and not into yet the tightening. Those middle periods are kind of the boring years. They are the years like 2004 and 06, you forget they even existed. What happened in 2004 and 2006 . You dont remember. 2007 and 2008 you remember. Were in that period in the United States. The markets went up incredibly in 2003, 2004, right . No, 2004, 2005, 2006 were boring years. Markets didnt do anything. Were they flat, joe . They were flat. They started moving in the financial crisis. The returns in each years were single digit returns, boring. We had 15 years almost. In other words, you take 2000. Then pump it with liquidity, then get the bull market in equities, then in that middle period when things are not too tight or too loose, you have that period. Thats where the United States is. I would suggest we can only go down from here. No, no. Youre in that middle. That means the Central Banks got leeway, not too tight. Thats where we are and that also means probably pretty boring for equities. Also look at the return. There was a big gap if you look at yields, what would the expected yield be and that normalized. Now lets go to europe. By the way, all these countries are in very different parts of their cycle, which is the interesting thing. Now europe, southern europe, because it could not print money, could not have that response, and as a result, what happened is they were in a dead bubble, meaning their debts were rising faster than income. If theres one thing to Pay Attention to is dead debt rising faster than income. Is debt rising faster than income. If debt is rising faster than income, it cant do it forever and if its doing it fast for a long time youre going to have a bubble. The United States debt is not rising faster than income now, at equilibrium. Im not talking about government debt. Im talking about total debt with all the sectors of the economy. Europe, unsustainable, so you couldnt fund it. If you look at who buys the bonds, they wouldnt buy the bonds. They had a funding gap. Right now what happens is, in terms of they only have to rollover the debt. They dont have to sell a lot more than they sold, so thats an easier thing to do, but thats a depressed economy, because you cant finance it on debt, so they are in a chronic depression, essentially, depressions, that will remain there and theres a fiscal policy and monetary policy. A very different position in the cycle. Now take china. Totally different position. So china is in the part of the cycle where they need to tighten. The debt is rising very fast relative to income, particularly certain sectors of that debt, so what youre having is a tightening of monetary policy, and you need a tightening of monetary policy. Now all the economies and markets are connected, so what does that mean . It means that were, in brief, we have a world in which we have an enormous amount of liquidity. Liquidity means that people want to buy financial assets, so we build up the prices of financial assets, and they are not too high, not too low, they seem to be appropriate, but we also have a lot of longer term debt. You were referring to that. That longer term debt means it eats money. In other words, it requires money to pay for it. We have a lot of liabilities, unfunded liabilities beyond the debt. That eats money. We also have a world where theres excess capacity. A lot of the capacity was built in china, around the world. That produces a deflationary pressures, so were in a world with a lot of liquidity and also deflashary pressures existing at the same time. Let me ask this, then. You have historically been a bond investor. No. Every liquid market in the world equally. Because youre trying to, i guess, sort of balance the risk in equities versus the risk in debt caused you to overemphasize debt at a time when Interest Rates were so low. Is that strategy still going to work if it was down 3. 5 last year . I think its let me clarify how that works. Okay. Most important thing is to have a balanced portfolio. If i can say one thing to your investors, its try to achieve balance, because you dont know whats going to happen in the future. Particularly your investors on the screen. Its a zerosum game. And a bond is something that, like a treasury bond, will balance equities and you have to own more of it, because its got half the volatility. For example, if you had a lot of Treasury Bonds at the same time you had equities in the financial crisis, it operates in that way. Right. The basis of that strategy, which is not for your investors, Pension Funds, endowments, they have to have funds. Not for all of our investors. We have some. For those with assets more than 5 billion, it might apply. Anyway, the point im trying to convey is not about the all weather. The thing i would like to convey to your investors is at a moment in time where the assets are roughly, particularly balanced, its very important they dont have exposure to any one particular economic environment, and because a bond has half the volatility of a stock, then you need to have more of that. What you want to do is increase the duration. For the past its not a strategy in any way thats related. It worked equally well in the late 70s when bonds went down. You have to be total agnostic to the 20year bull market the bonds were in and ignore from 1 they are probably not going up a lot more. No, no, no, no, no. In terms of principle. No, no, no, no, no. Im saying if you just ask balance, how will you achieve balance . The number one thing i think you know in investing is asset class in a whole have to have greater returns than cash. Because if they are not higher than that, we have depressions. Whenever assets are not higher. The system is, the Federal Reserve puts cash in deposits and people with better ideas come along and use it. Then you have to have a balanced portfolio relative to that. The problem is the differences in the volatility of Asset Classes. So if you hold a 50 50 stock bond portfolio, youre going to be 90 correlated with equities because of the greater volatility, so the question is how to achieve balance. Im going to ask one last question, which is this. In an environment where everybody is seeking yield, especially Pension Funds and others, in a year like the one we just had, if youre not living almost all in equities, you looked around and said, i missed the boat. So the question is, what are you supposed to do . So, i think that the most important thing is that you look at perspective returns, not what the market did last. The biggest mistake of investing is people think a good investment is that which did well recently, not that its a more expensive investment, so you have to understand how to look at future returns. The Way Investments work is theres a present value effect, that what happens is its a lump sum payment for a cash flow, and what happens is as a present value goes up, the future return goes down. So for equities, they have to think that way. Think about what the yield is. If they pay more attention to equity yield rather than last return and look at the yields of assets, that would be perhaps the best way to look at it, so look at all the yields of assets and when we look at that, cash, 1 , bonds, 3 . You know youre going to get 3 in bonds. Thats locked in. Equities, about 4 . Thats the picture we now have to deal with. Now what do you do with that . You have to have balance. Thats the perspective id rather give. I want everybody, if they can, to watch this halfhour video, how the economic machine works. Im here at davos with policy makers and were discussing the Central Banks and so on, and its all around that. Its 30 minutes, and if people can understand that, i think it would help them a lot. Ray dalio, thank you. That video is on youtube. Much more ahead from davos. William will be here to give us perspective on russia before the winter games in sochi. Plus, a yearlong celebration of cnbcs anniversary. Were starting with 200. The 200 most influential names in business. Well take a peek at 7 30 a. M. Eastern time. Well get it down to 25 at some point. Youre going to help us, everybody. 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. We are just Getting Started here at davos. A lot to come, including a conversation about russia ahead of sochi. William is ready to sound off on the russian government and its leader, mr. Putin. Mr. Squawk from davos just after this. Aflac the answer when cnbc squawk box continues. Yeah, hes clean, boss. Now listen to me, duck. I have an associate that met with, uh, an unfortunate accident. While hes been incapacitated, somebodys been paying him cash. Now, is this your doing . Aflac . Now, if i met with some such accident, would aflac pay me . Nice. This is your stop. [ male announcer ] find out what aflac can do for you and your family. Aflac . [ male announcer ]. At aflac. Com. 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 [ 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. Advertisers in which country pay popular twitter users to tweet promotional comments . The answer, indonesia. Aflac. The sochi olympics are just 16 days away. Security is a top concern, and with his legacy on the line, flat mir putin is vowing to stop any attacks. Joining us is william browder. He is the ceo of Hermitage Capital. That may seem like an odd intro, but you have been one of the strongest critics. The magnitsky list is something youve been pushing to put into policy in the United States. Why dont you tell us about what happened there. Well, at one point for about ten years i was the largest foreign Portfolio Investor in russia. We had 4. 5 billion in russia in the country. In 2005 i was expelled from the country, declared as a national threat. Following that my offices were raided, they seized our documents. I hired a young lawyer to help us with these office raids. His name was sergei ma it was used for the authorities to steal all the taxes that we had paid in the previous year, 230 million. He testified against the authorities. They arrested him. They put him in jail. They tortured him for 358 days and they killed him. Since then ive been trying to get justice for my murdered lawyer. In the process, the russian authorities all the way up to putin have basically covered up what they did to him. Thats made me into one of the most outspoken dissidents against putin in russia. You know, i was speaking to some people last night and at a dinner they were talking about just all of the things that have happened in russia. Our relations with russia have taken a decided turn for the worst and some people point back to the magnitsky list as a reason for that. What happens next . What happens with russia and is there a way that we can work with them or are you convinced that theyre so corrupt theres no working with them . So its interesting. Why is it that the magnitsky list caused so much trouble . Just for everyones knowledge, the magnitsky list puts everyone on a list and freezes them and bans them from traveling. If it fies back. It ties back. The russian government is up to no good. These guys are doing a lot of stealing. At the olympics it costs 50 billion, 40 billion was kickbacks. All of that money is in the west. Why are they so upset about the magnitsky list . Theyre terrified their money will be frozen in the west. Whats this all about . Its all about russian corruption. How are we going to get along with them . How do you get along with people who are criminals who are running a state . I dont know. You cant beg them not to be criminal. Russia has a list. There are a lot of p lot of guy make money, that are making money off of the blood money thats coming out of russia. But politicians in washington, too . Politicians in washington on are my side . All of them. 89 of the house of representatives voted in favor of the angt. All of the politicians want this. The private bankers dont want it. The sort of lawyers and accountants and various they want a carrot versus stick or you can get more with honey than can you with a blunt instrument. Thats their argument with russia. Their argument is they want those carrots for themselves in their own pocket. Thats what they want. Mikhackhail kortikofsky is f. Will he ever be as outspoken as you will . Hes got a problem. I guarantee you he said you keep your mouth shut or your guys will be tortured or die. These are mafia people were dealing with in russia. Putin is a mafia guy. Given that, what do you think will happen at the olympics security wise . Its a corrupt country. They set up this olympics. They set up 50 billion. Its all locked down. Its so corrupt guys are bribing other guys. You dont think it leads to putin, he can control it all. He cant control anything. He can set the tone for the corruption but he doesnt control anything out there. Its completely people are transporting stuff and doing crazy stuff. Who knows . I wouldnt go to the olympics even if i was allowed into russia and i wouldnt be arrested if i went there. Its crazy to go to the olympics. God knows what can happen. Bill, thank you very much for joining us here. Thank you. Appreciate it. We have much more from davos right here on squawk box. Back here in a second. [ male announcer ] once, there was a man who found a magic seashell. It told him what was happening on the Trading Floor in real time. The shell brought him great fame. But then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their Trading Platform. [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a. Shell. Get live squawks right in your Trading Platform with think or swim from td ameritrade. Welcome back to squawk box live from the world Economic Forum in davos. We have headlines for you. Check out shares of coach. Quarterly profit of 1. 06. Shares also fell short with same store sales following 13. 6. Dow component United Technologies. A stock to watch this morning. That earned 1. 58 per share. We should also note that revenue was slightly short. United technologies saw earnings benefitted from a delay in deliveries for a Canadian Helicopter program although revenue negatively impacted. Mortgage applications. Mortgage bankers association, that continues at a rebound from a 13year low from the end of 2013. The average 30year Mortgage Rate now stands at 5 rather, 4. 5 . Scared me. I apologize. It is a special day and a special year here on cnbc as we celebrate 25 years on the air. We began marking this occasion by announcing a new initiative, and we want be your help to help us name the cnbc 25 leaders, icons and rebels. Cnbcs Tyler Mathisen joins us from our global headquarters. Tyler. Its a very special year at cnbc, our 25th year of broadcasting. Were going to unveil today right now a list of the 200 most influential Business People of the past 25 years. Were coordinating. Its no accident, with the gathering of some of those very influential people and World Leaders over where you are, becky, in davos. Over the next couple of months as we approach our formal 25th anniversary in april, were going to narrow down that list of 200 finalists with the help of you, our viewers, and come up with a definitive ranking of the 25, the elite 25. The rebels, the icons, the leaders who mattered most. The people who shaped or disrupted business and commerce, transformed the world of finance or imagined the products, the concepts, the intellectual thought leaders who changed the world. We did our own internal noodling and came up with a list of 200 of our finalists but we also assembled a three person blue ribbon Advisory Board to help us narrow and also expand our final contenders and give it the kind of global reach that we sought. For many ibara is a professor. Jeff sonnenfeld. And paul steiger is a professional chairman of pro publica. They helped us both pare our list and, as i mentioned, expand it. As you might imagine, folks, the discussions were very spirited. Some of the names were obvious, easy to identify. Jeff bezos, steve jobs, bill gates, but others were anything but easy to pinpoint. Some we know are going to be controversial. We included on our list kenneth lay of enron fame or infamy and michael milkin. I know you were interested in the financial titans who made the final 200 and probably some who didnt. Yeah. Weve been looking through the list. You are right, tyler, that there will be controversial names. Thattest why we need the viewers help to help us pick these names, to limit it down to those who they see are the most influential. Another one is dennis kozlowsky. Kozlowsky for thinking about the way we think of an american corporation. He was the builder of tyco. He went down in flames over such things as the 18,000 Umbrella Stand and so on and so forth. So there are some scoundrels on the list and there are some unlikely choices. This list really is like the nfl networks 50 greatest nfl players of all time. Some of them are going to be quarterbacks, ceos, but some are not quarterbacks in any way. We have entrepreneurs, we have people from the world of entertainment and sports like quincy jones. Even Magic Johnson is on our list for the ways he has trans forged minority business in this country. This is almost like brackets though. Jamie dimon, we have an exclusive interview in davos. If you were to put jamie up against sandy, who would you pick . This is one of those things, were doing it real time. I wish we could wait 100 years. I can tell you edison if you go back to a list like that, ben franklin that stand the test of time. Theres an old saying never name a street and city while the guy is still alive. Ill give you another one. It can be infamous. Tyler, you said, steve jobs, put him down. Put gates down. But then the rest bezos. John vogel is on the list, vanguard. Uhhuh. You may say not a big trend boring. You may say boring. Index funds. Index funds, longterm investing, okay . Then warren buffet. Where would you put warren buffet . I would argue hes helped spur people to think long term about investing and hes created a con groom mer ra glom mer rate. He piggybacked off of graham and dodd. Thats why this becomes complicated. Thats why we need the viewers. I want to pass it off to someone else. Too hard. You guys figure it out. Seen you in his clothes, yes. Drexler. I think mickey is on the list. Got to be. Retail. You ask a question, andrew, of how about ralph lauren. Hes on the list. You get into interesting conversations. You are just starting it. Is bob eiger more of a change agent than michael eisner. Who deserves credit for building the modern disney. What we want to do is get this kind of conversation started with our viewers. Who do you think should be on our top 25. Theres iger for you. You can head to cnbc. Com, 25 to vote for your picks and leave your comments. You can do writein campaigns for people we left off. Youre certainly in many daze cases going to go, hey, what were these guys thinking . Ralph roberts, brian roberts. Not for anything. Steve parks. There are names that need to be thought about. You volunteer. Mark hoffman, cnbc president. Theres 200. I dont know if he makes 25. Dont sell him short. 50. 50. All right, guys. Easy. Is ted turner on this list . Ted turner would have to be on this list. I think he is. Yes. Yes. That didnt happen in the last 25 years. Just looking. What about roger ales. Hes on the list. Ales is on the list. Tyler, thank you. Let me say ive covered all of my possible bases as far as career goes. I think ive done them all. As far as the tv business. Go ahead, ty. Take it away. I think youre supposed to take it away. Im still just in anyway, tyler. Thank you. Up next, policy analysis and the global economy. Hedge fund manager, dan arbess will join us after the break. Announcer still to come from the world Economic Forum in davos, chamber of commerce ceo thomas donna hugh, Morgan Stanleys jim gorm man and Actor Matt Damon. A big morning live from the alps. Squawk box in davos continues after the break. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. We know were not the center of your life, but well do our best to help you connect to what is. [ 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 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. Welcome back to squawk box. Our next guest lives at the intersection of hedge funds and deal making. Dan arbess is a partner and hes talking about the markets. Thank you for being here. Good morning. We just had ray dalia on and he was talking about where he thinks the world is in terms of both the economy and the markets. You think that the stock market right now is fairly priced or a little over priced . I heard ray talking about Asset Classes and whole which is what he does and hes best at that. I think this is a year for securities selection. If you look at the markets as a whole, last year we had policy supported lift. The markets traded up in anticipation of an improving economy and improving earnings. This year we actually have to see improving earnings and you arent going to see huge improvement in earnings across the board so this is going to be a security selector or a stock pickers market. The good news is, theres a lot of stuff going on and a lot of industries and businesses. There are a lot of Companies Going to blow away other companies in terms of earnings and growth potential. Thats whats interesting about being here in davos where everybody is talking about everything. Ray talks about having a balanced portfolio and that means having a lot of bonds in your portfolio. Would you do that right now . I personally dont worry about having, quote, the balanced portfolio. I think maybe a Retail Investor with a long term horizon may want to think that way. A lot of money. I do like leverage credit, high yield bonds, but those correlate more with equities and are much more idiosyncratic. I would not be long a lot of government bonds as an asset class right now for the obvious reasons that everybodys been talking about for a long time. When you say that there are some companies that are really going to outperform, is that because theyre in a special sector . Is that because they have a great ceo . When you say that, what are you listening for . Were about transforming industries and companies. We invest in a lot of Balance Sheet restructuring for Companies Facing financial distress. In the equity market, we look for businesses and industries that are going through transformation. Take, for example, the whole Retail Shopping experience. People are staying at home. Theyre shopping on their mobile devices. The mobile internet is a gigantic secular development that is killing Companies Like coach, for example. So if youre long google, the thing is generating huge operating margins and profits. Its growing at 25 a year at least, its trading at like one times its growth rate. Its still cheap. A company like coach is making kind of oldfashioned belts that you have to go to the store and buy. Nobodys buying them anymore, therefore, they got killed on earnings. Theres a lot to do. Some guys are going to be paying the price and under performing and other companies in the mobile internet space, as an example, there are other industries that are going through complete transformation. The airline industry. Right. A terrible Stock Investment for all of history. Until now. Has just become a great Stock Investment. Why . All of these companies have gone through restructure their Balance Sheets, taking out excess capacity, charging the customer for everything including an extra inch of space, and so theyve got great Pricing Power and great margins. Theyre doing beautifully. I have two questions. One on the mobile internet, where do you put amazon there . Amazon is amazon is going to be an absolute winner. Even though it doesnt make a dollar. It doesnt make a dollar. Its still in the business of taking market share and recovering real estate. If you look at a company like price line doing unbelievably because its consolidated all of the mom and pop hotels in europe that had no other way to market. This whole mobile internet space and all the first movers in it are going to be tomorrows huge winners in the economy. You have to have a piece of that theme in my view if youre investing in corporate securities. How long does this airline game trade work . I think the Airline Trade works, in my view, until the customer kind of starts to push back. Right now, great prasm which is how much you get for every asse the mode. Eventually we all know we dont like traveling. I dont like taking flights. Its just not a pleasant experience. Eventually the couple will push back and the business will have empty seats. For airlines, whats the moral. Story . We deregulated and got into trouble. Were not in trouble. Theres no moral of any story. Why was it so hard what messed it up in the first place . You know what messed it up was massive amounts of Balance Sheet leverage. Way too much capacity. A great big jet to fly from one point to the other. Normally that wouldnt happen. If it was only market forces, that wouldnt have happened. There was some intervention somewhere that happened. I dont really think that it was that it was there are other issues with government intervention. I just think that they structured the airline industry, it was wrong. The way that managements were thinking about growing and building their businesses was wrong and theyve now corrected that problem. Energy, another industry which will just blow the doors off. If you look at a company like chenier which jim cramer had suki on a couple of weeks ago, the ceo. They have the first gas export license from the United States. Three years ago in 2009 we owned the bank that had 70 cents on the dollar and convertible bonds on 50 cents on the dollar implied that they had zero equity value. The stock has gone from 3 to 46. It will continue to go up. My point is, theres a lot to do. Theres a lot of money to be made. Its a great investment environment. We dont have to sit and watch you guys every day and talk about whats going on in the macro environment. The macro environment is pretty stable. Not totally without risk. There are plenty of risks including the risk of a more activist government in russia that bill was talking about a few moments ago. Generally, its a pretty perfect investment. Weve got to go. Do you want a beer . Thank you. Appreciate it. Id love a beer. We have beer, pizza. Thank you. Thank you very much. When we come back, u. S. Chamber of commerce tom donohue will be joining us. Well talk Immigration Reform and Small Business. Well be back after this quick break. [ male announcer ] this is the story 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 its called the world Economic Forum. Our issues are all different than the rest of the world. Lets talk to tom donohue. Hes the leader of the chamber of commerce. Good to see you. Its the life blood of our business in the United States. Thats what you tried to ride herd over and make sure that things are make it easy for things to hatch. Over here each different country the dynamics are different. I went to a micro brewery. It started up well in switzerland. You cant do the same in greece or italy with all of the entrenched labor and regulations. What do you do when you come over here . You cant tell people how it should be done . What do you do, listen and try to gain some understanding of what . Well, if you havent if you stopped learning three days ago youre a dropout so you better listen. Second, we have all sorts of members that are here or people that could be members. Were a global organization. We have large and Small Companies from around the world that belong to the chamber because they do business in america. As American Companies do a huge amount of their business around the world and that includes small and Medium Sized Companies who because of the internet and Quick Movement of goods and information more and more of them are trading around the world. This is the place to be to figure out what were going to do next and to think about what we did before and to be better at it. For your guys to flourish, we need policies to be more amenable to the Small Business. Not over here, right . You should keep speaking because thats exactly my message. There are things that do you want me to keep speaking . You were saying that as an example. I will. You want to speak. You said i should speak. You go ahead. I mean for the rest of the week. The bottom line is government cant create jobs for the people in america, the 21 Million People that need them. Government can be helpful, but theyve got to get out of the way. If you have too many regulations, if you have too many restrictions, if youre clamping down on capital formation, if youre not dealing with the realities of the work force its very, very hard to put people to work. To put people to work we have to be very sure that we get an immigration bill. One of the angles i was going to take on this interview is that the chamber, im not going to say you move center, but the form j former bedfellows, thats people on the right, youve had to push back on certain parts of the right even on i guess threatening, look, were not going to support far right antiimmigration, policies, things that maybe the tea party. Have you had a falling out with that party . First of all, everybodys on the tea party. The tea party reform by folks like you and me i know. That were interested in controlling taxes, fixing cause and fixing entitlements. Now its now people are hooking their wagon to the tea party deal. The people that want to shut down the government, not pay our debts or dont want to deal with reality on education. Theres some overlap there. Is ted cruise, somebody like ted cruz . People that you know if they get nominated theyll get elected, if they get elected, theyll do no good. Dont elect them. How about ted cruz . We have a great story about ted cruz. He doesnt run for another four years. In four years you wont come out would you support him . Ask me in four years. Right now thats exactly the type of thing that was not productive. Well, i dont think ted cruz is the most productive member of the senate. All right. For immigration, whats the problem . I see bipartisan. I see both sides. I see Business Leaders. I see people that arent do you see labor . Labor . Strange bed fellow. You see, you need to think all the time that demo graphics are destiny. If you look at japan, if you look at there are more people dying than being born, demographics are destiny, they dont have an immigration policy. The United States, we fundamentally need the really smart people that were training in our universities, scientists, mathematicians, all of those folks, then we send them home. We need to keep a greater number of those. Down at the bottom line, we need more people to come here and work for whom we dont have people to take those jobs. In many ways were a nation of people without jobs and jobs without people. We need to bring those folks in. For example, for agriculture, for, you know, people to work in resorts. At various times of the year they need to be able to go back and forth in a legal way. Is there still mourning in america for the middle class . Andrew worries we may be 7 30, 8 00 at night, were pushing towards midnight, right . Its tough to see the jobs being created with all of this technology. You have to believe a lot of good things are going to happen. You have to believe the Energy Revolution will happen. You have to believe that technology unto itself isnt going to out innovate the jobs on the other side, right . Look, there are 350 Million People in the United States. They are some of the best consumers in the world. The economy is picking up. Were better off than europe. Europe is one of our real problems because theyre a huge export market for us. You hit energy right on the nose. There are people in american Companies Going to put factories here because of our energy prices. The Chemical Companies are bringing many factories back because natural gas is the seed corn. There will be plenty of jobs in the United States. The problem is that 30 of the kids dont graduate from high school, and in this environment its hard to find them a job. Tom, thank you. Theres minimum wage to talk about. Theres income, a lot of things to talk about. Come back to new york. Thats good, i will. Thank you. Thank you. In the meantime, we have a lot more coming up from davos, switzerland this morning. We are just getting things started. Make sure you stay up to date with the show and whats happening right here on the ground. The way to do that, follow us on twitter andrewrsorkin. And becky beckyquick and joesorkin. 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. Youre watching a special edition of squawk box live in davos. David reuben stein. Plus, an alpine version of the squawk ceo call. Morgan stanleys james gorman will join us on set. And matt damon joins us live to tackle the global water crisis. The star studded hour of squawk box begins right now. That is live. You saw some of the stuff we did yesterday. It was cloudy, dreary. Really beautiful today. Welcome back to squawk box on cnbc. Im joe concekearnin along with quick and joe sorkin. Were doing the show from 12 00 to 3 00 which we never thought about. Pizza. Were eating pizza on the set. Beer. Beer. We were out last night. Slept in the morning. Did sleep a little bit in the morning. The futures, well take a quick look. Theyve been down. Vtx came down and was up a little bit. Ibm was down. Ibm, thats one that we need to talk about at some point. Right. Down 7 bucks last time i looked. Six quarters where youre scratching your head. Buffets breaking even, isnt he . Keeps buying more. See, this is a company where i think youre going to see activists. You may. I didnt tell you, i went up there a week ago and saw watson. Did you really . I did. I did. I need to talk to you. Did you talk to him . You dont get to talk to him like that. Its Pretty Amazing stuff though. It would make you was could you tell it was a malevolent there was nothing malevolent. No, no, no, watson is maybe on jeopardy. I watched what it did to those other players. Headlines, dow component, United Technologies a among the stocks to watch. It earned 1. 58 per share. Revenue was slightly shy of consensus. Delays and delivery for a Canadian Helicopter program hurt revenue but helped earnings because the program is currently operating at a loss. Also, coach is now getting slammed in premarket trading. A 14. 6 drop resulted in earnings and revenue coming in way below estimates and also ibm as joe and i were discussing and becky beating estimates in its latest quarter. Heres the problem, the revenue fell short for the fourth consecutive quarter. Thats primarily due to a sales slump in china and emerging markets. A delegation of deal makers hold court here at davos annually. This year is no different. David reuben stein is the cofounder of the carlisle group. He joins us now. David, i know some of the areas youve been focused on have been europe and asia. Is davos a time for you to get to focus a little more on that . What do you do here in davos that helps you with what you do here at home . Were not allowed to say what we do here because we want to keep reporters guessing. Theres a chance to meet people you cant otherwise readily meemeet them. Im meeting government regulators, people we deal with, and generally meeting with the media. Get a sense of what they think is going on. Its productive. Three or four days is quite enough. This is early on. Most people just arrived yesterday, some even this morning. Whats your take away so far about what kind of stands out as some of the important themes . Well, in the Business World, like in life generally, nothing is always perfect. So before it was the Business World wasnt doing well, the economy isnt doing well. Now they think the economy is doing well and the the United States and some of the developed markets. People are worrying about whether were too frothy. Therefore people are worrying about whether were in bubble. I think right now people think the economies are generally pretty good around the world and we should worry about bubbles. People talk about that a bit. People are concerned about income inequality. When theyre making a fair amount of money, theres concern about whether people are suffering a bit. Thats a concern for people in the Business World as well as government officials. I wanted to touch on private equity. When we last saw you a week ago, right at the end of our interview we got there on the future of private equity. Youve transformed carlisle and other firms have transformed into larger asset managers. You were great at private equity. You knew how to do that. Now youve taken that name and put it on so many other businesses. Does it work long term for everybody . Well, nbc was a network that did broadcast in the evenings and regular shows and it got into cable. Does it do cable as well as it does broadcasting . Everybody whos in business does different things. Sometimes things work better and sometimes they dont work well. In our case what weve built so far has worked well. We will make some mistakes. Generally what weve done has worked pretty well because were managing money and were a fiduciary for people who give us money. Its not all that different from what weve done. Do you think size is good or bad . I think obviously its harder when you have a lot of money to manage to get the higher return as you may have gotten before. On the other hand, the way we manage each of our funds are separate so no one fund has 190 billion or something. Were not like a gigantic hedge fund. I think size can be a problem. Right now the economy is pretty good and were doing well on our returns. Youll be in the retail business. Well, we are like our peers, we are working to get retailers to invest in private equity. Why should Retail Investors not get the benefit when Institutional Investors can get them. Are you going to advertise . You are allowed more to advertise than before. The rules. Right now were not focused on advertising, were focused on doing things through registered representatives and people who work for large firms like merrill lynch, so forth, working through their representatives. Were not really tieszing but we do let people know what were doing. Where are we now . Do we like you . Private equities. Private election, the scum of the earth. Guy named bein was in the batman movie as the biggest villain. For a guy to get reelected, we trash the industry. Now you go to parties at the white house. Are you good guys or bad guys . The president would say he was never against private equity. Really . Thats what he would say. Who put the hit out on romney then . Well, some things that his why are you laughing . Was it you . Some things that his opponent in a president ial campaign did were things that they attacked for political or other reasons but that isnt to say that because he attacked some things that mitt romney may have done job killers, take big dividends. Doesnt matter what happens to the company, as long as we get our payout and big dividends. Are they a net good for society, net bad . All good questions. We dont talk about it anymore. People have gotten to know private equity, theyre seeing were not as bad as people think. We dont ship jobs off. Youre a big supporter of private equity. I am. I absolutely think its phenomenal. I cant imagine how many jobs would have been lost. Wed be down to 1 gdp growth. If your career is ever over in broadcasting, you have a job. Hold it. Why do you think the industry does such a poor job of articulating that . I dont think they do. Youre a part. Youre a democrat. Andrew, the other side is a media machine and the enablers. You talk to them. What do they tell you . Some people are very good at certain things and may not be good at other things. Were pretty good at making Companies Better and investing. May not be good at public replaces and advertising our wares. Generally we could do a better job in many other areas and were working on it. Right now the investments were micking are doing pretty well and the investors are happy. People like you are not getting complaints from people around the country. Yeah, that could be it. You werent questioning whether i was on your side . I was not but i wanted to give you a chance to articulate it. I dont want to sound bitter but i am. I think if you ever wanted to get out of this business and work for private equity, give me a call. Give me your card. Also, you like coming over here for some of the parties at night, dont you . Im a wellknown partier. Any party that finishes by 9 00 ill probably be there. He dances. It is weird here because everyones on east coast time so at 12 00 at night, midnight, im like, what am i doing here . Everyones saying its 6 00 p. M. Theres a builtin excuse that its not midnight, its 6 00. How late were you out . 3 00. You know what, dont be a pinocchio. No, tonight that was true. Last night that was true. I beat you last night . You beat me last night. You beat me . I did. Wow. David. My last dance was my bart mitzvah. Im not out for dancing. Thats another subject. You didnt dance this past weekend . I watched. You and al roker and beyonce. I watched a lot of people dance. I watched a lot of people dancing. Nobody wants to see me dance, believe me. David, thank you so much for joining us. Thank you. My pleasure. Media moguls meeting in davos to talk about the future of the industry and reshaping the industry. Later we have jamie dimon. And much, much, more. Then we should also give you this programming note. We have a biggie, tomorrow, jamie dimon will be speaking on squawk box from davos. We will begin airing that interview at 6 00 a. M. Eastern time. You do not want to miss it. Squawk box coming back live in just a moment. Became big busi . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. 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. 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. Exactly. L Liberty Global has a key presence in europe. Here to talk about the global strategy is mike fries. Hes libertys global ceo. Thanks for joining us. Thanks for having me. I should have asked it because its john malone, but when due in the past 12 months, past few years it feels like all of a sudden everybodys come back to cable. Right. What is that about . Well, fundamentally i never left cable neither did john. Its in his dna. Its in my dna. I think a couple of things have happened in the past couple of months. Netflix got people scared. One of the main things that netflix did is create great functionality. User interface, recommendation, navigation. With our platform what comcast has done with x 1, my kids dont get off the cable box. The apple remote, netflix is not as present because the x 1 platform gives them great user experience. I think bridging that functionality gap has been a big piece of the video story. Then of course broadband has always been our winning formula. Mike, i want to turn that on its head. If thats the case, if the cable has come back because theyve done such a better job of functionality, is that bad news for the apples and netflixs of the world . Is there room for everybody . Theyre pursuing very different strategies. Were about the bundle. Were bringing everything to everybody. 100 megabit broadband speed. All the content you can want with great functionality. Netflix is becoming more and more in my mind a channel like hbo. It has original content, great brand. In london, in the u. K. , we put netflix on our box. If youre a virgin customer and you want to watch netflix, switch to the netflix app. You dont have to leave the virgin box at all and go back and forth. Its becoming a channel. Thats smart. Ive heard some Cable Operators argue from a margin perspective you would just do better offering straight broadband and let others figure out how to go over the top with the content. Except that we have 20 million video customers that i would just as soon keep. But, sure, broadband is a great business. Very high margins. Something yefr oeveryone wants. Its like water. Video. People watch television, 150 hours they watch television. Not here they dont. A little less. In fact, get working. Youre the International Side of this snnchts yes. You know what i have over here . Four channels, i was watching the simpsons in german. Im embarrassed too say we own that. I didnt understand any of the jokes. I was still laughing. Got to work on your german. European video and cable is pretty good. Great value. Our average is 45. Were giving customers 100 megaby the broadband speeds for 45 bucks, not 150 bucks. Growth here versus the u. S. We have good growth. Markets like germany there are reports out that you want to spin off latin america . Yeah, we are looking at that. Because . 95 of our business is in europe. Thats where we want to stay focused. Were great at consolidating markets and growing markets. Latin america is 25 broadband penetration. There is tremendous opportunity to consolidate that market. It seems better for us to do that off Balance Sheet and not dilute the story that we built here. Its an existential question of the morning. We announced something called cnbc 25. The biggest 25 names in the business over the past 25 years. In the world. In business . In business. No, no, not company names. John malone, rupert mourdock. In the world of media over the past 25 years, who would be your number one pick . Thats an easy one. Brian webber, ralph roberts. Thats what we said. Thats what we said. Is this being taped . No. Actually, john is incredible. He is. He has built several empires. Today if you add up all the different businesses that Liberty Media has spawned, its like 160, 170. Never paid a dime in taxes. But hes a modest hes brilliant. Hes modest. Got to wrap it. Hold on. If you take john out of the list, whos number two . Oh, i think rupert probably pretty clever. Hes done some great work. I was going to talk to you about of all people, michael wolf on net neutrality. How distributors will be back and in the drivers seat. It will be nice if they own some content. Theyre going to own the content by controlling the distribution. Theres a lot of misinformation about net neutrality. Its already past that. Nothing to worry about. You dont think that the next two kids in a garage who want to create the next netflix could do it if you guys are charging whatever it costs netflix already . What netflix will end up doing is subsidizing consumers to get better speeds and better access. Today the problem isnt in the last mile, its in the rest of the network. What about harry . Will they say no or yes . You mean in europe . Hows it going to come down . Doesnt really matter. I think it will dislocate for a little bit. Its clever. Very clever. Kind of underhanded, isnt it . Does that crappy little antenna work . Yeah, it works. Final selfish question. Im a Time Warner Cable customer and sort of locked in. He cant give you a discount. Am i going to be a charter customer soon . I cant answer that question. Theres a pretty big gap between the bid and the ask, but thats the other side of johns world. How do i know . I think it would be a good thing for the u. S. To continue to consolidate. I would say time warner would take advantage of good for customers too . Should be. Would comcast be allowed to play there . My personal view is i think they would. You think they would . Thats just one mans view. Okay. Good. Thank you. Appreciate it. Coming up, Actor Matt Damon. Were going to talk about his new film but mostly were going to talk about his venture into providing water to the world because we just heard that people want broadband like water. A lot of people cant get water. Well be back in a moment. 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. Of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. And the little room above the strip mall off roble avenue. This magic moment it is the story of where every great idea begins. And of those who believed they had the power to do more. Dell is honored to be part of some of the worlds great stories. That began much the same way ours did. In a little dorm room 2713. This magic moment welcome back to davos, everybody. This is squawk box. Were live here. Weve got a lot of things that are coming on. In fact, were going to be speaking to Morgan Stanleys james gorman in just a few minutes. In the meantime, lets send it back to cnbc global headquarters. Kayla tauschy has a few headlines. Good morning, becky. Futures are looking slightly flat. The first is muhammad el eriam is stepping down. He will stay on to consult for pimlicos parent company. Thats german insurer alliance. Air watch is being bought. Theyre paying about 1. 5 billion in cash and stock. Vmw is down by just about 2 in premarket trading. Government officiwfficials are pay more. The rules will include new testing that simulates a side crash. Officials think the tougher standards would prevent about five deaths, dozens of injuries per year. Stay tuned for more squawk box live from davos. Back after the short break. Announcer coming up next hour, actor, Academy Award winner, producer, philanthropist matt damon will be squawking in davos. How do you like them apples innocen innocen. Announcer hes taking on the global water crisis and hes going to join joe, becky, andrew during the 8 00 a. M. Hour. Conquer the morning, conquer the day. Squawk box is coming right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back to squawk box. Were coming to you live from davos, switzerland this morning. We have headlines for you, the big one being amazon is denying reports that its thinking of starting a paid tv business. They were investigating that possibility. Amazon now telling cnbc it has no such plans although it does continue to build selection for its prime instant video product. Also, sears is closing its flagship Downtown Chicago store. Thats the latest move in its effort to trim the number of Retail Locations it has. This particular store has lost millions since it opened back in 2001. Sears does have three other stores in chicago so maybe that mitigates it. The company is headquartered in illinois. Thats weird. That store has only been open since 2001. Usually the old stores you close the old stores. Maybe real estate. Also two Las Vegas Casinos will become the first gambling establishments to accept bit co coin. The d las vegas casino, bitcoin will be used. Patrons will not be able to use the virtual currency, however, for gambling. So i dont know. The who and the what . A couple of market leaders. Those two . I have nod state there. Have you . They just got free publicity. That might help them. Does your next guest accept bitcoin . Lets ask. For some perspective on the Global Markets, james gorman. He is Morgan Stanley chairman. And we just asked reuben stein and tom donohue, what do they do over here . What kind of business are they taking care of, if at all. I know you are. What are you doing over here for Morgan Stanley . How does it make sense for you and what are you accomplishing . First off, joe, its great to be on the set here. Beautiful. Great. Nice. Warm. Weather great. Awesome. Obviously two things are going on. Theres the conference itself. Important issues of the day being debated bringing the political, the business community, Academic Community together. Thats very convenient. Secondly, for institutions like ours, opportunities to see clients who are from everywhere around the world and all gathered within half a mile. Ee northern mousily convenient. Opportunities to spend time with people from all over the world. You can leverage your time. This isnt going anywhere. There will be a davos. There will always be a time and place for davos. Its always been here except the year after september 11th when they took davos to new york which was a wonderful gesture. Were all trying to figure out what wall street means now. It certainly doesnt mean buckets in wall street. Im still trying to figure out where we are in the new wall street. We had earnings recently come out. We had euro earnings, bank of americas earnings. How are you seeing that play out . Youve emphasized one thing, goldman has emphasized another . Does goldman want retail . Do you want more . Whos going best . First off, wall street is probably in the biggest transition in the last four or five years than weve had in 75, 78 years since the great depression. So enormous amount of strategic change, not just to the u. S. Firms you mentioned but to europe, across asia now. Management have to figure out what is the right strategy for them. So when we sit down with our board, we dont say what is the other guy or girls doing, we focus on what is Morgan Stanleys goal . What is our core dna . What do we want to do . What do we have the capabilities to fulfill. Thats how we came up with our strategy. How would you grade yourself in what youve decided to focus on in the past couple of years or since your tenure . I think the strategy is working. Frankly, you know, i dont want to do a selfgrade. The stock is up 60 plus last year. The investor are coming back to the stock. Our cds trade is below 100 for the First Time Since 2007. The credit worthiness is back. The results arent there to be fair. I think the strategy is in place. The direction is clear. The steps weve laid out are working. The full results arent there because thats not where we want it to be. You dont have to name names. Who missed . Big bond trading un be knits . Where was the weakness that you saw . Boy, its hard to identify who missed. You dont have to say anyone in particular. I think it was clearly doing a lot of bond trading. Listen, the bond business was tough. It was tough for us. It was our worst quarter for the year. Commodities were difficult. I think that will rebound now that theres action going on with oil. Listen, if you had a strong equities franchise and strong asset Wealth Management you did better. Will you get back to where you manage peoples money for a living and you dont trade your own . I mean, are you in a good position because youve got, you know, a real solid Investors Management company . Brokers. Youve got youre almost a thundering herd, arent you . Maybe. What i would point out is weve got 1. 9 trillion of folks money, which is depending how you count, number one or two in the world. That is a phenomenal basis to put behind the resources, the intellectual capital. Match that with one of the top couple of investment banks in the world and you have a really potent Business Model in a recovering global economy. I feel good about it. There is a question, sort of culture question inside of Morgan Stanley. Whos more important now, the Investment Bankers which typically used to be or the brokers . Theres been people who have said, look, now the bankers report to the brokers. Its been a switch. Is that true . No, thats ridiculous. Anybody who says that, listen, were a big house. Theyre all important. They all play a role. The asset and Wealth Management businesses give us balance. The Investment Banking give us that turbo charge when youre in economic recoveries like were in now. These questions should have been asked back in 1997 when Morgan Stanley merged with dean witt ter. Were making it work now. Do you think it was the right decision then . It failed. I dont know if you think it failed but oh, i cant second guess that. I like what it gave us to do what we did recently so, yes, from that perspective, the company is strong because we had that merger originally. James, what is it that makes it work now . I mean, whats different . What did you do . He works there now. If you come through the crisis as we all did, you know, whether on your side of the table or on mine, were all pretty scarred from it. What people quickly figured out is rolling the dice with somebody elses capital is not a good investment model. Investors dont like it. By having a more balanced Business Model where all youre doing is serving your clients, bringing both the retail clients the product institution can create and bringing them the research that we get off the back of our institutional business is a very potent mix. I think the worlds changed. The regulatory world has changed. The political world has changed. We as Business People is there anyone. [ tires screech ] [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event through february 28th. 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. We shaare back. I didnt see you move or unplug anything. After i asked you about goldman sachs, i didnt see you unplug. Is there anything you should be envious of. Joe, you know i couldnt answer that. You could sort of dance around it. Listen, everybodys got to do what they think theyre best at. We know what we think goldman is pretty damn good at aye lot of stuff. Theyve done a great job. Youre not envious of anything theyve done. Im going to surprise you maybe because i grew up with so many siblings. Live in a world of competition. Ten of you . Ten children in my family. Say that you imagine that he probably wishes he had an arm that could further leverage what they do Investment Banking wise. Do you think he does . If i get in the world of trying to imagine what a peer is thinking at some point, this would be this would does anyone else worry . Go ahead. I have a different one for you. Were going to have jamie dimon on the program tomorrow. When you look at whats happened with jamie and the firm and the settlements theyve made over the last month or two, what do you think of that . I think firstly the decision to buy into washington mutual, which both helped the American Financial system was made with the support of the request of the u. S. Government. Was both a bold decision, generally a positive decision but had consequences. You picked up a lot of stuff along with those acquisitions. I think thats a lot of what j. P. s living with. Listen, jamies a great guy. We need Strong Financial institutions in the u. S. , no question about it. We should be celebrating when our banks are doing well. What about this whole situation in china . I think Morgan Stanley may be looked at this in hiring princelings in government. Hiring somebody whos the child of somebody in government is not a bad thing. There are a lot of talented people that come from those families. All youve got to do is have the appropriate conflict controls in an organization, which all of us face all the time. It could be china, could be the u. S. , makes no difference. Final question. We launched something called the cnbc 25. Top 25 Business Leaders of the past 25 years. Oh. In the world of finance, who would you put at the top of that list . I think hed said lloyd probably. Wouldnt you . Off of your head. You can put paulson, sandy weill on that list. Transformative over the past 25 years. I think hank paulson made some of the courageous decisions in the shortest period of time that anybody has put under the pressure to do and, you know, i go to work every day thinking if we can hit an 80 right on the decisions were making were doing beautifully. I think they did better than that. T. A. R. P. I think was extraordinary. It was innovative. Hed be number one and probably two and three. Not bernak . Obviously great support. Hes done great. The troika at the time. Bernanke, paulson, this was the yankees. We were lucky to have them at the plate. All three of them hopefully are on the list. Greg, great having you. Thank you. Thank you. Well be back next year, absolutely. Thank you. Up next, Actor Matt Damon joins us to talk about his new venture to bring clean water to the world. That interview is up after this break. Squawk box will be right back. By the way, we go from damon to dimon. J. P. s jamie dimon will be here. We start at 6 00 a. M. Eastern time. Squawk box is back with matt damon right after this break. [ male announcer ] the new new york is open. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. I nethats my geico Digital Insurance id card were open to it. Gots all my pertinents on it and such. Works for me. Turn to the camera. Ah, actually i think my eyes might ha. Next Digital Insurance id cards. Just a tap away on the geico app. Could save you fifteen percent or more on car insurance. Everybody knows that. Well, did you know that when a tree falls in the forest and no ones around, it does make a sound . Ohhh. Ugh. Geico. Little help here. Welcome back to squawk box. 8 45 on the east coast. On wednesday morning the futures right now still roughly pointing to a mixed open. The dow would be open by just about 18 points to the down side. Led down by earnings from United Technologies and ibm, two components that both had relatively choppy quarters. More on that in a second. Lets check some of the earnings that have come out this morning. We have coach taking a hit. Earnings and revenues fell. Coach suffering a 13. 6 drop in samestore sales for the Fourth Quarter. Losing market share to competitors like Michael Koors and that stock down 6. 5 . Mixed quarter for dow component United Technologies. It earned 1. 58 per share. Thats five cents above estimates. Revenues were slightly shy. That stock hovering around the flat line. Another earnings miss came from mining freeportmcmoran. Missed consensus by 12 . Revenue also short. That seems to be a recurring problem. This time its due to falling metals prices. Joe, thats the latest in corporate headlines. Send it over to you. Hope youre staying warm. Oh, its nice, kayla. Too warm. Hot. Much nicer than we have here, i should say. I have my jacket here. Im wearing it. Its worse here than it looks like there. Yeah, its like 10 degrees. Polar vortex 2, i think. Stay warm. Youre sleeveless though. Interesting choice. Anyway, a planet without access to safe drinking water. This is not funny. Our next guest is here in daf vot davos is here to share more with us. Academy award winner matt damon cofounder of water. Org and gary white. Theyre working to inform people because, matt, you point out that you have to remind yourself every day that this is for real. And just reading the numbers and some of the facts, i guess i am just clueless. There are people that are thirsty, and not just a few. You. And mo yeah, a child dies every 20 seconds. Three a minute . Three a water. From not having clean water. Lack of access to clean water and sanitation. All of these kind of things and diarrheal diseases that wouldnt kill our kids. Maybe they miss a day of school or something, but, no, these are claiming millions of children every year. Theres people that spend most of their day trying to get water, trying to get thats what they do. Or they cant work a full day because half of the time theyre trying just to provide for what we take for granted, food, shelter, water. Thats exactly right. The its a very big issue for women and girls. Its often left to them to do the scavenging for water. So if you can get clean water into a household, suddenly these kids will go back to school. And, you know, their prospects for a worthwhile life just yeah. Looking at just reading between the lines. Philanthropic efforts, while theyre noble, you cant leverage them. Theres a way to do this where i think everybody in the end knows that as everyone rises up, everybody becomes consumers. Theres a way of maybe not making money immediately but theres Public Private partnerships that can be done to give people loans, micro loans. Explain it. I dont think its implicit to understand it. Sure. We look at some of the Public Private things we have with the pepsi could kpepsico f how does it work . Do you lend people money to dig wells . Yeah. Theres People Living in slums that have water pipes passing through the slums but they cant get connected because they cant afford to pay the connection fee. That can be over 150. What we help them do is tap into micro finance so they can get a water connection at their home. Theyre no longer walking to collect water. They can use that time to work at a paying job and repay the loan. Were really trying to create the market forces. You can drive down the per person kofcosts of implementing that even though you have corporate help but you can drive it down. You can cut it in half, cant you, what it costs . Yeah. Even more than that. Were down below, you know, 10 per person . Where was t 36 at the start. It came down from there. The average for digging a well is a standard way of thinking. When i first got involved i started raising money to drill wells and which is something that needs to happen but i realize pretty quickly as i started to look at this issue that that wasnt going to be the answer. What got you into this . Yeah. The very first well, i was on a trip in 2006 and actually that bono had arranged. And basically it was like a college mini course. It was about studying extreme poverty and every day had a different learning focus and one of the days the learning focus was water. I ended up going on a water collection with a girl and a 14yearold girl and i just really hit it off with her. She had come home from school, grabbed her jerry can. We walked for about a mile. In the course of our conversation i said, you know, what are you going to do when you grow up . Are you going to stay in this . A very rural village in zambia . She said, no, no, im going to the big city and im going to be a nurse. I just remember identifying with her because i remember when ben aflac and i said were going to the big city of new york and being actors. I remembered that feeling of being a teenager and having that hope of what life might bring. It wasnt until i was driving away that i foresight to sink ae well a mile from this girls home, she would have spent her entire day scavenging for water. She would never have become a nurse in lousaka, she would be somebody who was literally trying to eke out an existence from one day to the next. Theres the issue of death and needless death and suffering which is which is huge, but then there are all these other t t other things. I had to ask, what exactly do you do with these companies . I think its a similar situation. We have a lot of the visceral moments. We get to travel to developing countries and to see that hit you right in the face that the people are so held back by lack of water and sanitation from reaching their potential. So, for us what were trying to do is kind of move beyond that traditional topdown charity model. There is never enough charity in the world to solve this problem. We need 200 billion a year for 5 years invested to get it happen. Right now if you add up all the assistance and charity, its 9 billion a year. Weve got to leverage it from the bottom up. Were trying to change the model to help people tap into their intrinsic power as customers and citizens and even the People Living in poverty have the ability to do this. Right now we meet people all the time in these countries that are paying 125 interest to loan sharks so they can build a toilet. So the demand is there. Its rational to take out a loan to do that but if we can drive down the cost dramatically then we can help so many more people get water. Its 98 or something. Its better than subprime. Thats the thing is weve is weve completed now 250,000 of these of the loans and theyve paid back at 98 . Yeah. And yet when we were in india a few months ago talking to rmfi partners we asked them what kind of the biggest choke point was for them, which was access to affordable capital. The demand is absolutely there, but the problem is these guys are taking wholesale loans out at 15 , by the time they add on they tack on their percentage to keep their lights on, you know, the loans are going out to the poorest of the poor at 22 to 24 which is insane when you think about what you and i can get a loan for, right . Pepsi i saw a certain amount of money, but this is working so theres a better way to leverage this, isnt there . Do a fund or something . You got a fund youre working on . Right. Thats one of the things we wanted to hit on here in davos is the creation of this Investment Fund that will take social impact investors sometimes called the social Capital Markets and match it with the demand that were seeing with the microfinance partners theyre paying 15 . We polled them and talked to them and said if we can drive the cost in capital in half from 15 to 7 their demand would double for capital, theyd be able to reach twice as many people and the costs would come down and reach poorer people further down the pyramid and social impact investors in the United States would be able to get a target rate of return of 2 is what were hoping for. So they can get their money back. Get their capital back as well as some interest as well as do good in the world. We think the market for that is huge. Were going to try to raise 12 million in the first round of this and then well continue. How are you talking to . Did you end up talking to banks about it . Jpmorgan did something with the bill gates foundation. Yeah. Who who are you going to collect the money from . Matt wont say it but matt and michael and sochi burch who are tech leaders in the Silicon Valley have committed the first 3 million to launch that. Were quarter of the way there. I think were is there something we can put up that for people that want to get involved . This is new, right . You announcing this now . How do you get to do it, water. Org . Yeah. You can email him. Thats okay. At water. Org. This is not beneath what we do here. And im not joking. J. Y. . Yeah, jerry white at water. Org. Hopefully its starting a new trend of trying to take something as basic as water and sanitation and match it to the Capital Markets. Where are the places now im interested. Where the places that you have the lowest percentage of people that can get freshwater and clean water . For percentagewise its countries in subsaharan africa. In terms of absolute number of people that lack these services, you know, india is huge, you know, indonesias huge. Were working in both of those countries. But, yeah. The market and the demand for that. Will this work equally in terms of cooperation with local authorities . Oh, absolutely. Everybody wants to do it. You dont have any problem with any of them . No. I mean its the Water Utilities themselves that were trying to help people tap into, so they actually get more of a customer base. Do you divide it up evenly . How do you decide where to put your main effort . Right now were in india. Weve got a lot of programs that are pretty mature there and weve got a grant from the pepsico foundation. So were were this is something wed like to expand to a number of different countries, i mean, its it works really well. This model works really well in urban and very urban areas where, you know, there are people that are kind of living together and theres infrastructure in place. Were not trying to reinvent the wheel. Its just piggybacking on existing infrastructure. Is the expectation that individuals can fill the rest fund . I think its a combination. A lot of High Net Worth individuals are into social impact investing. You look at private foundation that can actually not only make grants, but they can make programrelated investments they are called and they can make loans into this type of work as well. Before we go, we have one question for matt. You have to ask. I was going to ask who is this Jeremy Renner . I didnt forget who is. But jeremy is not playing bourne. Are you going to be back or not . You know, wed have to have a script. Are you a badass . You are looking at a guy with a broken collarbone right now. Would that give you a chance . All those moves, do you know how to do those moves . If you touched me on the shoulder i would cry like a baby, literally cry. I want to ask him a question. We Just Announced this thing today about the 200 most important Business People in the past 25 years. Cnbc is 25 years old now. In the media world, in hollywood, is there a person you put on the top of the list . The most important the most important in the past 25 years when it comes to the transformation of your business. Well, you know, i mean, lucas and spielberg. Yeah, certainly those. Okay. And lucas, i mean, what he did with, you know, sound and, you know, but id have to think about it. But you do well with spielberg. I think liberace is up there, too. And liberace. Clearly. Matt, thank you very much. We know were not the center of your life, but well do our best to help you connect to what is. Well, a great morning. That was a lot of fun. Tomorrow we have an exclusive interview with jamie dimon. Make sure you join us. Squawk on the street starts right now. Good wednesday morning, welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber at a snowy new york stock exchange. The snow may have been tough on