Transcripts For CNBC Squawk Box 20140327

Economic arena. I always forget that he actually worked years ago. Then we have steve forbes, the grand master of todays ceremonies. Then we have bill ford. Well talk about the Automotive Industry, maybe ask him a question about tesla or two but really try to understand what manufacturing means in this country. And then the governor of north dakota, now, the governor of north Dakota North Dakota has the lowest Unemployment Rate in this country. Were going to talk about shale, natural gas, what all of that means, innovative and manufacturing and finally, the big issue of the morning, education, and we have cheryl hyman, the chancellor of the city or rather the Chicago City College here and what theyre doing with education and teaming up with companies and what theyre doing to create jobs. Thats what we have going on right here in chicago at the forbes reinventing America Summit. And im going to send it in the meantime back to you, becky. I knew what happened there. I was confused, too. Usually we do headlines and then we do the scene setters. I know it caught you off guard. You kind of looked like he thought it was before the show. You see, its a different time zone out there. No, no, no. The show is starting. Youre live. Normally we do the introduction, i do the headlines and then you you are on, andrew. You are on right now. Im aware that the show is on. Youre kind of in the midwest, although what do you mean kind of . Well, because hes in a big city. It is an hour earlier. I want him out somewhere on a big green tractor, like plowing and to get the feel for, you know, whats in the middle of the country. You see, hes going to the conference doesnt do it for you . No. Hes going to say ive been west of the hudson. When you go right from new york right into where did you fly into . Ohare. Ohare. Flew right into ohare. And then youre in illinois with the one governor in the entire state that still thinks you have to raise taxes 100 and that will help he has a lot of farmland. They have a lot of problems, too. Thats the land of blago, right . What about the fly over state part . You didnt go there. Thats what i was expecting. No, you landed in the one big city out there so you can sort of still feel, you know its very new york like, although they would say that its different. Yeah. They would say its really different. They put their garbage in the back in alleys, not in front. Is that true . Yeah, big wide streets. Its a very clean city. Are you saying youre from there, too . You are because you grew up in gary, indiana. Im from right down from there. Most people dont admit to being born anywhere near gary. I was born in gary. You want to hear Something Else . Same hospital as michael jackson. That was my claim to fame when i was a kid. Same hospital . Yeah, gary methodist. That would be cool. All right. Well be back to andrew. I have a lot for rahm today, too. I know. I actually sat in his in the west wing in my talk to him for like a half hour once when he was chief of do you think he has more power now or more power before . I think he has more power now, i do. As mayor . Because i think thats why he left, because i think he was kind of undercut. But i just you know, hes hanging out with steve forbes, hes pushing Charter Schools, hes reigning in unions. I dont know who this man is at this point. But hes telling reporters that they need to get out of washington, d. C. Because the air is too thin there for it to work in their brains. Hes saying things like that to reporters. Did he say that . Yep, he did. I dont know who this man is and hes hanging out with forbes. So we need to talk to him. Well have some political conversation, of course, as well. Thats what we have going on from chicago this morning. You found your pocket scare for today. I knew you would for today. Yesterday, it was misplaced. But looking fine, looking good. Look pretty good in them jeans. Sharp dressed man. Let me tell you guys about a few headlines this morning. As joe mentioned, increase in dif depends or stock buyback programs. Among the rejected banks is citigroup. The fed remains unconvinced about the overall reliability about citis planning process. This is the second rejection in three years, and its seen as a major blow to citis ceo and michael corvat. The stock took a hit on this news. You can see it was down by about 44. 7 . Down more than 2 to the 47. 79. And while citi was rejected, rivals jpmorgan and bank of america had their plans approved along with Morgan Stanley, wells fargo, pnc and many more. So not only do you not potentially get a dividend right away, but you also theres questions about how well how will things have been going in terms of, you know, fortifying the banks balance sheet. I thought there is some formula that you could figure out and how to make sure you wound up with the credit mim minimum level. Like Goldman Sachs changed their plan area in the week after they realized it wasnt going to meet the minimums. Youre not going to just move. Things have improved there and thats probably why its disappointing to corbett and because i figure they must have thought it was in shape enough to where it could past muster, but it didnt. Yeah. And while the fed approved bank of americas capital plan, the federal Housing Finance agency announced at the same time a settlement with that bank for about 9. 3 billion. The deal will end litigation over the bad mortgages issued leading up to the financial crisis. And former bank of america chief ken lewis settled a lawsuit, accusing him of deceiving investors about one of his biggest acquisitions, merrill lynch. Lewis led the bank from 2001 to 2009. Hell pay 10 million to resolve claims by new York Attorney general eric snyderman. Lewis will be barred from three years for serving as an officer or director of a public company. Shares of bank of america at this point close around 17 yesterday. Lets talk a little bit more about the feds rejection of citigroups plans. Joining us right now is anthony pelinni who says he was very surprised by this news. Anthony, what do you think happened . A combination of factors. You know, first of all, it seems like city did not do a great job at addressing some previous issues that the fed had. But when you read the fed comments, it does seem that citi came very close to getting a passing grade with some provisions. You know, much like jpmorgan last year. Whether or not this tipped the scale to failure, well never know. But this seems to be more of a bump in the road for citi rather than a critical shortfall. Is it true, though, that it must be fairley complicated to try and figure out. You cant just figure the formula and here is how it works . Complicated, arbitrary and subjective, i might add. When you look at what citi did ask to return, it was well above any minimum capital requirement. The fed had no problem with what they asked for. They had some problems, they noted some minor deficiencies that none of which alone would have caused them to fail, but combined, so to speak, made their overall reliability less than adequate. So the big question it was very interesting because the other three banks that failed due to qualitative factors had some serious criticisms. Hsbc, santander and rbs citizens. So the bigger question this raises is whats happening behind the scenes with citi and its regulators. Are there other problems we dont know about . I think the timing of the mexico incident was somewhat embarrassing for citi. I dont know specifically, you know, what issues they didnt address. There was some hint that they didnt do something right. It is harder, perhaps, for regulators to get their hands around global risk and citi certainly has the biggest Global Platform of any u. S. Banks. But, you know, this is a missed opportunity rather than a failure in our eyes. Citi was up 7 last week. Theyre probably going to give back most of that gain this week. But the return of capital story for citi is still very much alive and well and one way to look at this is we still have even more dry powder Going Forward. Anthony, andrew has a question, too. Anthony, i have a question. Its not a citigroup question. Its the story we just did right before that, which is about ken lewis, bank of america, and whether or not you think you should have settled and paid 10 million and been barred. Im going to take the position that he shouldnt have, because if you remember, the government, talking about behind the scenes, the government told him that he had to do it this way. As an analyst, how do you feel about this . Thats a really good point. As an analyst and as an american, one has to question some of these judgments and some of these actions. Obviously, bank of america wanted to back out of the deal. But the fed at that time refused to let bank of america back out. Unfortunately, the relation of that fact also providedest to people that bank of america did have knowledge because they did request to terminate that transaction. Did you feel lied to as an analyst . No. I felt that the federal government did not treat bank of america in a fair and equitable way. So, anthony, what do you do with citigroup at this point . Obviously, a disappointment. But you thats easy. Buy the heck out of it. The stock is cheap. Theyre going to return at least 10 balance year in each of the next three years. Youll probably see an accelerated disposition of improving assets, failure to return excess capital. The turn around is there. Its obviously, its remarkable. The valuation is there. Banks dont have double and triple potential as they did two or three years ago, but certainly citi, by 2017, should be at a 7 earnings run rate. You put a 10 or 12 multiple on that and clearly this 40 or 50 off side over the next two years, banks tend to trade forward earnings. So very few banks right now, especially some of these larger ones have that upside potential and that kind of earnings visibility. We have double digit Earnings Growth. One good thing about citi is theres plenty of room to improve of the previous Risk Management teams, but Going Forward, the new guys seem to be doing a great job. This is just unfortunate. More of a missed opportunity. 7 more than the positive momentum that was folding. But this story is a bumpty turn around story. This isnt a Straight Line recovery. But it certainly looks like its a one step backwards two steps forward story. Anthony, thanks a lot. Great talking to you. Some people might say it was bound to happen, but the ipo didnt do so well. The ipo of King Digital Entertainment failed to make a big splash yesterday. The maker of the popular game candy crush saga slid blow its offering price of 22. 50. It traded as low as 18. 90, closed at 119. 45. Now raising some concern about whether the ipo market has been overheated and, you know, two steps or three forward, two back. Its been pretty good. I dont know whether you can live cap is what worries me, too. A lot of the momentum stocks have gotten a little bit dicey in recent weeks. Well see whether theres any indication of any real problems. We got down close yesterday to the december 31st low or the december 31st close. Were only 2. 5 points, about 3 the points up for the year. So were flad flat for the year. Right . Yeah. Wow. I didnt even realize that. Okay. So all the progress we thought we had made to this point, maybe not so much. Lets talk about whats happening overseas. The International Monetary fund reaching a deal to provide 14 billion to 18 billion to ukraine. Ukrainian Officials Say this deal would require a painful change for ukrainians. The imf agreement will unlock aid to other down yonors. Ukraine must complete certainly prior actions before the imf board will approve the aid package, including adopting reforms in the energy sector. Geopolitical tensions paid a part in yesterdays crimes, obviously. But our next guest says when it comes to ukraine, were overreacting. Oversees more than 256 billion in assets under management. So china is more important than ukraine . Well, i think ultimately. The deceleration, looking at those macroeconomics factors, i think ultimately you have to keep your eye on the longterm fundamentals. Bond falling, military hostilities, good opportunities to buy if youve got the discipline to stick with it, you know, three to six months or more. We havent really seen the markets sell off on ukraine. We really havent. This is a negotiated situation. From the russian perspective, right now its not like it would be in the syria or gulf war or 2003. It is fundamentally distinct. And it doesnt rise to the level of cold war 2. 0 . I think that might be a bit premature. 30,000 troops now. You cant invade ukraine with 30,000 troops, can you . I would think not. Although probably invasion from our perspective, military action is probably not higher on the list. I think the good news is, though, that russia would be more open, month susceptible to economic sanctions than it would have been ten, 15 years ago. So there are some leverage points. Again, i dont think this rises to the occasion of Something Like the gulf war. And i just wonder, both obama and putin seem to be saying the things you would expect them to say at this point. I wonder if when they talk on the phone they really actually talk instead of the talking points. Did you see obamas speech yesterday . It was like he won the debate, it sounded very logical and everything, but i dont know, its his were going nowhere with this. We cant really do anything and europe is not going to go along with this. Other leverage points, russian gas going into ukraine into western europe. Its debatable who has the most in terms of economic sanctions. Its going both ways right now. Vlad, listen barry, look. Thats the conversation youre envisioning . Yeah. Crimea has been russian for 2,000 years except since you know, we have this and and its part of the british i just wonder if theyre really as much there was something overnight that some european officials said it looks more likely that the russians would go into Eastern Ukraine at this point because it looks similar to what happened back in georgia. If that happened, would that change your mind about anything . That would clearly support a diversified position going into this. Coming out of last year, fixed income, a lot of people are pulling money out and they were saying stick with your allocation. Its therefore moments like these. I think youre right. Chinese demand, the banking system. I would be paying more attention to Earnings Growth top line. I like what obama says, you know, economically, it doesnt affect us that much. Its a regional power. He said some but its in brussels and i like it, though. Because they disus all the time. Hes not enthusiastic about this because the lights are going to get turned off. But we lost georgia. And what else a couple years ago, right . I havent thought about it since it happened, not once. Do we lose atlanta and sea island, that georgia i might worry about. But do we really care that much about what happened im just kind of stunned hes getting away with it. We dont want to be isolationists. Coming up, why College Sports may never be the same. They went, we have to stand up, we have to lead. And why you may want to run for the border for breakfast. Thats right. Early morning taco bell, the worst meal i ever had at taco bell is the executive edge is next. As we head to break, check out the futures. Squawk box coming right back. Y in the u. S. , real estate in hong kong, and the optics industry in germany . At t. Rowe price, we understand the connections of a complex, Global Economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. [ male announcer ] when fixed income experts. Work with equity experts. Who work with regional experts. Who work with Portfolio Management experts, thats when expertise happens. Mfs. Because there is no expertise without collaboration. Welcome back, everybody. As we get ready for tonights march madness, the world of College Sports could be in for dramatic changes. The National Labor Relations Board has given Football Players at Northwestern University the green light to unionize. They can create the nations First College athletics union. Union lawyers argued that the Football Players are part of a commercial enterprise that generates hefty profits through their labor. The ncaa, big ten conference and northwestern oppose the union drive. Northwestern argued that the College Athletes are students and cant be put in the same category as factory workers. Wow, what do you guys think about this . I dont like change in general and im used to things the way they are. I need to see to determine how i feel based on what andrew says about this. Ive read the wall street journals take on it. I have not read the representative of the prolitarians yet. The nlrb has been very active as weve heard about criticism from republicans about how you know, whether its been stacked to some extent. Its been very active, andrew. This is a regional guy. He is saying they are Athletes First that need to be paid or need to have union rights and students second. Ive always thought that it was and this only apply toes private institutions, so if this does hold, whenever they play, whenever a State College i mean, its going to be totally different in the way things are done. I like the way things are now. I dont here is the view from the midwest. Were actually in chicago, northwestern is very close by. The proletariat view. My question is, is it only applicable to teams that are profitable . Meaning, if i was on the fencing team and the fencing team makes no money, can i unionize . Thats always been my big issue with whether you pay the athleteses or student athletes because we look at basketball, we look at football and we say, if its huge, commercial, then its well, not every football and every Basketball Program is usually profitable, either. Exactly. And a lot of them arent. We talked to the president of the ncaa yesterday. A lot of them are not at all. I think its only 20 or 25 of the number one ncaa schools actually make money doing this. The rest of them, theyre paying. And by the way, theres a huge demand on the other side that theyre paying too much because theyre in the making any money doing it. The idyllic notion win one for the gipper and watching these kids in the march madness, its all about the game. I dont know, i still, you know, i have this the idealistic view that, you know, getting an education and youve got a scholarship and youre there and this is sort of a that they work 50 hours a week and their coaches tell them when they can eat, sleep and drink, i dont know. When they brought up at t, i said theres no way that can happen. Look, i worked 50 or 60 hours a week when i was in college at the college newspaper. But i was also paid. It was a situation where i was paid to do that. So how do you feel about this . Im actually for probably not paying them as athletes, but for allowing them to benefit financially from their athleticism. Meaning if they if they want to sign jerseys and get paid for that, if they want to but then theres a whole pay thing that certain athletes are going to get paid and others arent. That to me is more free market than whats going on here. That makes sense to me. I do think athletes should be able to be paid for their likeness when its picked up in a video game. That to me was clearly wait a second, you have a Video Game Company coming in using your likeness and not getting paid . That is one off outside the actual theme of playing im not going to do any union bashing. I dont know. What did the teams get mediocre across the board if they were i dont know. I look at, you know, sometimes the public unions and you wonder no, im not going to like i said, im not going to do it. But i like the way things are now. It doesnt seem its hard to imagine how it would work in this new system. It would give you a oh, but you i think you agree with us, do you agree with becky and myself on this issue that they should be able to be paid for their likeness and things of that sort . If someone would tell me all of the pros and cons and i can total them all up. I dont know what the unintended consequences are. Maybe we dont know enough about that. Well keep talking about this and well get the ncaa guy back on. They were blindsided by this, too. The nlrb, andrew, its a big part of our life. I never heard of it before, but those four letters are a huge part of were going to have bill ford on later and rahm emanuel. Both of them we should ask this question to. And rahm, too. I want to ask him whether hes got darchbt take on that now at this point. Oh, no, they took away the breakfast story. I thought we knew about this . The taco waffle breakfast. I knew that that was coming. Youve been waiting . Today is the first day. We dont have any here to feed you. That makes me wonder who is running that place and why it isnt here. Because you tack about taco bell so much. Novak was on our list. We dont have any in chicago here, either. Focusing so much on china that he forgets what did i just said, the worst meal i ever had was graded taco bell . You did. Nothing here, nothing. Well talk about that story later. When we come back, is the russian economy Strong Enough to deal with sanctions . Well dig into that. And we kick off our lineup from the forbes reinventing America Summit. That is coming up from chicago at 6 50 eastern time. Plus, right now as we take a break, take a look at yesterdays winners losers. About Business Internet . Ok, how about thirty seconds . At comcast business our internet is fast. Up to 5x faster than slow dsl from the phone company. And our phones better too. Sign up for internet and voice and find out how to get four weeks of internet for free. Time to make the call. 8005016000 comcast business. Built for business. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and Andrew Ross Sorkin. Who is in chicago this morning for the forbes reinventing america conference. In the headlines this morning, citigroup shares are under pressure in a surprise move the Federal Reserve i would say again rejected citis plans for increasing its dividend and stock buyback plan. Weve seen this movie before, but we thought that they had done enough at this point. The federal expressed concern about the banks risk planning process. And stocks, thats 4. 70 a stock if you go back all the way to where it was, even though it says we did talk to Anthony Polini from raymond james. I was surprised, he said buy the heck out of it. Hes been saying that for a while, though, right . And you never know. And he says this is not a straight shot up. This is a recovery story. They have a lot of things they can do. Its expected to be a jagged longterm up. And he said when he was talking about management, he said none of this applies to current management. He was talking about most of the flaws, even vickram, yeah. And companies that had their plans approved by the fed are on the rise this morning. They include names like jpmorgan, sxern suppress, wells fargo, Morgan Stanley and bank of america. Elsewhere, the International Monetary fund is going to provide 14 billion to 18 billion in aid to ukraine once ukraine completes a number of fm reforms. The deal unlocks ai s aid from. With ukraine scheduled to receive 27 billion over the next few years, stay tuned. I dont think this money would be there if this wasnt ukraine any more. Overnight, there were suggestions that the things look more likely than initially expected. In the meantime, you have seen the micex rebound from march 14th. But there was a report that was out saying a new classified intelligent assessment concludes its more likely than not that the Russian Forces will enter Eastern Ukraine. Part of it is because it was reminiscent of what went through before it went into chechnya and georgia. You wonder, maybe you wouldnt see a huge amount of resistance in the eastern part of that country. Very difficult for them to military and theyve already lost the navy, essentially. Right. That might do it. And apparently its reminiscent to what it looked like before the russians invaded both chechnya and georgia. Lets talk about russias economy. The economy could contract by as much as 1. 8 in 2014. So will the president of ukraine escape Economic Disaster . Joining us with his thought is bef bennet. Jeff, whats been interesting is the micex rebounding. What do you think . I think clearly the markets are assuming, for the time being anyway, that the geopolitical situation doesnt get any worse. And i think what the market is successfully doing is pricing in events as they are today. So the rebound in the index clearly assumes that we dont get an invasion from russia of the ukraine and whether that will happen or the sanctions tit for tat between the west and russia escalated significantly. The markets did come under pressure once again. So i think the markets are doing a pretty good job of pricing in whats going on now, but its still obviously very dependent on how these events play out. What would you tell investors, if youre willing to take a risk, go back in. If not, steer clear . No. Were not telling investors to build positions in russia. Hes given the rules of our game and a lot of emerging markets around the world. Were looking at a neutral position in russia. We think what the market has done is essentially priced in events as they stand now. But i think were more inclined to sell and to buy because we are concerned about the geopolitical situation. You also just mentioned the economy, which is going to be under pressure. But were certainly not telling people to buy at this point. I think its way too early for that to be the case. You think that the big 800pound gorilla is china . That thought is going to be the dominant factor . Yeah. Certainly for emerging markets. I think china is undoubtedly going to be the biggest factor. We do expect the economy to be stronger in china than the current fears recently have been in the markets. We think growth is going to be around the 7. 5 level. We think some of the negative sentiment about china has certainly been overplayed without any question. In fact, our view is that emerging markets generally will show in time better growth this year than we saw last year the i think that will benefit the asset class overall. Clearly, russia is a big market. There is significant economic risk and investors will keep watching it. But whether you sell aggressively now, you need, i think, further significant geopolitical deterioration to make the market a sell at this point in time. You think the world bank is right, just in terms of what you might see in the economy in russia or do you think theres an even bigger downside . No, i doubt that. I think the world bank is right, talking about a decent negative number in the event the geopolitical situation escalates. We cut our number a couple of weeks ago to 1. 5 , thats plus 1. 5 . And thats where we are today and the consensus has come down below our number. We think theres a lot of downside to that number. But it, as i say, does depend on the geopolitical situation and how much more serious it becomes. Were assuming Capital Spending comes under pressure. Were assuming Consumer Confidence is weaker. With the ruble having come down, it will be a bit of a boost to exports and that will be an offsociety. So i think to get on a negative number, again, youve got to see significant rationing up of sanctions and a deterioration of the political situation. Thank you very much. When we return, new rules for doing business in cuba. Well have that story next. I watched the entire g2 yesterday. I had some time actually, two days, godfather 2. I know a lot of what happened. The cars look the same as down there. But it didnt work out for hyman ross and a lot of stuff happened. I think it was historically accurate. As we head to break, a quick check off whats happening in the european markets. Well be right back. K. Are you still sleeping . Just wanted to check and make sure that we were on schedule. The First Technology of its kind. Mom and dad, i have great news. Is now providing answers families need. Siemens. Answers. 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, everybody. In your planner today, the squawk planner, yoga and fitness apparently lululemon is expected to focus Quarterly Results in about a half an hour or so. Well have those numbers as soon as theyre released and well be talking to dana telsey about it. Also, 8 30 eastern time, the weekly jobless claims report. And microsoft kicks off an event at 1 ook p. M. Eastern time. The new ceo nadella could announce an office for ipad. Thats what we hear. Thats your squawk plan her and ill send it back to you over to, joe. Cuba is changing its Business Model. Lets check in with our chief International Correspondent Michelle Caruso cabrera. She thinks shes an expert on cuba. Arent you cuban . Im cuban american. So i defer to you. Thank you. You know, godfather 2 is pretty good, isnt it . We were that close to having a really cool place to go. We can all hope, pray. Guess what . Tell me. We have gotten ahold of what we think is the cuban investment log that is going to be approved on saturday. And point number one, it allows investment. Wow. What a concept. Yeah, what a concept. Allows investors. Businesses can be 100 foreignowned. Come on. Up until now, if you wanted to invest in cuba, no problem, you put up 100 of the money, but we retail at least 51 control and usually much higher than that. Guess what . They didnt get a lot of foreign investment. A promise of no ex appropriations. Here is a detail. Cuban ex ills can invest. Cuban exile somewhere in the world in the eyes of cuba, they can invest and cubans in cuba cannot. Why . Cuban exiles in the United States are profited by the United States government from investing in cuba. What theyve done with this law is im a cuban exile, i can invest but i can tunnel money to one of my family members and they can start a business as long as theyre not in cuba, right . Right. So this is meant to set up that tension and perhaps cause the cuban population in the United States to pull the exile and oh, okay. Thats smart. Right. Now, critics of this will say its not going to lead to a lot of foreign investment. Rule of law, you have a judicial system in which disputes can be resolved quickly and in a way that you have achieved justice. Take a look at the video here. Look at these women sewing on 1950s Singer Sewing machines. Cuba needs an investment. It needs a coat of paint like you wouldnt believe. Whether or not this will make a difference, youll hear all kinds of critics saying this is just a show. Maybe a lot of it is. Foreign investment . It was 55 years ago. It really was january 1st 1959, absolutely. Remember they arrested new Years Eve Party and i dont know whether that really happened. But that is the next and batista left and said good luck to you all and ive got to get the hell out of here. And over the next receivable years, castro exappropriated every and now, if im rahm and michael were still alive, they could go back and to did on what they were going to do. Right. Here is the other big issue. A lot of the property that was taken is still disputed. There are still american claims sitting in treasuries that until those get resolved, the cuban embargo doesnt go away by law. The cocacola plant where now they make kcola instead. What about all this . They moved to the dr, i think. The doe minute cminican repu. Those are huge, exactly. That never happened. You just wonder i cant imagine that the cuban people wouldnt be much better off. My mother to this day, you see the documentary, my mother to this day wants to go back and get my grandmothers house, which was huge and beautiful. Shay became the most famous photo in the world. Hes a murderer. To try to help people. And cant we say unequivoc unequivocally he oversaw the execution of thousands of individuals, yeah. That is i hear to a lot of people might consider yeah. All right. Thanks. Thank you, michelle. Ill be back to talk about the ukraine bill. Wow, you know about that . Youre not ukrainian. No. Your father was ukrainian and your mother was cuban . No. But i am against communism and total t to ta totalitaran okay. Lets get to andrew in chicago. We are in chicago live at the forbes reinventing america conference opinion were talking about the Biggest Issue of all after the break, education, education reform, the kills, we have the chancellor of the city colleges of chicago with us this morning and were going to talk about all that when squawk box returns right after this. Ameriprise asked people a simple question can you keep your lifestyle in retirement . I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry, but you worry. What happens when your paychecks stop . Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. Geico motorcycle. See how much you could save. One of the Big Questions is always about education and skills and where are the skills and how are we going to narrow the skills gap . This morning, i am joined by the chancellor of the city of chicago i always the city colleges of chicago, always very complicated. Cheryl hyman is here. She is working on a really unique program with the mayor this morning. Not just this morning, but for a long time now. To bring people from college straight into jobs. Where are pooeg People Education plays a huge role in the recovery of our economy. Typically when youve heard about conversations about how education will help, its been focused on k through 12. Many are realizing that the battle for today and tomorrows work force is taking place at Community Colleges. In chicago, we have thousands of jobs that are going unfilled while people are looking for work. Clearly theres a skills to jobs mismatch. Theres also information gap right. Because many people dont know where to go. We launch college to careers as a way to address that, to ensure that chicagoans dont miss what increasingly give us an example of how its working. Youre working with a number of companies here. Were working with a number of companies. Through research we found that 80 of the jobs in our region would be focused in six industries, health care, i. T. , transportation, distribution, logistics, business, hospitality, culinary and health care. So what we did was brought together Industry Partners that represent each one of those industries. And aligned each one of our schools with those industries and what theyre doing is working directly with our faculty to redesign our curriculum, to make sure our curriculum match work force demand, make sure its relevant. Theyre providing teacher practitioners. Theyre at the table helping us redesign the curriculum for those industries. That raises an interesting question, though. Thats right. Whose responsibility is it . In the old days i dont want to say the old days. Theres way atime when a number of companies had apprenticeship programs. Thats right. Real training inside the company. Thats right. A lot of those companies dont have that anymore. Right. Who should be paying for all this . I think its a shared responsibility. Companies cant afford to take on that large burden. I would say thats our responsibility. We are a college. We train and should be training and preparing our students to have credentials of economic value so they can go right into the work force. So it is a shared responsibility. I think its their responsibility to let us know the skills that our students need and its our responsibility to train them for those skills thats why its so important to have a modellike college to careers where they have become a part of the institution and working with our fact zbluulty. You raise an interesting question. What do you think of unpaid internships . Thats a controversial issue these days. We have some of those. I think unpaid internships that are embedded as part of the training helps prepare the student to be in the real world. Its not just a Technical Skills that they need, they need the soft skills, too. They need to learn how to function in these environments. They need to learn critical thinking. They need to learn problem solving. The only way to do that is to be at the company with the employees learning it. I think as long as its embedded as part of their training, its actually quite beneficial for the student. Is there a goodple xaple of a company thats kids that are coming out from one side of the college, into careers right now . Uhhuh. If you look at manufacturing, that is that is a booming industry that is impacting our nation, not just the chicago region. And so we have programs that are anywhere from six months to two years. Theres 14,000 jobs in manufacturing and students come out making 45,000 to 60,000 right out of city colleges. We have to run. Heres the question. 45,000 to 60,000. How much does it cost for the program. Our programs are about 89 per credit hour, one of the lowest in the state of ill zblil thank you for coming in this morning. Thank you. Appreciate it. Joe, ill send it back to you. Coming up, are the feds expectations for the economy all wrong . Former National Economic Council Director Larry Lindsey is here to tell us why they have to check the forecast. And why midland, texas may put the bakken to shame. More squawk coming up next. [ male announcer ] when fixed income experts. Work with equity experts. Who work with regional experts. Who work with Portfolio Management experts, thats when expertise happens. Mfs. Because there is no expertise without collaboration. Cy setback for citi. Plus, bank of america strikes a major settlement. We put the financials in focus. An oil find bigger than the bakken. Theres a whole ocean of oil under our foot. We talk to the ceo of apache about the major field found in midland, texas. And the man himself, steve forbes, the host of forbes einventing america conference will be here to talk about getting america back on track. Squawk box begins right now. Welcome back, everybody. This is squawk box right here on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin who is in chicago this morning at the forbes reinventing America Summit. Our guest host is Larry Lindsey, president and ceo of the lindsey group. We have a lot of grounded to cover with him over the next two hours. Before we start, though, lets take a look at where the futures stand this morning. Yesterday you did see a decline for the markets. At this point, the s p is within points of giving back everything it already picked up for 2014. You can see after those declines yesterday, the markets are indicated higher. S p up by just about 2. 5 points. The tenyear note right now you take a look, you see the yield is at 2. 7 . In our head loans this morning, 25 of 30 banks have had their plans for increased dividends and stock buybacks approved by the Federal Reserve. Thats the glass half full. Five did not make it. The most notable exception is citigroup. Well talk more about this in just a moment. It is a big day for microsoft ceo satya nadella. Hes expected to announce a version of microsofts Popular Office Software Suite for apples ipad. About time. A busy Economic Calendar ahead. We get the labor departments weekly report on initial jobless claims. At 10 00 eastern time, the National Association of realtors is out with pending home sales. Looking at some of larrys you cant say all of this stuff. I dont think you can say this stuff. The Federal Reserve blocking five banks from increasing their dividends or stock buyback programs including citigroup. Lets get more on this story from kayla tausche. They said no one other time. Theyve had time to do a lot of stuff. Joe, it was in 2012. So two years ago, that the fed actually rejected citigroup. That was one of the facets leading to the ousting of ceo vi vickrum pandit. With 12 banks participating in this exercise for the first time around it was bound to have more rejects than in the past. They have a long way to go to meet the u. S. Standards but in addition to hsbc, santander and zions were rejected each for a different reason. 25 banks did pass, though not all with flying colors. They did announce a boost to dividends and buy backs. Goldman sachs and bank of america planned to give back more than the fed actually allowed them. The fed placed new restrictions on them. They had to resize those plans based on the feds stringency. B of a says it will announce a 4 billion buy back. Morgan stanley doubled its dividend an initiated a 1 billion buy back now that they have finished that acquisition of smith barney. Citigroup, the only big bank to get rejected second time in three years. It was a huge surprise to the street as we can see by the move in the chart of citigroup after hours. Its now down by about 5 premarket. Analysts expected citi to have the most upside after years of lackluster returns. They put a lot of faith in the new ceo and some of the priorities he put in place there. The fed said citi hadnt done a good enough job assessing its own internal risk. And it needed to go back to the drawing board. That was a 6. 4 billion buy back and a dividend of a nickel. They are keeping the 1 cent dividend and 1. 2 billion program theyve had in place for several years. In a statement, the ceo said he was deeply disappointed that the bank would work with the fed to fix some of the issues. Its interesting. Last year, the fed rejected Goldman Sachs and jpmorgan for qualitative reasons. This time, senior fed officials said you know what, those were easy fixes. What we think needs to happen at citigroup is not easy, might take a lot of time, so they are not letting themmen crease capital returns. We have a long memory, kayla. Im sure that there are actual numbers that cause them to make these decisions. But if there was one bank just out of control, way too big, way too systemic and just sort of everywhere. Sort of ubiquitous with the financial crisis. I wonder if that plays into this a little bit. I think it does, joe. If you look at the language that the fed used in detailing the problems that it found with citigroup, it said the bank hadnt done a good enough job assessing its own risk. What happens if treasury yields rise by 500 basis points . What happens if the u. S. Housing market falls by 50 on the pricing front . Citigroup is so global, it touches so many different areas of the Global Economy they need to think about what if asia falls 30 , what if mexico falls 80 and the fed basically said you dont have enough of those potential scenarios in place to even gauge how much this could affect you down the road. Yes. Larry . Take another bank on that list, hsbc. Hsbc never asked for a dime from anyone. It obviously managed its risk. It is a global company. Why is the fed second guessing an hsbc which never took any money and which in the past obviously was doing a good job . Right. Kayla, thanks. Lets get more on the markets. Larry is here. Ill introduce allison first, allison deans, and our guest host, Larry Lindsey is president and ceo of the lindsey group. Do you, allison, youve worked around the street. Are you surprised at what happened to citi . Does some of it have to do with still the bad behavior that we associate with citigroup from the financial crisis . I this i part of it is that it is i dont know if its bad behavior, you had a sprawling organization and having worked in the office of the chairman for a brief period before i went to bank one, it was very hard to get your arms around everything that was going on there. They had a process called windows on risk. This was hard to explain. That was their explanation of how they looked at risk. Its sprawling and i dont think they had a focused and disciplined process. If you look back at citi historically, its great that theyre global and theyre good at figing out local markets. Theyve never had a good track record when it comes to credit. Whats helped them is their exposure to any particular area of credit that blows up has never been enormous because theyre so global. My sense is the fed aes lookint that type of credit. Is the fed, larry, fighting yesterdays i mean, the farm animal has already left the barn and the door has been shut. Do we need to are they doing what they should be doing right now . I was listening to the list of risks that are supposed to be able to be covered in your coverage of this. Are we supposed to have a bank that can cover a 500point increase in the yield curve or a 50 collapse in the Housing Market . There isnt enough capital on the planet to prudently run a bank with those conditions. The real risk is policy banking. Most of the risk in the u. S. Economy is always a policydriven risk. Running a bubble for too long. Running housing policy the way we ran it. Washington cannot admit that it is the source of much of the risk. And therefore, its saying in the private sector you have to accommodate for the risk that we induce. End of world scenarios are not taking into account in stress tests, are they . No. They shouldnt be. Biggest fear is a bomb in a nuclear bomb in new york city. Theres no bank that can survive that, is there . Theres certainly no bank. Nor would it make sense for any bank to plan for that kind of a disaster. The u. S. Government doesnt plan, really, for that kind of disaster. And to expect private institutions to do so is not a Cost Effective way of running things. I dont think the stress tests are that extreme. If they were, most of the banks would have buyback and Dividend Increase plans turned down. I think they do look back historically at what has been the potential risk in certain Asset Classes and want to make sure they have the capital cushion, the reserves in place as well as they have a process to handle and deal with Capital Raising or selling off businesses in those crises. I dont think theyre looking at armageddon. I think youre right, alison. What struck me is hsbc being on the list, obvious i a sprawling organization but one which has never taken a dime through anyone and made it through fine in the 2008 crisis. They did have a lot of problems after they bought Household Financial in the United States. Both with credibility and the way things were being done and credit losses. Perhaps they realized should things get worse there were some potential problems. Alison, just on the market in general, candy crush, i dont know, that didnt go well. Biotech is down 20 . Momentum stocks are having trouble. Were flat on the year, up two points on the s p. The fed is tapering. Most people say the 3 gdp growth that everyone thinks is coming is going to help the market and it should be going higher. Is this market still in an upward trajectory . I do think eventually but i think were in a wait and see period. The mark set fairly valued if you dont see improving Economic Growth and improving earnings momentum, particularly top line growth. So far, the excuse for not seeing any of that has been the winter weather. Its slowed things down dramatically. But as the weather issues start to go away, we dont see improving Economic Growth and that showing up in corporate profits. I think we do have a flat market and the market stays flat until we see signs of that improvement. Yes. Weather. The stress test include Global Warming . You dont include Global Warming, that is armageddon. We cant possibly survive that. Every spring is ten days earlier now. Whats the date . Its 22 degrees outside. It was 24 on mine. Its so cold. Thank you, alison. Thank you. We better talk to these people. Can you imagine putting that in a stress test . No one would pay a dividend. Larry will be with us throughout the rest of the show. When we come back, the man behind the forbes reinventing America Summit, steve forbes himself will be joining andrew in chicago. Thats coming up in a few minutes. First, taco bell is open for breakfast. Waffle tacos anyone . Plus, a twist on the ad campaign. Squawk box will be right back. Gotta get going. Gotta be good. Good . Good. Growth is the goal. How do we do that . I talked to ups. Theyll help us out. New technology. Smart advice. We focus on the business and they take care of the logistics. Ups . Good going. We get good. Thats great. Great. Great. Great. Great. Great. Great. Great. Great. all great i love logistics. Olets say you pay your tguy around 2 percent to manage your money. Thats not much, you think except its 2 percent every year. Does that make a difference . Search cost of Financial Advisors ouch over time it really adds up. Then go to e trade and find out how much our advice costs. Spoiler alert. Its low. Really . Yes, really. E trade offers Investment Advice and guidance from dedicated professional financial consultants. Its guidance on your terms not ours thats how our system works. E trade. Less for us, more for you. Welcome back to squawk box, everyone. The future this morning are indicated higher. We know they were yesterday, too. It didnt turn out that way at the end of the day. The dow futures are indicated up by about 23 points. The nasdaq futures are also indicated higher, up by 4. 5. The s p futures up by 1. 5. Taco bell fans, we mean you, joe, get ready for breakfast. The fast food chain will begin offering breakfast meals today featuring a waffle taco. Yum brands is looking to boost sales at its 6,000 locations. The stores will open at 7 00 a. M. They are even going as far as using Ronald Mcdonald in their ads. I dont know how thats possible . Isnt that a trademark . Mcdonalds is the number one player in the breakfast space, making up about 20 of mcdonalds sales overall, those morning hours. When taco bell tested this, it made up 4 of its overall sales, but that was before a national ad campaign. I have always liked sausage with syrup. You know what i mean . You ever had pigs in a blanket . Im not a huge fan of that. I make pigs in a blanket. You put eggs in a waffle with syrup. Ask andrew you ask him. Hes right here. Andrew, would you turn your chobani in for a little taco . Im game for a little waffle taco. How about that kale juice. Theres a taco bell at Ohare Airport in chicago. After the show im thinking i may see if they have waffle tacos on hand. Report back. Were making fun of this. I am not dismissing that out of hand at all, andrew, the potential for a waffle taco. Are you . Im not. I may do an onair review tomorrow if i can find my way to a taco bell. In the past its best to defer to taco bells judgment on stuff theyre introducing. I like their tacos, not interested in a waffle taco. Im just not. Joe, your bio has you eating a single hard boiled egg in the morning. Thats true. Lets do truth in advertising. Good point. Were live in chicago this morning. Within we come back from the windy city, we have steve forbes, the host an ringmaster of this conference were here for. Forbes are reinventing america conference. We have steve forbes within we return. Back in 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. Predibut, manufacturings a prettin the United States do. Means advanced technology. We learned that Technology Allows us to be craft oriented. No ones losing their job. Theres no beer robot that has suddenly chased them out. The technology is actually creating new jobs. Siemens designed and built the right tools and resources to get the job done. Lights against the sky welcome back, everybody. We just got quarterly numbers from lululemon. The Company Earned 75 cents a share for the Fourth Quarter, beating street expectation s by3 cents. The company did say that Current Quarter earnings and revenue would come in below analyst estimates. That stock is up 1. 6 . Lets get to andrew in chicago. Andrew, take it away. We are in the windy city and we have steve forbes with us this morning. Were at the forbes reinventing America Summit. And steve, thank you for being here. Good to be here, thank you. Thank you for hosting us. What is this all about . What this is about, even though the economy has been punk since 2008, theres a lot of things happening in this country. One of them is reinvention of manufacturing. We know about natural gas, making us the head of the chemical industry, that means more capital for new things. The Railroad Industry is going through a revolution, 3d printing. All of this positive turbulence is taking place, since the 70s, terrible decade but you have the rise of microsoft, apple, amgen. We thought it would be a good idea to bring the makers together, the schools, educating skilled workers. Honeywell, what are they doing, ford. Its an exciting thing. Youre optimistic. Let me throw a little bit of a little less optimism on here. I want to read you something that Steve Rattner, you know well, recently wrote back in january New York Times in the. He says reassuring of manufacturing jobs is a myth. He said in order to compete, these new jobs offer less in health care, pension and benefits than Industrial Workers historically received. Do you agree with that . And is that a problem . You can talk about pay packages that have changed since the 1970s after the great inflation and relative decline of manufacturing in this country. The question is where are we going from here . Yes, a lot of stuff still goes offshore. What is amazing, a lot of stuff is becoming inshore. We are becoming competitive. Its not because of low wages. Its because what made this country great in the past was were always on the you canning edge of new things. Do you think a company like apple, which manufactures so much of its business outside of this country, typically in china, that those jobs are jobs that we want here in the u. S. . Were inventing new jobs, thats the promise of Something Like 3d printing. Yes, youre getting traditional ones like chemicals coming back onshore. You look at the auto industry, nonlegacy companies. Legacy companies are getting their act together. Were talking with bill ford this morning. Also foreign manufacturers do very well in this country. The american skilled worker is there. You dont try to compete on wages. You try to compete on technology. So were combining the old with the new. Thats whats exciting. Were also going to be talking about politics here this morning. We have the mayor here. Sure. How much does regulation play in all of this in Larry Lindsey was talking about regulation with the banks earlier. Regulations have become a killer, just as they were back in the 1970s. I think youre starting to see a backlash, saying what are we getting to are a buck on these things . What works and what just gets in the way . Youll start to see it in the Financial Sector and other areas. Yes, we have a regulatory wave but i can see a counterwave. Youve publicly been supportive of rubios regulation proposal. I want to read you a criticism of it and have you respond. This coming from the new republic of all places. Im sure we can make a comment about that. Danny vinick writes, the plan has nothing to do with cost benefit analysis. On the contrary it sets up a cap based solely on the economic coasts of regulations regardless of benefits. How should regulation be measured . Well, there are various ways to do it. We know between 1. 8 trillion and 2 trillion in this country goes for regulation. A lot of it is just junk. One of the things we should be doing more of is what is the goal . Dont tell us how to get to a goal. Well figure that out. So a lot of the stuff micromanaging. Micromanaging banks. Here are the things you should be doing. How you get there is your own business. More goalorienteds. We have a question back at headquarters. Joe, do you have a question . I always have questions and comments, andrew. Good to see steve. You two guys, are you getting along okay . This is like coke brothers meet krugman. Were holding hands. You cant see it. Are you . Yes. Apparently the president just met the pope, just moments ago. I dont know whether we have video. We exchanged gifts. Apparently they gave each other your book how capitalism will save us. It was such a coincidence that at the same time they both gave no, actually that did not happen. I didnt know the president visited with you, joe, this morning. Thats news. Yes, the pope. Do you think theyre both talking about the shortfalls of capitalism at this point . They might be but i think the pope is ahead of the curve in terms of understanding what markets are about. What he wants are results. He came from a continent where you have crony capitalism to farewell. I hope the pope is telling the president , dont go our way with crony capitalism. Ive learned from the mistakes argentina and others have made. Well have rahm on later, too. Steve, are you optimistic that the worm has turned 0 are that the pendulum will start swinging back towards less, you know, Central Planning and more free market capitalism . I dont know if im optimistic. Are you . Or do you think 2014 might help in november . I think 2014 will help. You look at a city like chicago. Rahm emanuel, mayor, is a big proponent of Charter Schools, quite the opposite of what we saw in new york city. He wants results. Hes resultyorntd. I think youll see more and more of put the ideology aside, how do we make this thing work . People are on the ground. Mayors say the rubber meets the road. More likely the rubber keeps hitting you in the face when youre mayor. You have to be ready for anything. Its more of a cando attitude thats more exciting. Company is up for sale. Whats the process, where are you . Were in the process, were happy. Well let you know. I hope you let us know first. Steve, thank you for having us and hosting us. Thank you, andrew. Ill send it back. More squawk box coming up next. Xt. Welcome back to squawk box, everyone. Lets get our headlines for the morning. Caesars entertainment announcing it will close harrahs tunica mississippi. The wall street journal says that twitter is preparing to roll out a new music strategy this week. The relaunch comes just a week after twitter pulled its music app from itunes store. The company is trying to emerge from the shadow of a food safety scare in 2012 and fend off rivals with innovative homegrown fare in china. Yum gets more of half of its overale sales in china and plans to open 700 stores there this year. The imf reached an agreement for loans. It will get approved. 14 billion todays 18 billion is the imf part of the deal, a precursor to a lot of other deals that would get done by other international bodies. There are conditions. Ukraine has to have a new Monetary Policy in which they target inflation. Before they used to target a fixed Exchange Rate and would intervene in the forns currency markets. Now theyll move to what is much more conventional Monetary Policy, the way we think about it in the United States. Theyll have to recapitalize the banks, most of which are in deep trouble due to a bad economy over the last several years. How theyre going to do that, they were vague and silent on. Thats important and well find out over time what they mean and want. Deep spending cuts, you go to the imf, the federal government of your country will always face the mandate of deep spending cuts. Consumers will have to pay the real cost of energy. Gas has been subsidized heavily since the soviet days. Its come to be expected by the population. All kinds of distorgs in the economy, huge problems with deficits in the government. Theyll raise prices drastically, by at least 50 starting next month and then theyll eventually get to the point where consumers are paying the real cost of energy. And new procedures to reduce corruption, because behind closed doors, the discussion about ukraine is how deeply corrupt, kleptocratic, distrustful, horrendous the place. Theyre getting subsidized. The consumers pay relatively nothing relative to the cost. Businesses have to pick up a lot of the costs. The consumer ends up picking it up in taxes. Nothings free. It was found as a geopolitical entity. It definitely is. Thats what this is. For sure. Well watch to see how tough the enforcement of those are. They will say there will be prerequired actions. Behind closed doors months ago they were saying there will have to be an election first. Guess what, we havent had the election. They are very much there to try to keep ukraine in the western sphere of influence, not in the russian sphere of influence for sure. Thank you, michelle. Lets turn our attention back to our guest host, par Larry Lindsey. Especially if their growth forecast comes to be true. Alison was talking about 3 growth. Thats the feds target for this year. We know how fast productivity is growing. We know how many warm bodies are coming into the labor pool, 0. 6. The supply side of the economy is growing at 1. 75. To fill the gap from 1. 75 to 3 , you have to lower the Unemployment Rate 1. 25 points a year. Thats a tenth of a point a month. Wee were at 6. 7 in february, were be at 6 in september and 5. 5 next february. Thats a long way from june and, frankly, i dont think the fed will wait until you get to 5. 5. Once they get a 5 handle theyll have to raise rates. One two of things has to give. Either youre not going to get your 3 growth or youll have to raise rates sooner or some mix of both. Both of those are bad news for the markets . Yes. Everyone said that the new fed chair, janet yellen who i think is a great choice, misspoke on six months. Maybe she shouldnt have been specific on the exact timing but she was, you know, she stumbled into the truth. The old forecast was december. They were going to raise rates until december of 2015. That will be thats a year after theyll probably do it. What is happening is the fed is gradually stumbling over its own math and coming into the realistic situation that growth is going to be lower and Interest Rates will have to rise sooner in order to make the numbers work. If you were to put a date on it, a year from now . Well, im on the Slower Growth camp. I dont think were coming anywhere near 3 growth. Yes, i would say probably next february would be about the right time. Wow. What would that mean . I guess the markets get there gradually. It depends on whether the markets like the fed or growth. Its been all fed up to this point. Right . Yes. They are actually going to get neither. They are going to get growth more like a 2. 5 or 2. 25. Your scenario describes the messy exit that people dont think will happen right now. Its hard to get out of this. Were addicted to it. Interest rates are zero. To have unemployment be something close to 6 and have Interest Rates be zero is truly unprecedented. Interest rates dont have to be 3 or 4 but zero is too low. And do you think 2. 25 with zero is not that bad for the markets hen . I think it will be 2. 25 and 50 or 75. Its basically zero. That still isnt that bad. Its not awful but its certainly not where Market Expectations are now. That means theres still a lot of adjustment that has to happen between now and then . Yes. The near end of the yield curve if you were king and had your way, if we cut taxes and did things for corporations, could we go to 3 . Easily. The reason were not having faster labor force growth, the cbo put its finger on it, we have developed a lot of incentives out there. To not work. Its not that people quit their jobs to go on welfare, its that once theyre receiving benefits, urban institute, others have done studies on this, the effective tax rate on going back to work in terms of lost benefits and the taxes you pay is north of 50 . People dont go to work when more than half of it goes to the government. The talk is to raise earned income tax credits. We have a benefits mountain of eight or nine different benefits that you can get over that income rank. They all phase out at different rates when you put it all together, if for example married couple, one of them working, the incentives for the other one to go back to work just arent there, because the loss of benefits. You have to look at day care, new clothes, set the alarm clock. You have to do all kinds of stuff. Whos going to get the kids 0 of to school and meet them at the bus . Its complicated, its tough out there. Larry lindsey is our guest. As we head to a break, check out shares of baxter international. Its Just Announced plans to split into two separate companies. One of the companies will focus on biopharmaceuticals. The other on medical. The oil and gas boom leading to huge growth for the state of north dakota. The states governor will join andrew in chicago to talk about that. Squawk box will be right back. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. Hey ray, my uncle wanted to say thanks for idea hub. O well tell him i said youre welcome. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. Yea, and these ideas are across the board bullish, bearish and neutral. I think you need a bigger desk, pal. Another one . Traders love our trading patterns, now with options patterns. Whats not to love . They see what others are trading like the days top 10 options trades by volume and get ideas yea i have an idea how about trading that in for a salad . [ male announcer ] so come trade at the place thats all about options and futures. Optionsxpress. Open an account today and get a 150 amazon. Com gift card when you call 18883303137 now. Optionsxpress by charles schwab. For what reality teaches you firsthand. In the face of danger, and under the most demanding circumstances. Experience builds character. Experience builds confidence. And experience. Has built this. Introducing the 2014 glk. The engineering and the experience of mercedesbenz. See your authorized dealer for exceptional offers through mercedesbenz financial services. There is a lot of clowning around this week in north brook, illinois. Characters from around the world are gathered for the world clown Associations Annual convention. They are businessmen, veterans, Police Officers and moms. But this week their alter egos take center stage as they learn and share the tricks of their trade. 250 international clouts come together each year for the convention. There have been reports recently of a clown shortage in the United States. But clowns at the Convention Say there are plenty of clowns, they just dont join professional organizations as they have in the past. Theres one in staten island. I havent seen this one. I think its a hoax. Its been on usa today. Hes very scary. Creepy. A lot of people have a clownaphobia. Cramer had it bad, not our cramer. The dad from modern family has it, too. Al bundy . No, phil dunphy. Its hilarious. We watch that. Lets go to chicago. He happens to be 25 miles away from the clown convention. Hes in chicago at the forbes reinventing america sum zblit coincidence, i think not. I knew there would be a clown joke. I knew Something Like that was coming. They wear less makeup typically than you, andrew. Were here in chicago what a come back. Im going to ignore that were here in chicago at the forbes reinventing America Summit. Im joined by the governor of north dakota, jack dalrymple. Breaking news overnight, u. S. Census came out, youre the Fastest Growing state in the country. Fastest growing gdp in the country, Fastest Growing personal income in the country. For lots of reasons, i would argue a lot of it has to do with energy. One of the questions i would have for you as a governor is to the extent there are things youre doing in the state that are helpful, are they applicable to other parts of this country . I think without any question there is a model that our state is following that could be followed anywhere in the country and come up with the same kind of results. I admit, it does help to have an oil boom going on in your state, but beyond that, we have low unemployment everywhere in our state, hundreds of miles away from the nearest oil well. Microsoft is expanding, caterpillar, Companies Like that. Unemployment in your state, under 3 . Right. Gdp last year in your state, 7. 9 . Right. Prior to that what was the 13. 4 number . That was the year before. You know, the 15year average for our state is 8 per year gdp growth. So we talk about, you know, the sustainability of it. Youll see states that spike up and have a good year. But we have been doing this for 15 years. What percentage of the revenue or the business in your state would you describe as Energy Related and then what has been built around that . Well, you know, we still collect only about 25 to 30 of our state tax revenue from oil and gas taxes. Were by no means totally dependent on oil and gas. Agriculture is huge, of course, in north dakota. We have probably as many Tillable Acres as any state. Technology is working, advanced manufacturing is working. You say microsoft has come to the state. Microsoft has the second largest campus they have is in fargo, north dakota. What goes on at the microsoft campus . I did not know that. What goes on at the microsoft campus in north dakota . They focus basically on their accounting software, all of their small and Medium Business software is located in fargo, north dakota, over 2,000 employees. And you know, thats something that most people dont know. Whats the tax rate in your state . Well, we have a very low income tax rate. I think were like, you know, the third lowest of all states that levy an income tax. Were lowering taxes every time the legislature convenes. When you think about the oil workers in your state, are they locals . Are they instate, coming from out of state, whats happening . Theyre evolving from the transient oil worker which is when the oil boom starts. Theyre evolving into families, married people, actually wanting to setting down in north dakota. Thats why we have the Fastest Growing housing sector in the United States. Lets talk about Energy Efficiency issues. Nat gas flareup efficiency is huge in your state, north dakota burning almost a third of all natural gas that it produces, just away into the air. How does that change . Thats what happens when you have a really big boom going on. Weve got from to the number two Oil Producing state in the United States. We have to keep up with that. Its not easy. The wells are coming in every day. A lot of wells are being flared. Its a matter of budding the processing plants, getting the infrastructure in place to gather it. Youre obviously a proponent of keystone, the pipeline. What do you think the chances are it actually goes through . Ive given up trying to handicap that issue. Its been around for so long. I thought that when the state department cleared the way for that, that really there is no reason left for it not to be approved. Were still hopeful. I was with the president about a month ago. Thats right. He said that we would know within a couple of months. We have to run. Given how much your state depends on gas and oil and energy, what do you think of green energy . Wind, solar, other stuff like that . We are from a policy standpoint, we are all of the above believers. We think lets bring it all on, lets have it all compete. Its all good. We dont believe in choosing a form of energy. Okay. Governor, thank you for being here. You bet. Good luck with the conference. Really appreciate it. Becky, back to you. Its north dakota and texas seeing a huge energy boom because of all these drilling techniques. We have the number one driller in the Permian Basin. The ceo of apache will talk shale opportunity and the state of the industry. Squawk box will be right back. Welcome back, everybody. Lets talk more oil. Some of the more bullish estimates say that shale could produce four times more than is found in other areas. We have president and ceo of apache. Youve been changing the mix of the company to make sure you take advantage of all the oil thats here now base on the new drilling forming as. Where do you stand in terms of the transformation . We started back in 2009 and started transforming the company back to north america. Historically, apache had been a north american company. We started Going International in early 1990s. With the idea we could find bigger reserves. It became obvious we could find those same reserves in north america. In 2009 we started transforming back to north america. The Permian Basin, the anadarko basin. We have 3. 3 million gross acres, 1. 7 million net acres in the Permian Basin. Does that sound right to you, the idea that this cline shale formation could have three times the amount in the bakken base in . Those are two distinct shale plays. If you look at the permian ba n basin, its a totally different basin. Cline shale, we drilled 51 wells last year. The economics are Getting Better were going to drill 35. I dont think at this point its in a position to be called the next bakken or eagleford. Certainly the permian base inwill end up being bigger than the eagle or bakken, frankly. Last year, your north american liquids volume increased 46,000 barrels a day. Thats an increase of 46 . What happens this year in 2014 . Well, weve decided toward 15 to 18 liquids growth in north america. Our overall growth rate in north america is beginning to be about 12 to 15 . Thats going to be powered by that Permian Basin and the anadarko formation. I feel good about where we are going into 2014. I think weve got the makings of a real growth spirit here with apo apache corporation. With all that coming online, do you think it can stay at current levels. If you look at the markets, 97 is priced on brand. Wti sell at a discount to world prices. You know, a lot of that is being taken care of with some of the pipelines coming out of the Permian Basin to the gulf coast. And at some point im sure from a political standpoint it will make sense to start exporting crude oil out of the United States. If it doesnt, dont you think well start seeing things being capped in the fracing areas . Im sorry, i didnt hear the questions. If we dont export, arent we going to have to start capping a lot of the wells weve been putting in, particularly in fracing portions of the country . I doubt very seriously we get to the point where we have to start shutting in wells because we dont have capacity for the crude oil. We export a tremendous amount of Refined Products right now. I dont see that as the problem as much as i do the differential between wti and brand, frankly. Let me ask you this. Where does wti have to be in order for some of the wells to be profitable for you . The same thing with natural gas. What makes it not profitable . What level . Well, right now, especially in the Permian Basin, you could go down to 50, 60. It depends on the play, certainly. On the gas side, youre really looking at, at least in our estimation, as you need to have a sustainable 5 gas price. But the problem with gas prices are, is theres so much, an abundance of natural gas in this country. Every time you start creeping up on the price, you start creeping up on the rig. You just oversupply again. All right. Steve, thank you very much for joining us. Thank you very much. Thank you for having me. Thats a good problem to have, though. So much gas. It should be clownaphobia. Its not. Its cular aphobia. Its derived from a greek term for people who used to work on stilts. Its cularaphobia. Its like mickey mouse or goofy. Most kids cry the first time they see those. Its amazing that mcdonalds picked that and has done so well with it. Taco bell is using Ronald Mcdonald but not this Ronald Mcdonald. Theyre using guys all over the country with the name of Ronald Mcdonalds. Thats the real one right there. He used to sit behind us here on the screen. It was unsettling. Coming up, executive chairman of fording with bill ford. I wonder if hes related. Thats weird. What a coincidence. Hell join andrew at the forbes reinventing America Summit. Textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, Global Economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. With investment information, risks, fees and expenses i just ah woke up today and i said i need something sportier. Annnd done. Ok maxwell, just need to ah contact your Insurance Company with the vin number. Oh, i just did it. With my geico app. Vin is up to the loaded. Ok well then jerry here will take you through all of the features then. Why dont weeeeeeeeeeee go out to the car. Ok, ill just be outside. Ok, yeah. His dad is my boss. Yeah. Vin scanning to add a car. Just a tap away on the geico app. Under pressure. Citigroup stock sliding after a rejection by the fed. Well take a closer look at what it means for the bank and the health of the Financial Sector. Were at the forbes reinventing america conference in chicago. In this hour, the executive chairman of ford, bill ford, is going to be our special guest. Plus, the mayor of chicago, rahm emanuel here to talk about business and politics. Plus, is lululemon the right fit for your portfolio . The companys earnings out, we get street reaction and talk retail spring sales. Chicago chicago chicago chicago i will show you around welcome back to squawk box here on cnbc, first in business worldwide, im joe kernen along with becky quick and Andrew Ross Sorkin who is at the forbes reinventing America Summit in chicago. In just ten minutes, executive chairman of ford, bill ford, will be joining andrew. We have the futures at this hour after a rough session yesterday. It says up 14 points or so. Not a whole heck of a lot. The s p is at 1852. Closed last year at 1849 and change. Were flat, really, sort of, on the year. You thought it was bad when january was down to flat. Yes. And everybody that comes on says it will be an okay year but it will be volatile and not like last year where you could print money in the stock market. As opposed to the last four years. I dont know what to say. First week, first month, first quarter. Maybe mob. A business did i day for economic numbers ahead. At the bottom of the hour we get a final revision for the Fourth Quarter gdp and jobless claims. At 10 00, the latest numbers on pending home sales. Were watching shares of lululemon this morning as well. They Beat Estimates for the most recent quart i by 3 cents, i think. Its giving a cautious outlook for the Current Quarter. As a result, that stock just over 1 earlier is looking like its down 1. 2 . Baxter International Shares are rising in premarket trading after it announced plans to split its two publicly traded companies. One will focus on b biopharmaceutica biopharmaceuticals. Shares of Ally Financial will soon be coming to the New York Stock Exchange. The ipo process has been launched for the bank saying it will sell 95 million shares. The treasury holes about 177 million shares of ally. That was the old gm. Gmac. It so far recovered about 89 of the 17. 2 billion it invested in the bank during the financial crisis. Its known for the commercials where the guy keeps giving Something Really Nice to one kid. A pony to one kid and a fake horse to the other. Terrible, terrible. Ice cream for you but you dont get any. I dont know why that helps people go to ally. I just think the guy shares of citigroup getting hit yesterday, the company failing the feds stress test. Meanwhile, Goldman Sachs, bank of america and others passed but only after reducing requests for buybacks and dividends. Joining us with perspective is mart marty mosbmosby. I think were in the process. The process is the fed wants the banks to get better at Risk Management. Theyre heightening the bar every year. We have to remember that citigroup has not once but, you know, a couple times in the past put the u. S. Financial system at risk. Theyll be more heavily scrutinized. What were looking at, though, in failures are the two hardest things to do. Its not about the amount of losses you could have in credit. Its about earnings volatility under the stresses, then also imagining what could happen that youre not expecting. So those are the things that were talking about here in and of themselves, the fed said they werent enough to fail from a qualitative standpoint and were making significant process. The fed wants to make an example and make sure the banks are Getting Better each year as we go through the process. Is it fair you say citi has had some problems in the past but its not the same guy running the place. Is it fair to penalize the bank because of that. They were citing the complexity of the bank. You have new management, a new attitude and new approach, which, over time, will spell out less risk than what weve had in the past. They are making progress. Unfortunately youre looking for a stamp of approval which wont come. Theyll be able to start whittling away at the losses. Theyll be able to look at what theyll be able to do with the divestment of those assets. Those are positive things that they can show the market theyre making progress this year. Were reestablishing the stock here and well start to see progress as we move through the year. Why would you buy a Large Financial Institution . Theyre being turned into utilities. The regulations arent going to allow them to grow and now theyre limited on stock buybacks and dividends. Whats the incentive for buying a big bank right now . When youre looking at the big bank, each has its own strategy. Its not, in general, the positive sign, we can look past citigroup. Lets look at wells fargo also where they were able to increase their dividend 17 , which reflects a very strong earnings momentum. Theres a model here thats being able to address financial needs of customers across the country. Leveraging the National Franchise and being able to attract more customers. So we think thats a very positive sign. The banks in general are being able to increase their payouts every year. So while this is waiting for string in new york, we are still seeing progress. And eventually well get to the point where they can pay meaningfully higher out in dividends and share repurchase. We just got the news that Ally Financial will be making an ipo, its launched the ipo process for this. It will be selling 95 million shares. Its already going to give underwriters the option to purchase an additional 14. 3 million shares. Is that a good potential ipo candidate . Were looking at the ability for the mark tote look into Consumer Finance companies. That also helps in the sense when you start looking at what City Holdings has, they have a big Consumer Finance company there that can actually be able to ipo or be able to roll out, which pulls down their assets that they want to divest. It does show theres liquidity in the marketplace which could be favorable as the households have begun to deleverage, beginning to get their Financial Condition in shape. We would think the Consumer Finance would be a nice business over the next several years. All right, marty, thanks. Well leave it there today. Appreciate your time. Thanks for having me. When we return, we head back to the windy city. Thats where andrew is at the forbes reinventing America Summit. Hell be joined by a special guest, the executive chairman of ford, bill ford. Thats right after this. Right now as we head to a break, check out the squawk box market indicator. Shows you the futures are up but only by about 21 points above fair value. Squawk box will be right back. We route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back to squawk box this morning. We are coming to you live from chicago. Forbes is holding its reinventing America Summit. Im join eed by the ceo and chairman of ford, bill ford. Talking about manufacturing and jobs, youre one of the few businesses in this country that has a lot of manufacturing jobs. Are there still more jobs to be had in the Automotive Industry . Or given robotics, aone of the other technologies theyre talking about, is it a slimming field. Were becoming more hightech in the way we make cars but were adding 5,000 jobs this last year. Were bringing some of the jobs from overseas back home. You mention the windy city. We make explorer here in chicago and we export it to almost 100 Different Countries. Youre talking about bringing jobs back here, the reshoring. What are the economics of doing that right now for american businesses and automakers in particular . It depends. Youre looking at different currency fluctuations around the world. It always changes at a moment in time. We are a lot more competitive today in america than we were six, seven years ago. Being competitive in america also means lower wages. This is vw, not ford. I want to talk about unions in a second. Their beginning wage for Assembly Workers is 14. 50 an hour, with benefits, that goes up to 27 an hour. Vw in germany, 67 an hour. Theres a big distinction. But there is. You have to be careful with that because, for instance, you have these entrylevel wages that grow into that kind of wage that you just talked about. But one thing for sure is, when our times were darkest in the 0, 07, 08, 09 time frame, the uaw helped our industry get back on its feet, helped ford get back on its feet. A lot of people would say the uaw put other companies out of business effectively. I cant speak to other companies but look, theres no question that at ford, its a twoway street. Over a manyyear period they were asking for more but were the ones that gave it. When we got into a tough period, i sat down with ron and i said, ron, you have to help me save the ford motor company. We didnt have to go through bankruptcy and didnt have to get a federal bailout. Did he that. They took the health care and put it in a viba on their books. He helped make us more competitive in the plants. And as a result were growing now in north america. Given your support for the uaw, which i think thats what im hearing here, were you surprised that when it came to vw in tennessee that the workers didnt want to join up . Look, surprised, no, because theres a long history of organizing that didnt go well in the south. I would say this, i say this all the time, weve had a great relationship with our work force. I dont look at them as union nonunion, i look at them as ford workers. Whether youre white collar or blue collar. We have second, third, fourth, fifth, even sixth generation of ford workers in our plant. Theyre the ones that pulled us through the dark days. They love our company. Theres another company that went through darker days, which is general motors, and is going through its own dark days right now, mary barra. What do you make of what happened there, what should have happened there . I shouldnt comment on that. Its a tough situation for everyone involved, obviously. One thing we do, whenever our competitor goes through Something Like this, we try and learn everything we can from it. We review our own processes to make sure that were robust. Let me ask you this then. In your mind, do you think Something Like this would happen or couldnt reach the top of a company . If Something Like this were to happen at ford more quickly . Its hard to speculate. I dont know all the facts over there. I think they are still being uncovered. Its hard for me to comment. One thing i do know is that, you know, weve had, you know, issues in the past. We learn everything we can from them. We review our own process all the time. I just dont know all the facts there. Lets talk about another bit of a controversy which is tesla and the dealership issue in new jersey and perhaps around the rest of the country. Do you think they should be able to sell direct to customers . Well, its going to be interesting to watch that unfold. We have a great model with our dealer model. Weve had them for over 100 years. Our dealers have evolved. There was a period of time when our customers thought our dealers and manufacturers perhaps werent, you know, as customeroriented as they should be. Thats changed a lot in modern times. Were very happy with our model. I dont know whats going to happen. Do you think it should be allowed . Meaning if i started a car company tomorrow and wanted to sell direct to consumers, would you campaign or lobby to say no . I think our dealers as as i said, i think that model really works. I dont know whether it should or shouldnt. The real question is whats the best way to serve the customer . Ultimately, our dealers have many years knowing the Customer Experience and treating them well. The important part is the after sale, all the service. Our dealers have figured out thats where you treat your customer well. If you do that, theyll come back to you. Right. Joe has a question back in headquarters. Yes. Were you intimately involved with the company back in the explorer days . You remember that . I was, yes. And i tried to think if i were running a company, how many times per year do you hear about something that could be a recall issue but, you know, you cant recall everything. Its hard to decide what rises to the level of that. And its tough its a tough decision to make, isnt it . Well, you know, what you have to do is let the data tell you what the story is. I mean, thats one of the things that weve learned over the years is that because youre right. There are issues out there in the field all the time. But the data has to really lead you to the right answer. And then so in our case, we feel we have a very robust process and when the data is telling us we have an issue, then we act. Yes, because if you want to do the right thing obviously, but if you jumped on every single issue and order a recall, wed be the government would be owning the automakers every five or six years it seems like. And its very difficult. Well, look, i have to desire to have the government own ford motor company. I remember that. Yes. Well do everything we can to make sure that doesnt happen. Would it surprise you that the government and gm, neither one of them, were able to connect 12 deaths back to some similarly related problem . Does that say theres a problem with our tracking systems just from the regulation point of view . Look, i really feel like i cant comment on it. I simply dont know the facts on that. They are coming out, i read them just as you do. Im no closer to them than you are. I think were still learning a lot about it. All i can say is, we at ford are trying to learn every lesson we can from this. From this situation. Real quick, just a couple more. Not on the dealership issue. But i want to get your views about tesla broadly. Is that a company you look at and you think has a Bright Future . Is that a company you say has made the wrong bet on one technology . Anytime you have disruption in an industry, its very interesting. And you know, tesla came in with a different Business Model and they came in with a point of view on technology. And i find it very interesting, and because one of the things weve done at ford, that i have long advocated is to push the envelope on technology. And so during the dark days for us, we made two big bets which were really not at all where ford was. We said we wanted to be the fuel economy leader and the technology leader, both of which were weaknesses for us. Here we sit a few years later and weve largely achieved that. Im always interested in what a competitor is doing. And i spent a lot of time in silicon valley. Im on the board of ebay, i have my own private equity fund that takes me out there all the time. Im fascinated by new technology. Right. You got me i was going there for my last question. You are on the board of ebay, given the debate over splitting the company and paypal, not in the automotive space but i want to catch you on it. What do you think of car icon co carl icahn coming in here . One thing is, we at the board have had this discussion internally and will continue to. I think john donahoe has done a good job, very good job over the years. I think hes an excellent ceo. But you know, these are the kind of questions investors ask. And so we at the board spend a lot of time working through this. Were you on the board during the skype sale and watch all of that happen . Yes. Now this debate over mark andreasens role . I probably shouldnt comment on fellow directors. Okay. Thank you. Were going to leave it there. Thank you, andrew. We send it back to hq. Thank you, andrew. Thanks, bill ford. Two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. Welcome back to squawk box. Lets get back to Larry Lindsey, president and ceo of lindsey group. Larry, expert on economic and fiscal things, youre to the right of center. I come to you for advice and solace at different times. I think politically i can push back and ron paul said, you know, ukraine is halfway around the world. And its got nothing to do with us and weve had forets into Different Countries that didnt work out so well. This is how we should be acting right now. Its not in your National Interest to be the policemen of the world. You think we really messed this up in terms of looking weak . I think the main thing you have to do is not overcommit. If youre going to have the since before pearl harbor, you cannot protect yourself do we need a bigger military . I think in the end were going to repeat the same mistakes we made after past wars where we disarmed too much. When the policeman goes home, lets face it, the bad guys start to run amuck, then the policeman has to come. I dont blame americans for being tired. I mean, weve been policing for 70 years. We got a lot of bad press overseas, a lot of criticism for doing so. No one really supported us in this effort, they criticized us. No youre welcome. Enoughs enough. And so i get why the Political Landscape is going in that direction and its true in both parties. The other thing about america, weve always preferred to stay home. We usually require a president to constantly remind us of our overseas commitments in order to give up our preference for staying home. Thats not president obama. Thats not what he was elected to do. So i think were in a natural, lets retreat from the world phase. Is that okay . Does it matter if we pull back from the world stage . I think in my opinion i think well be learning a very bad lesson from this. I dont think i think there putin is a smart player. Hes kgb agent. He understands the rhythm of things. I do not think he is going to go into Eastern Ukraine. I think hell try and win the whole thing in the may 20th election. We cant v say we have a red line again. We drew it around ourselves militarily. We will obey that red line. The kid will finally the same thing happened in syria. Over the last few years weve put Russia Center stage in all the major crisis spots, north korea, syria, iran. Its going to be very, very difficult for the president to have freedom of movement here when russia can cause mischief in all those places. All right. Well talk more. Coming up, we have a hard data number of weekly jobless claims, plus chicago mayor, rahm emanuel, will join us live from the forbes einventing America Summit. Well be right back. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Welcome back to squawk box. We have our last look at Fourth Quarter gdp and the numbers say there was a very subtle upward revision. From 2. 4 to 2. 6. Remember, this was a much bigger number when it first started out. Lets go through the internals on the personal consumption side, definitely an uptick. 3. 3 versus 2. 6. On the price index, 1. 6, wild expectations. Last look, current look. If we look at the personal consumption expenditure, quarter over quarter, 1. 3 also what we were expecting. And our last look. Jobless claims moved down. Im sorry, 10,000. We revised 320 to 321, then we take that number down to 311,000. These numbers getting ever closer to that 300,000 mark. Continuing claims dropped a bit from 2. 875 to 2. 82 and change, million, of course. Contrasts with some of the other data. We are jobless claims in paris, for example, at alltime highs released yesterday at 1 00 eastern. This number comes at a time when Interest Rates are still mostly, mostly in a range similar, maybe slightly lower yields to where they were after the statements. Of course, foreign exchange, everybody is watching the euro. It has weakened up. Pound is getting stronger. They had good data today. Back to you. Rick, thank you. From one studio in chicago to another, right now lets get back to andrew who is also in chicago. Live from the forbes reinventing America Summit. Andrew. Thank you, becky. Im here with the mayor of chicago, rahm emanuel, we are at the forbes reinventing America Summit. Its great to see you, especially after these slightly better numbers. Theyre better than the other way around. Yes. We should be happy about that. In the 7 00 hour, i talked to steve forbes. We were talking about manufacturing and what youre trying to do in and around this city back here. But Steve Rattner who you at some point i think you may have worked with him. Yes. We both worked together for the president. For the president. He wrote a piece New York Times in the recently saying this whole idea of reshoring and bringing manufacturing back is a bit of a myth. In that, the types of jobs to the extent we want to be competitive with places like china mean youre not going to get the wages or benefits, that whatever you thought was the american dreamish may be a little more challenged now. Well, look, the way i look at it is not Going Forward looking through the rearview mirror. That is Going Forward looking forward to the future. His manufacturing going to be a part of chicago or the nations economy, yes. I want it part of the chicago economy specifically in the advanced manufacturing which is richard j. Daly Community College is all towards advanced manufacturer. Janet yellen who will be here on monday is going to see that school. We actually did a study when i first got here, i asked mckenzie and brooking to do an economic plan for the city. Did i not want another lost decade economically. They showed we lost jobs in of manying but held our own in advanced manufacturing. That area is highly paid, highly skilled. Those are good manufacturing jobs in the sense you can raise a middle class family and sustain a middleclass standard of living. Thats part of manufacturing that is essential. You just had bill ford on, oldest facility in their family here in the city of chicago. They added a third shift, 1,200 jobs under my tenure. It now export todays more countries around the world than any other ford plant, 67. They cant make enough explorers. Right. Those are good paying jobs, good jobs in the city of chicago. Theres 4,200 people there plus 900 in supply. Those are all advanced manufacturing jobs that are essential to chicagos economy. What is the role of unions . One of the questions i asked bill ford is about the uaw. He was a fan of the uaw. On the other side of unions these days, you know where im going with this, Charter Schools and the teachers uni dont onin this city, you have become enemy number one. I think thats an east coast perspective where you dont see the country. Let me give you two examples where i partnered. I saw what you said to chuck todd last week. If you keep it up, i may csa it to you. Ill give you a classic example. We have a diversified economy. No one sector makes up 13 . I worked with the carpets and teamsters to remove the lawsuit from mccormick place, the biggest footprint in the world. Once that lawsuit was gone, convention business, we signed 7 billion of longterm business. We worked out a deal between the electrical workers and the stage hands. They promote shows now. We have 30,000 hotels in the city of chicago. We have 10,000 more. More hotels are going up because of the convention and tourism business. Labor partnered with us. We dont have any of the Hatfield Mccoy fights at mccormick anymore. Theyre our partners. Uaw and the city of chicago worked together. I eliminated the per employee head tax, made that plan the at ford more competitive. They added a third shift. Labor was my partner in trying to get that done. But i say to labor, any union, be a partner at figuring how we can have a win win situation. We now have a third example of that. The city of chicago has the largest wellness plan, dealing with the six chronic illnesses of any public or private sector. Our Health Care Costs have started to come down or taper off, not growing as fast as they would have. Labor has been my partner in improving health care and Health Care Costs. They know their wages were getting involved into the Health Care Sector rather than into what about education . On education, heres the future. I made changes to the city of chicago. Our Graduation Rate was stuck in the mid50s when i was mayor. It is now at the highest level its ever been, on its way to 80 in the next three years. A record turnaround of our Graduation Rate where we were basically almost graduating and having a dropout per graduate. Weve done that, yes, theres been disagreements but not at the expense of our kids. We have a longer school day equal to the fill potential of our children and weve made the changes necessary. I say to everybody, be a partner in making the necessary changes so everybody can win. The good news is, our kids test scores are up, our Graduation Rates are up. Because we put our Children First rather than let them bear the brunt of our politics. Joe has a question for you. Joe . In a similar vein to what you were saying, mr. Mayor, i loved your comments about the thin air in washington. You were there for a while. Did you have an oxygen tank . My actual question, im serious about this. You messed up that metaphor but thats okay. No. You were suggest to this thin air as well. Was your brain not working when you were chief of staff . Theres a lot of people that claim that. When you moved to chicago and became mayor, theres a lot of people that say youve had not a rebirth or reawakening but that youve moved, at least on fiscal issues, more to the center or even to the right. S that that happened now that the buck stops at your december snk are you different than when you were in congress or washington . You have to look at my entire tenure working for both president clinton, congress and president obama. So thats number one. Number two, i hope im always learning things. Im not fortunate enough to decide i will learn nothing new. Every day you learn something new. If you have three teenagers like me, you learn something new every day because they tell you how stupid you are every day. I do know this, making sure we have safe streets, stable schools and finances, those tough things that you have to do give people confidence in your city, which is why now chicago was just cited by a magazines athe number one city for Corporate Headquarters and expansion because people see the strength and certainty well act in the Public Policy arena. How thin is the air in new york city that de blasio is breathing . My focus is to make sure the most american of American Cities is number one. Now, in both job creation and also in people moving back to the cities. Were living in a period of time of a renaissance for the cities. Our density is strength. Our talent is strength. Our culture life is our strength. Theres 100 cities around the world that drive the intellectual and Cultural Energy of the economy. Chicago is one of those. As i tell our residents what we do in the next two to three years will determine if chicago in the next 20, 30 years will remain as a world status. Were meeting our challenges head on. Were also investing in our strengths. Classic example in education, our Community Colleges, which i run, or appoint the staff and the directors for, was just rated by the world bank as the number one example of both career and collegetocareer kind of Skilled Development in the country. When i came here, we had a 7 Graduation Rate. We doubled it in two years and on our way to doubling it again over the next five years. Those are the types of investments, those are the types of leaderships that give the corporations and the people that create jobs, small, medium and large, the confidence to relocate in the city. You have to, as i always say, denial is not a longterm strategy. You have to meet challenges head on, solve them. It gives people confidence that youre willing to meet challenges. Invest in your strength. We have a worldclass work force and transportation city in a worldclass city. Thats why more corporations are moving the city of chicago and more families are also moving. Well siened in a quick break, ill send it back to becky and well continue this conversation. Good, because i can take a breath. Thin air. Well be back with more from rahm emanuel right after this break. In the meantime, take a quick look at the futures. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Sunny or bubbly . Cozy or cool . Meow or woof . Wheels or wheeeels . Everything exactly the way you want it. Until boom, its bedtime. Your mattress isnt bliss its a battleground of thwarted desire. Enter the allnew sleep number classic series. Designed to let couples sleep together in individualized comfort. Starting at just 699. 99 for a queen mattress. Hes the softy his sleep number setting is 35. Youre the rock your setting is 60. That works. Hes the night owl. His sides up while youre in dreamland. Youre the early bird. Up and at em. No problem, because youre in it together. Keeping the love alive. And by the way snoring . Sleep numbers even got an adjustment for that. Crazy . Only if sleeping peacefully with your soulmate is crazy. Find your sleep number setting only at one of our 425 stores nationwide. You can afford a sleep number bed, you cant afford another mediocre nights sleep. Know better sleep with sleep number. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. Skip back to our exclusive conversation with rahm emanuel at the forbes reinventing America Summit. Rahm, ill let you talk more about chicago in a second. While we have you here, i have to get stuff out that ive been thinking for so many years. Its been said when obamacare was being considered that you wanted a more incremental approach to doing things and that that may have been one of the reasons you finally left. Now with what were seeing, the way it was introduced and the prospect for 2014 and there was a time you took back the house, you were in charge of that, trying to get democrats elected. It may not go so well in 2014. When you go back, would would you say you were right in the way obamacare was done and introduced . No. Im not going to say anything. Im going to wait for you. I thought you wanted to talk about chicago. We do. I even started by saying you can get back to chicago. Was that a net positive for the country and the party . Well, first of all, to the president s credit, he thought of the country first, not party. Second of all you have health care we had a decade or two in which everybody talked about Health Care Costs were eating up not only wages but profitability both in private and public sectors. Health care costs three years in a row have been tied with or running at rates of inflation. Thats a direct result of the bill. The president , to his credit, ive worked for two president s and in Congress Worked opposite another president not opposite but with another president. He was not scared to have contrary opinions. He constantly during tough moments in passing that bill asked me my opinion, ungarnished. Three different moments in time in kind of the passage. I gave it to him. To his credit, he didnt want a yes person. He asked me my opinion. I gave him why i thought we should do something slightly different. Once he decided what he did, after my son was done reading his torah portion of the bar mitzvah, i came into the white house to round up votes and get the Health Care Plan pass. He was Strong Enough and had the character to ask for a contrary opinion. I gave it to him unvarnished. That said, Health Care Costs are down. People with preexisting conditions have coverage. Children up to the age of 26 get to stay on their parents plan. Theres a tremendous amount of reform. Does it need to be changed and reform going on . Absolutely. Is it the right thing for the country to get Health Care Costs that were running at an exorbitant rate under control . Absolutely. The direct result, the first real benefit isnt the expansion of cover but is the control of Health Care Costs for the first time in over 50 years since world war ii when we based ourselves on an employerbased health care system. Whats going on in the Democratic Party . You represent one side of the Democratic Party and i would argue the mayor of new york de blas blasio, represents a different Democratic Party. I think we have a healthy debate. I think it gets framed wrong between center left. Give you a classic example. When i became mayor, a hot topic in our party nation, appropriately is Early Childhood education. 20,000 of the children in the city of chicago received a full school day kindergarten. 20,000 got two hours a day. Right. I said this is nuts. I made major changes in the central office, whacked about 20 million, 22 million, every child, all 47,000 get a full school day so theyre ready for first grade and the rest of their life. Second, i reorganized our prek. 75 of our children now at ages of 3 or 4 who live in poverty have a full day of prek. I did it with quality, all third party providers, not schools, have a bachelors degree in providing that. 95 faithbased entities also provide Early Childhood education with why . Quality, the missing point of the debate is quality, not quantity. Are you a de blasio fan or no . Hes doing a great job in the city of new york. He has a big job to do. I have a big job to do. We all learn from each other, get examples of what we have to do. My focus is on the city of chicago. I want to be clear, making sure 35 of our people have a Fouryear College degree versus other areas of the country which is 27 . I want to keep growing that. Our biggest economic engines are our universities and research entities. Keeping our airport as a worldclass transportation system, its number one in the country. Thats connected airports. Mass transit, were investing 5 billion to modernize. And all the cultural entities that make this a worldclass city, which is why more corporations moved to the city of chicago last year. Still big challenges. Becky has a question. Sure. Youve done a phenomenal job as mayor there. Why dont we stop there, becky, with this. But. Moodys downgraded your Credit Rating earlier this month. They did it because of the unfund pension liability problem, suggesting if theres not a pension fix they could downgrade you again. How do you deal with it . First things first. I balanced our budget three years in a row, put money back in the Rainy Day Fund and never raised property or gas tax. I eliminated the employee head tax two years ahead of schedule that i said i was going to do. But i made major reforms to our structural deficit. Now were not done but we took about twothirds of our structural deficit and whacked it out of the system. We have more work to do there. The next piece, even if the campaign i was running we have toism if the longterm fiscal. Theres music in the background. I told labor, its going to take revenue and reform. You cant do this on the backs of taxpayers or on the backs of workers. Together we can solve this problem. If i solve it, ill be able to invest not only in our pension but paving the roads. We have to go. Evanston, northwestern, unions, students athlete . S whats your point. We have two of the best basketball players, last year, this year, number one. Both are champions on the court and in the classroom. I think there should be aunioni . Is it the right decision . Trust me, i wont read it. Ill watch sweet 16 tonight. But i want a bigger about our athletes being champions in the classroom to complement being champions on the court and our two athletes in chicago number one in basketball are champions in both places not one or the other. Thank you very much. Send it back to hq. Thanks, andrew. See you, guys. Weve got to go. Coming up, sweet 16 back in action. Jim cramers final predictions just ahead. Well be right back. Change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, Global Economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. With investment information, risks, fees and expenses save you fifteen percent or more on car insurance. D Everybody Knows that. Well, did you know pinocchio was a bad motivational speaker . I look around this room and i see nothing but untapped potential. You have potential. You have. Oh boy. Geico. Fifteen minutes could save you fifteen percent or more on car insurance. Make it happen with fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Lets get down to the New York Stock Exchange jim cramer, only time for four of these. Stanford or dayton . Tonight ive got baylor going and arizona going and florida. These are integral for me. I could get blown out. Number three in the espn celebrity pool. Very important night for me. Very important. It is for you. Yeah. You think baylor can take wisconsin . Yes, i do. Yes, i do. Ill watch it from chicago where im moving this afternoon because i see the city is great. Thank you for asking the obvious question. No one wants to buy chicago mutual bonds. Suddenly, it may be the greatest city but the municipals are not that liked. Look at his strategy versus the governor of illinois strategy . The polar opposites . He tells a great story but its important to talk about the finances and i thought, becky, you raised the most, important, compelling issue, is the house in order financially. What about, so florida takes ucla you figure . Yes, i really believe in that. I think florida goes all the way, how about you . I got florida winning. Okay. And arizona i dont have a high degree of confidence in anything anymore. Arizonas a must. I mean, i got it. I also need uconn which is tough. We could go to Madison Square garden tomorrow night and watch shabazz and deandre. Thshabazz, you cant stop th guy. Feel better, jim. When we come back, weve got more from our guest host. Alright, that should just about do it. Excuse me, what are you doing . Uh, well we are fine tuning these small cells that improve coverage, capacity and quality of the network. It means youll be able to post from the breakroom. Great did it hurt . When you fell from heaven . awkward laugh . A little. laughs im sorry, i have to go. At t is building you a better network. [ male announcer ] when fixed income experts. Work with equity experts. Who work with regional experts. Who work with Portfolio Management experts, thats when expertise happens. Mfs. Because there is no expertise without collaboration. Welcome back to squawk box. Lets get back to our guest host larry lindsay, president and ceo of the lindsay group. You expect a new round quantitative exhaustion . Qualitative. Qualitative. Weve been focussing on quantitative for so long meaning more spending and more regulation and more money. Were kind of out of ideas. We dont have a lot of new tricks. Our sleeve and what we got to start doing is thinking about how to get things right. Rahm admitted they basically got obamacare wrong when they passed it. They should have done it, you know, in a more efficient way. I think thats one area well have to start working on quality. Well need more quality in Bank Regulation to get the banks running. Well need new ideas in Monetary Policy and were certainly going to need new ideas in fiscal policy. The problem isnt quantitative, its qualitative. Weve got to do more with less. I remember i think you told me that rahm you told me romney was going to win. I did. I did. Three days before i got i got my numbers wrong. What about november and the senate . Were saying its going to be 5149. Republican gain of six. Republican gain of about six to eight in the house. I didnt read the story but i guess krugman is now just so livid at nate silver. He used to love him. They used to vacation together and now that nate silver said maybe the republicans win now i guess theres a big hissy fit between the two. Nates job and what our job is to look at the numbers as best we can and originally we thought it was obama. The polling data was very skewed in two Different Directions and we picked the wrong skew in 2012 and we should stick with our original prediction which ill do this time. It was weird because it was right at a point in time where he could be reelected and now i dont think he could be reelected at this point. The president . Yeah. Earlier where he wouldnt be reelected and there was a sweet spot. Theres a reason we have parties basically in for eight years and thats it. Yeah. It has to do with exhaustion again. You know, your staff is running out. Your ideas are running out. And your energys running out. Its a tough job. Were running out of time here, too. Larry, thank you very much for joining us today. That does it for us today. Right now its time for squawk on the street. Lets get it started lets get it started lets get it started lets get it started in here good thursday morning, welcome to squawk on the street, im krrl quihere with cramer and david faber. Big morning for banking retail, tech, futures were staging what has come to be a familiar pattern this week. That was an up open. But obviously weve lost some ground. The ten year now below 27 and the final gdp was revised up and europe this morning has mild losses as well. Our roadmap begins with citigroup trading lower in the premarket. 25 of 30 major banks passed the