Transcripts For CNBC Squawk Box 20150130

Deflated balls . That would be a bad bet. Lets get you through some of the big stories theyre watching this morning. The first read on Fourth Quarter gdp at 8 30 eastern time. Forecasters say the economy likely grew at an annual pace of 3. 2 . And then coming up on the earnings front well be looking for results from chevron, eli lily and mastercard all before the opening bell and in global news Russia Central Bank made cutting rates unexpectedly. The rouble extending losses after that news. Hell join us from moscow in a couple of minutes. Number of stocks well be watching today. We mentioned google at the top. Declining online ad prices. Also Unfavorable Foreign Exchange rates. Google has been a great stock though. Well keep an eye on it throughout the session. Amazons earnings were much better than expected on strong holiday sales. The company gets about a third of its revenue from october to december and its Current Quarter guidance falls short of consensus but were going to look through all of these things and decide which way to play the stock with an analyst that covers google and amazon in a minute. Visa topped wall street forecasts. The company pointing to strong Holiday Season and strengthening job market encouraging people to spend and also afounsed a four for one split of its common stock. Shares of deckers, cutting its full year forecast because of slowing demand of its ugg branned shoes in the u. S. Broadcom exceeded expectations. Check out the shares of synaptics please. They make display trooifrs for smartphones. Latest results were above expectations expectations. You have to divert your eyes if you dont want to see the price. Its right over your shoulder. What if someone didnt want to check it out. Theyre like this guy is bossy. Theyre watching the channel for a reason. They may not want to look at it. Theyre smaert. If you would like to look at it. Here is where it is. I dont want to be pushy. I would like to show you a few other stocks. A little bit of decorum. Costco came out with a special Cash Dividend to 5 a share. Take a look at those shares this morning. Honda is cutting its annual profit target. Setting aside hundreds of Million Dollars in cash. Valiant is buying Prostate Cancer vaccine from the drug maker. The price tag almost 300 murder in the Second Degree but thats what they were already making in revenue. That was part of the problem with what brought them down. How expensive the drug had been. This is one of the deals. This deal is subject to higher and better bids. The fda approving two six dose hiv pills. They combine inhibitors made by johnson johnson. A boosting agent is produced by gilead. And shake shack is making its public debut. The new york based burger chains ipo pricing at 2 is a share above the 17 to 19 expected range. The offer valuing that chain that started as a hot dog cart if you remember in Madison Square park at about 700 45 million. This makes no sense. They have a couplel dozen stores. How many are there . The number is 30. They hope to get to 450. Buzz feed has a hilarious map of all the places they could go but i dont know. Just seems tough. But you dont want to miss a restaurant tour. Danny meyer is the founder but also the ceo of shake shack on squawk on the street later this morning. Lets check on the markets this morning. Well take a quick look at where the futures are after a great day yesterday. I guess some of that had to do with claims numbers. I dont know whether good news is bad or bad news is good or what anymore. It looks like the fed is going to remain patient but theyre still on track and every time we get a good number if theyre going to be patient we have the rest of the world cooling inflationary concerns. You think sooner or later people come around to this being seen as a positive. Hopefully the gdp number isnt too far below Fourth Quarter when we did 5 but theyll get some back. The futures were down more than 100 points earlier. Yeah . Yeah. Do you think its fair . I have no idea. If they price it and sold the stock and its going to open there then its fair. Its just by deaf situation where the supply and demand with the underwriters and how they work you may be right. A year from now it could be down 40 from where it is but could be up 40 . I dont think we have any idea. I. I think you like uber stuff better. This is just food. Look im a big we go there all the time. If they can deliver it over the internet it would print it on a 3d printer. I dont know if you can yet. You can do it. Im trying to think of an airbnb. If you could get it from the cloud youd like it. Its just too low tech for you. Thats what i want. You want a 3d. 3d printer. If i could print whatever i wanted at home and then eat it. I dont understand the whole concept. Especially like printing organs or something. I dont know. Its a little above us. It is. Lets look at europe at this point in morning and see whether we can glean anything from the action there. Its pretty flat. That scares me. 740 points. Its just not that many points in greece but a little bit better. Better today. Well see what happens. Lets look at asia. Quickly. The asian markets down 1. 5 and as far as shanghai goes lets look at oil which yesterday was bottoming at 40 to 45. Cant go much lower than where it is according to all of our guests. 4495 was the close. The ten year it inched up a little in terms of a 173 yesterday. Its back down to 171. A great month for bonds. No one would have thought you could make a lot of money down to 1. 7 but you could have. The dollar versus the other currencies, great time to go to europe. Getting better and better at 113. Thats improved. That was at 112 before and well check out gold which got close to 1300. Its back down a little and now back up today though to 1264 but remember we were down at 1200 for awhile. Almost got too much. You can see it on the right hand side of that chart. It has been in a mini bull market. Lets talk about the technology apology juans. Google and amazon posting results. Google missing the market while amazon posted a blowout quarter. Back with us is collin Senior Technology analyst at bcg financial and you said yesterday you thought this would be the time for amazon bringing in profits. They came in for profits almost three times what was expected. Joe asked do profits matter . Clearly they do. The market reacted quite positive. We were looking for that north american operating margin segment to rebound and we got it. We got more than what we were looking for. Its still a 5 margin. Its still a very low margin business. Their Forward Guidance is still for a loss to a very small profit. Nothing has fundamentally changed. Its still jeff besos constantly investing but they did show the leverage for the model. For the quantity of revenue you have a lot of profit. Youre saying they did it this quarter just to prove to the street we can turn it if we feel like it . Hard to say if they intentionally did it or didnt. We talk about the publisher brush up that did depress margins in the september quarter. We got a nice little rebound. Its important to remember their net income was 214 million. It was actually lower than the prior years december quarter. So the Market Reaction gained 15 billion. North of 10 . Yesterday when you were saying you thought this was going to be a great time to be in amazon this morning its up 345. Do you still like it at 345 . Do you still buy it . Yes because the momentum is back in the name. Seeing these big swings in the stock is something that makes it difficult to own, right . Because like i said the thesis and the story really has not changed. Theyre still going to be investing. Well see how the march quarter tracks but they could go back to posting losses. You said yes but sounded more hesitant. Had a nice big move right . Maybe not. So you take the money you gained and like i said the momentum is in the name. Lets see how march quarter tracks. Lets talk about google because that one did not hit all the metrics that the street was anticipating. Yeah. I could hear the arrow whistling by my ear. Stock was down 5 at one point. Now its back up. This is the reset. If you hold a multinational the impact of the stronger u. S. Dollar is really quite material. You know 200 i never thought of google as being a multinational. I think of Companies Like a cocacola, procter gamble. It surprised me to see Foreign Exchange being such a big issue there. Yeah 4 of Revenue Growth it doesnt look quite as strong. Google is a fantastic core business. Theres some maturation thats happening. We continue to see it in the paid clicks and click pricing that havent resolved mobile phones as well as desktop search so theres all in our view. Stock trades around 17 times for a company thats growing around 17 times. Jumped right out of the dpat saying this is a noisey quarter. I had one time expenses that were unusual around 300 million. So its a lot better than it looks guys. Dont get too upset with us. Thats when the stock turned. Yeah. I dont think anything will be moving either way. Do you feel like this is where you look past Foreign Exchange issues . Yeah think about how many times a day you use Google Services. They arguably make some of the worlds best software. I use Google Services dozens of times a day and theyre going to continue to mon tiezitize them. You have to like that theyre putting money to find the next big revenues. Do you think theres any chance they lose access to the iphone . One of the things we heard Marissa Meyer talking about is her hope that she becomes the Search Engine on iphone this spring and that deal is up for grabs. If i were tim cook and i had eric schmidt on apples board and google comes out with an android and chases after my core business. Thats three or four years ago. I hear you right . I would kick them out but for the economic benefits to google whoever wins that deal all the economic benefits will flow to apple. Just the amount of revenue they have to pay out. Its a mind share. So you think theres no number . Theres no profit number attached. A little. Maybe 80 or 85 of the benefits flow back to apple. Apple cant lock google out of their platform. Thank you for joining us again today. Its good talking to you. The big Global Market story. A surprise Interest Rate cut. Jeff joins us from moscow this morning, jeff. Yeah hey, good morning to you. Well it just shows the russians still know how to spring a surprise occasionally. No one had this pencilled in as a rate cut today. The Analyst Consensus was there would be no change because inflation still sitting arn 12 and they expected it would top out somewhere around 17 but clearly the Russian Central Bank has decided that enough is enough enough. The combined pain of Falling Oil Prices and saifrksthis economy wiped 200 billion off of the economy last year. Instead of sticking with the inflation line theyre going to try to reach for growth. Thats why we have seen the 2 cut in Interest Rates. I spoke to the head of russias second lanchest bank vtb just before this decision was announced and i asked him where he felt Interest Rates should be for this economy. I am not a supporter of high Interest Rates. The central bank should bring it down. But if it stays high for too long i think it will create a lot of problem and we expect already negative economic growth, gdp growth. The interesting thing is the last couple of days we have seen international Companies Like gm say theyre going to suspend production here for a few months as a result of a slow down in this market. And theyve shutdown a couple of the beer plants. So its not just the russians who are feeling the pain of sanctions in the falling oil price. You can clearly see International Investors taking it on the chin here as well guys. Back to you. Jeff i understand that we always follow the direction not necessarily the level of rates but when youre still talking about 15 Interest Rates it still seems like thats a high number even though they just gave up 200 basis points off the bat. My other question is this isnt good for the rouble and isnt that a big deal for them as well . Yeah absolutely. I agree on both those counts. They lifted Interest Rates 11. 5 through 2014. As they fought this rear guard action against the big sell off in the rouble as the oil price declined and then we had the dramatic two weeks in december. The last time i was here in moscow where they moved 650 basis points overnight to try and stop the outflow. So as far as theyre concerned now they think they got some stability back in the russian currency and thats given them a window of opportunity for the rate move. But youre right, real rates when you put in the bankers margin are still going to be somewhere around 17 18 19 . Thats not a huge incentive to borrow but because of the sanctions, people here really dont have too many options. Capital markets internationally are being closed to them. Back to you becky. Thank you. Seems like they may be stuck in the worst of all possible worlds at this point. Really high Interest Rates still. Lousy rouble. Thank you. This is something that a lot of people didnt see coming but i think you did. Well i had an interview with the russian finance minister and you can sewe more about that online and he said we think the volatility has declined in the rouble. We think the Interest Rates are the wrong number for the Current Conditions in the economy. Now like every other developed government and central bank around the world the russians continue to argue their central bank is independent but when the finance minister is saying we really think Interest Rates need to come down you can imagine there is a good deal of pressure being placed on the central bank here and you do get the feeling that theres a little more confidence that the rouble found a more natural level given where we have come on oil prices. If you look at the two charts becky oil and the rouble came down through the last 12 months parallel. So if the oil price is bouncing or steady around here theres good reason to believe that the rouble can remain steady as well and thats given them the window of opportunity. The remarkable thing is that the economists were all looking in the wrong direction. They were focused on inflation. None of them seemed to be looking at the markets to volatility but thats why theyre economists and not traders. Jeff thank you. Well talk to you again soon. Okay when we return were going to talk about the oddest super bowl bets including katy perry. The star of this years halftime show all happening on nbc. But first heres a look back at this state in history. Were back in a moment. Ive been called a control freak. I like to think of myself as more of a control. Enthusiast. Mmm, a perfect 177degrees. And thats why this road warrior rents from national. I can bypass the counter and go straight to my car. And i dont have to talk to any humans, unless i want to. And i dont. And national lets me choose any car in the aisle. Control. Its so, whats the word . Sexy. Go national. Go like a pro. Take a deeeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Ahhhahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. See why speed matters, at aflac. Com. When they say your. We mean ours. All the weekend hopefully. It just seems selfish. Jen, you know im not going to push you around but if you get a chance after giving everyone else their Weather Forecast could you give us our Weather Forecast too from the weather channel. Heres the thing. Whats mine is yours, whats yours is mine we are all in this together. Okay. Thats true. More snow. Ill give you a personal forecast, though its cold. We have cold cold cold coming. There is a clipper system. Its called carrie and were seeing the snow mainly in maine. Well pick up 8 to 12 inches of snow. You saw a few flurries out here today in new york city. Especially lower manhattan. The story is the cold behind carrie. Youll see temperatures dropping off sub zero and wall street way down to southern new england. Were going to be in the Single Digits probably in town. It will feel like Single Digits saturday morning. Thats going to be the story. This cold air from canada this is about 20 degrees below zero up here. A piece of that is getting down into the northeast for saturday morning. Thats story number one. Story number two is our rain for super bowl fans out here today and tomorrow in the southwest but this is half of a system that is going to be tracking across the nation. Its a Cross Country storm. You get the two to combine. The northern system and southern system and by sunday this is a big weather maker. Chicago, you have the snow shovels out and snowplows out. On monday its moving back into the northeast and were talking about another big weather maker here. Inches of snow new york city boston, rainsnow line is going to be an issue and monday is groundhog day so thats the day we find out if there were six more weeks of winter. Oh theyre not picking him up anymore. Dropped him on his head. Hes dead. What does this new ground hog know about forecasting . I dont know. But theyre not going to pick him up. If he tries to pick you up sometime. Just run the other way. Anyway, thank you. We appreciate it. I do love that movie. Were just days away now from the super bowl. And even if a football isnt your game theres plenty of other things to keep you engaged including crazy bets. For example, what color hoodie will Bill Belichick wear . Katy perry is the star of the halftime show. Will she wear her hair up or down . If she wears a whip cream bikini and you bet 100 does have a bikini . What will she sing . Long shots 251. How about a squawk friend al michaels. Beattie heart of business. New york city. Thank you al. This is squawk box. Al, are you with us . He is hangs out. He just hangs out. He likes red ties. So did reagan if you remember. I hear well, al is a lined a little bit with red tie. No with reagan. Any way you can bet on that if youd like. He probably doesnt want that to get out. Maybe you want to wager if at some point he mentions the point spread. Andrew asked about deflategate earlier. Is there a moratorium on talking about it . Its a long shot but if you wage 100 and you get a 1,500 payout. What time is the actual kickoff . Around 6 20. Is that right . Usually. Do you know . I was going to guess 6 00. Anybody can help with us . I was going to guess 6 00 but i think youre right. 6 30. We have been on the west coast a few times. You get to watch it early in the day . Out there, we have been but not this year which is a little bit different. Youre coming over to my place to a Big Super Bowl Party . Is that in the mail . You didnt get the invitation . No. You . No. Im going to bed at halftime. Ill just watch the first half. Really . Do you know what time you know what . Ill watch until 9 00. What type of fixings you going to have . All of them . I got a little has batchy so i can make different barbecue things for you guys. Do you guarantee me youre not putting on nabby at 9 00 . After what is happening with mary . Not in the living room. Dont spoil dont spoil okay. We got to go. Im not giving you grief. Two of the worlds best known deal makers. United on squawk box. Find out what they think plunging oil prices could do to mma. As we head to a break take a look at yesterdays s p 500 winners and losers. Life from the beating heart of business, new york city. This is squawk box. Welcome back to squawk box this morning. Good morning. Low oil prices giving mma activity a boost in the Energy Sector hitting a tenyear high and oil prices hoverings 45 a barrel and we will talk about a lot more. Ralph is the ceo and blair is the partner and cofounder of centre view partners. Did i call you ever view and center corps . I think so conflating the two in my head least. Where do you think things are . We are now coming up at the end of what seems like a bad month in the markets at least it feels like and does that portend a choppy mma confidence . Does that mean we are going to have a tough year . I think first of all, we came off a very strong year last year. Mma dollar volume was up 47 globally although it was predominantly in larger deals, roughly 70 in those deals came from deals in 5 million. So with we got positive momentum coming into this year. I think generally if we dont get an exogenous event and i wouldnt destroy the volatility in the market right now to be that sort of thing that momentum will continue. Are ceos looking at this situation, the oil issues and Everything Else saying they want to hold and wait or thinking things are great, lets dive . For the most part im with ralph is. Ceos remain confident. Mma is off to a pretty good start. 200 billion transactions in january. The big question is youve had three pricing stocks oil, the dollar and the swiss franc. Its basically having ceos saying maybe we ought to wait a little bit until equity values settle out but i dont see it in any way as retardant to how much do you think your business can be driven by activism this year . Both of you are involved or have been on the other side of a nelson peltz situation. You were on pepsi and youre on dupont right now. Activism is as active as its ever been. It is 200 billion worth of buying power before leverage. Not a company in the country that is immune to it and we spend a lot of time with it. The question is always making sure and im not sure where it is, but making sure the companies are making the short term and longterm decisions. Pepsi was performing really well. Top shelf return. Top economic performance. Nelson recognized that and i think its a is the right strategy we see it more and more to take the activists and try to bring them under the tent . Is that a silencing strategy . What is that . We see it over and over again. Nelson peltz a seed of sorts on pepsi. I dont know where you think dupont will ultimately land. Obviously im not going to comment on that but look. I think, first of all, the idea which may have existed five to ten years ago of an insular board that is a sinacure and filled with pure supporters of the strategy of the chief executive and of the company is a thing of the past. And so as a general matter boards are much more responsive to shareholders, much more responsive to different perspectives and i think anyone whether they are in the Legal Community or Investment Banking community, would advise boards to do that and the real question is you dont want to do something that disturbs the ability of a board to freely interact and to develop the best as blair said long term and shortterm strategy for shareholder a bill johnson is a talented board member on pepsi that any board would be happy to have. The fact is its a good thing that someone like nelson and someone in a company like pepsi can recognize that as a commonality. A piece on wall street journal talks about the falling prices for oil the pain is starting to be felt. I wonder what you think this lead to in terms of opportunity. Investors have come on the show and said this is an opportunity of a lifetime when you get to the oil patch. Its always an opportunity of a lifetime. Oil has had this kind of drop six times the past 30 years. So each of those lifetimes, what has happened at least in the mma part of the cycle, the delay for activity is actually been measured in quarters not months and makes sense. Youre sitting there as a ceo, the first order of business is to figure out where you stand as a business and what is your strategy, what is your plan to deal with a new environment . That takes time. There is also the reality of figuring out what is the right valuation, what is the right stock price for any company, and you dont want to as a buyer, be there youd rather be a little late than a little early. I would say in the Energy Sector i completely agree with what blair said that you can have a lot of mma activity when prices are high as we did, and you can have a lot of activity and will when prices are quite a bit lower. Its the interragnum when they are in the unsettled mode that youre going to have a more period. You dont want to look foolish if youre buying in the middle of the process. Sure. Take time. If youre thinking about energy mma, my bet is 2016 will little more interesting and robust than that. Youre my consumer goods guru of sorts. There you go. A couple of things. We have seen coke and mcdonalds struggle. Do you think those are fixable businesses . I do. I think, fundamentally i know youre not a coke guy but a pepsi guy. I would say its a powerful brand name and its very hard across any business to hurt a powerful brand name with the right management. In terms of the fixes, not easy. Different question. Youre a valuation guy too. Shake shack has a Public Offering today. Does that math make sense to you . A guy that goes into board rooms and tell a guy to buy Companies Based on certain valuations since this is your space, what do you say . More importantly, im a big user of the product. Hes dodging the question. Listen. I think that there are valuations generally in Smaller Companies that will have to prove out a lot of growth. Shake shack has done a lot of growth. Thats a great product. Look at blairs figure. I need to ask you. A memo. You seen the reporting on this that evercore suggested to samsung to buy beckys favorite company. Im holding on to the keyboard. First of all, im not going to comment on that other than to say Investment Bankers bring lots of presentations to lots of clients. Sometimes you visit a client and they dont each know what youre going to talk to them about. So leave it at that. Okay. I have a final political question for both of you because both of you have been historically democratic supporters. Your names have been bandied about historically as people who might wind up in washington. What do you think has been the repercussion or impact of what happened to antonio weiss, visavis Elizabeth Warren and what that is doing to the party and your standing in it. So ill start. I think that the Party Remains a party where there is an ultimate common goal. Broadbased growth for as many people as possible that is always what we are about. There are always going to be periods in any party where certain groups are more in favor of certain groups or less in favor, and i think regarding what happened to antonio, he is a quality individual as there is. And i think i imagine its a moment in time and that is that a moment in time that just last six months or do you feel like the next four or eight years are going to be very different . I dont think it will be different. What i believe is individuals who are broadminded will always be welcome, and by different parts of the party and i think the key is for the party in 16 to have a unified message and the question Elizabeth Warren versus whether its anyone else will be no different than jeb bush versus rand paul. Broadbased growth for as many people as possible. So i guess if you ask a republican that hed say, growth for as many of the 1 ers as possible inspect that how you distinguish the party . What if the republicans said he has been so quiet during this segment. What if the republican were to say, broadbased growth for as many people as possible but we actually think the private sector should be providing the growth instead of the government sector. That would be the difference i guess, right . We do too. There you go. How about you, ralph . Broadbased growth for as many people like we have seen the past six years for the middle class . What i would say is broadbased private sector growth. Thank you thats all you needed to say. I would still be over here not saying anything. I think to get back to the question andrew asked, i think, first of all, this is not a new phenomenon. Since the financial crisis anyone who has had success in the Financial Community has, you know in fairness been Walking Around washington with a target on their front. Right. And their back. And back. And that is not i would argue that is not even just a Democratic Party phenomenon. Its broadbased phenomenon and i think is continues for some period of time. I would say even though i am one of those people i really dont think that is a particularly good thing for this country. You look at the problems where they dont have the Strong Capital markets we have here and one of the reasons that we have distinguished ourselves as an economy here is because of our strong and vibrant Capital Markets that you two gentlemen are part of. So its sort of doesnt make a lot of sense that, you know doesnt. Thats why i think it is short term. It has never been a longterm horizon where people who want to serve from different sectors who have the talent to do it are not at more points than not welcome and i dont think that is going to change i dont. I think that the whole warren movement is really almost the tea Party Represented to some people a plus for the democrats. I think Elizabeth Warren is a huge plus for the republicans. I think so. The wings of both parties are detrimental. Are negative to the party themselves and also to the country as a whole. Okay. We got to leave it there. The dynamic duo that is ralph and blair. Now that we are a all neighbors, pop on back. Its really easy. Ralph, over the years, we have become i feel very close to you. I do. In a lot of different ways. You know . You know, lets have lunch. Okay lets do it if you call me i would say have your person call my person but neither one of us have people. Hes got a person. He has a person . Lets not talk about that. He has percents. The ceo of ad giant bbdo would you take the call to pretend i have a person . Ill email you. Email me email andrew hell forward it to me. What is arguably the biggest weekend of the year in the marketing police. Plus fred hassan will be here. He is behind a lot of things happening and he is living in the world of private equity and looking for the next big business before the accident. Eli lilly out with results this morning. The ceo will join us first on cnbc. Coming up this morning, commercials in this weekends super bowl selling out for a record 4. 5 million for 30 seconds its safe to say a lot is riding on every frame. We will talk to a man behind some of the biggest advertisers. The ceo of worldwide right after this. [ male announcer ] at northrop grumman, weve always been at the forefront of advanced electronics. Providing technology to get more detail. Detect hidden threats. See the whole picture. Process critical information and put it in the hands of our defenders. 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But one thing we keep talking about this year is that since its 4. 5 million for 30 seconds which we think is cheap really. Very. Very reasonable rates this year. I mean theres a lot of synergy. But so it is cheap. But theyre sort of trying to get at lo of mileage before during and after. You cant really think of super bowl as a single spot in the game. You have to treat it as a proper campaign. An event that runs for at least weeks and in some cases months. If you think doritos is going to crash the super bowl its the tenth year theyve done it. That starts in september. Last year they got a hundred million years. If someone is a director im producing and shooting a trailer for a 30second commercial. Thats weird to me. How long is the trailer for the 30second commercial . Sometimes theyre very short. Sometimes theyre ten minutes. And it works. It sure does. And you put it on twitter and facebook because this is the world were in right now. Well, the world were in is the world were always in. Its just better now because fame sells. Fame sells. If lots of people are all thinking about and talking about your brand at the same time, you get a herd effect on sales. And the only way you can get that kind of bang is with an event like the super bowl where 111 Million People see your commercial at the same time. And, you know in the weeks running up to it everybody is talking about it. Thats how you sell stuff. I look at the way you can value a company. If taylor swift has 51 million twitter followers, what would that be worth to someone that wanted to advertise to her followers . I mean she must can you value what she even without the music what shes worth . I guess if she was if they were all going to see it at the same time, you could take this just because you have 51 million followers doesnt mean theyre following every tweet you send out. You have a captive audience for the super bowl. You have to i go back and see. You follow her so its different. I do. I like her. Andrew there was a lot of talk about the idea that nbc sold its last ad just this week. 4. 5 million. Thats a record price. Last year they sold out a lot earlier for the super bowl ads. Is that because they were underpriced last year . Is it because 4. 5 million is a lot to swallow . They did get it. Some people hold back thinking theyll be left back with inventory and people will get a great deal in the last two days. But it didnt work that way. The demand was there. I mean, thats just phenomenal. It speaks to how important it is. How valuable it is. What are you most proud of . Which commercial should we watch . Thats like asking me which of my kids i love most. Travel safe. Good see you. When we come back well have a special hour that were calling modern medicine with veteran pharma executive fred hassan. An all star hour of squawk box begins right after this. Your dad just kissed my mom. Turning two worlds into one takes love. Helping protect that world takes state farm. 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. Starting now, a special squawk box summit. Well dive into modern medicine with ceos from some of the worlds Biggest Health care companies. From the effects of obamacare to reducing drug costs. From the obesity epidemic to consolidation in the health sector. Well tackle the biggest issues in american health. Its a special hour of squawk box and it starts right now. Live from new york where business never sleeps, this is squawk box. Welcome back to squawk box here on cnbc first in business worldwide. Im Andrew Ross Sorkin along with joe kernen and becky quick. In the headlines at this hour a key economic report is about 90 minutes away with the governments First Reading of Fourth Quarter gdp. Looking for a growth rate of 2. 8 . Also shake shack is to start trading today. Above the expecting range which is higher than initial predictions. And russia cutting its key rate this morning. The rate had been decreased to support the falling ruble. But now another surprise this morning. Becky . We do have a number of stocks to watch today. Googles earnings and revenue missing the mark. Amongst some of the drags they cited declining online ad prices also Unfavorable Foreign Exchange rates. The stock was down just a the news came out yesterday, but then the cfo started talking about things and explaining things that made investors feel better. That stock is trading higher this morning. Amazons earnings blowing away estimates on strong holiday sales. They get a third of its revenue from october to december. Its current revenue guidance falls short of consensus. And visa topping wall streets forecast. A strengthening job market encourages people to spend. Visa also announcing a split of its common stock class a shares. What . Visa, yeah. It is. So thats helping the dow . Its up 7. All right. Shares of outdoor footwear deckers gets crushed this morning. Cutting its forecast talking about slow demand for its ugg branded shoes in the United States. President obama what a good day. President obamas invited the heads of research at several drug makers to the white house this morning to discuss investments, plan to improve health and treat disease. Meg tirrell joins us from washington with more. Probably has something to do with the thing he said in the state of the Union Address which nows the time i think everybody would agree with that. Because were almost ready. Were right on the cusp i think. Absolutely. Thats what a lot of people think. We reported earlier this week that several drug makers had received invitations to the white house today. It is that Precision Medicine initiative that president obama mentioned in the state of the Union Address. We now have some details. Hell allocating 215 million in his Budget Proposal on monday to this project. The funding is going to go to nih, the National Cancer institute, fda, and other places. There will be a focus on cancer. And also a push to compile a National Data base of more than a million americans and all of their health information. And that will of course include genomic sequencing. But also include things like lifestyle, things from their medical records, use of personal Health Devices and all sorts of things. Its a comprehensive project but starting with cancer. Its not just sequencing but illumina is among the companies invited to the white house will be at that event today. It starts later this morning. Other include vertex, regeneron. Back to you guys. All right, meg. Thank you very much. In fact, we are very lucky today to have a very special guest joining us this morning to talk more about modern medicine. Our guest host is fred hassan. Hes partner at warburg pinkus. And fred you hear what megs talking about. You heard what the president has indicated. It sounds fantastic but it harkens back to 1971. Where have we come over those four decades . What can we expect this time around . Well its always more complex than the physical sciences. Theres so much that still needs to be unravelled. But weve made huge progress. As we heard earlier, this is the time when we really need to get going. The one big event that occurred and im so glad that illumina is there. The one big thing that happened in 2014 is the cost to sequence a genome dropped. Thats a massive advance compared to the fact it was millions of dollars only five years ago. That big disruption is going to now enable thousands of whole genomes to get sequenced so you can see the variance and try to link that back to disease. Im really glad this thing is happening. I wish it had happened a little earlier, but this is the right time absolutely. You really think that were on the cusp of being able to turn the corner and take all this promise that weve talked about for decades and really put it into action . Well never before has Information Technology and molecular biology converged the way it is converging right now. Just like Information Technology transformed the financial industry in the 80s and 90s. Now Information Technology combined with molecular biology is really going to transform the health care industry. And its coming at a very good time. Were dealing right now this is the big frontier for everybody. Whats better than health and wellness . Everybody wants to make advances. We are advancing health and wellness, a year and a half every ten years. Its really starting to get better. Its almost like metadata. Its kind of daunting and mind boggling. Ive wanted it to go faster too. But now we can do the genome for less than a thousand dollars. How much of that is background noise . And then you take a so how many total base pairs in a human genome . Do you know off hand . 300 i have no idea. Base pick. Something like that. A base pair. Like three. So yeah those three, yeah right. Three out of a trillion can cause a disease. You cant look at it as a human and discern whats happening. This is why it has to emerge with i. T. Thats where its finally being, you know where the promise is were able to start to do that. I think the real problem with this cancer area is its a very it changes all the time. And to chase those mutations is really a problem. And im not sure this is going to be that easy a journey. I think its fantastic that now 5 of lung cancers can be done with very precise medicine. Its fantastic. But a lot of the cancers are very hard to follow. They kind of go in different directions. It would be nice instead of understanding when theres something wrong, we still need a lot of work to understand just how everything works in terms of genetics and coding and metabolism and designing. It combines them all, developmental biology. Then you think of neurobiology. We havent even skra ched the surface of that. Thats the next thing beyond cancer. Alzheimers and parkinsons and als. It is daunting and we get frustrated. Ill tell you whats frustrating about big pharma and maybe less about biotech. Sometimes it seems like they squander their Research Money and their opportunities on extending patent protection or on marketing or getting doctors to prescribe their drug versus someone elses. Most of the big discoveries have been biotech. Was the last big pharma statins and then add ons to statins. When was the last time a Pharma Company came up with a Ground Breaking drug . Its a very good question but the reality is theres an ecosystem that you got about 3,000 small shops then in the middle and then the big pharmas to put in the big bucks. Right now merck has a fantastic product for immunooncology. I know the lab in cambridge where it came out from but it took somebody with a Balance Sheet of merck to be able to make the big bets. Theyre working on ten different cancers now. Theyre going to take the same platforms and try it on ten different cancers. Thats where you need the big pharma. Which institute . This is to m. I. T. This was a small shop right next to m. I. T. And part of a scientist whose name i dont know. But it was part of an asset sharing that merck got. So something that seems to be present over ten different types of cancers. That would be well, this platform works in melanoma. Now theyre going to validate that in lung cancer. So when you get Something Like this, you dont know where the limits are. And thats where you need the big bucks. And you have to be somebody with that kind of Balance Sheet to be able to do that. Its interesting. Fred fortunately is going to be with us for the rest of the show. We have time to talk about the exciting prospects coming up. Stay with us. Coming up this special hour of squawk box modern medicine continues, weve got the chairman and ceo of eli lilly. Also weve got the chairman and ceo of celgene. Also well talk to the ceo of actavis. A lot coming up. Were back in a moment. Financial noise financial noise financial noise welcome back to squawk box, everyone. Weve been watching the futures this morning. Things got off to a rocky start with the dow futures down by more than a hundred points. Theyve halved the losses. Down 49 points. S p futures off 10. 5 points. And the nasdaq down by 2 points. Of course this comes after a few rough sessions. There was a rebound after the two days that wed seen earlier in the week with steep losses. Well continue to monitor it and see where we get towards the opening bell. Lets talk about stocks to watch. A mixed quarter for xerox. Revenue a little bit short. The company is raising its quarterly dividend. The stock is down by about 4 this morning. Earnings for Newell Rubbermaid beating the street by a penny. That stocks down slightly as well. Down by about 23 cents. Check out tyco. The company seeing a bigger from Foreign Exchange than previously forecast. Thats a story weve heard again and again this week. That stock up by just over 1 . Were going to hear it again. I imagine eli lilly posted results. Beat estimates by 2 cents earning 75 cents a share. Revenue, however, was below last year and slightly below forecast. But this is a story weve talked about with this next gentleman again and again because ceos have to deal with patent expiration. Joining us now to talk through the numbers first on cnbc, john likt lickliter. John, all coming at a time when youre dealing with, you know trying to manage through patent expirations with revenue sometimes going down year every year. I think for 2014 it was 15 below 2013. Its been a roller coaster, ride. You know we lost our u. S. Patent on zyprexa. And we lost our cancer drug, our bone drug, and then our neuroscience product. Both coming off patent essentially last year. Its been up and down as you know when you lose a patent in this business, the generic entry comes very quickly. You essentially lose all that revenue overnight. We saw this coming. Weve been investing in rnd. Weve been replenishing our pipeline. Last year four approvals from the fda. So were launching new products and we hope this year to begin a new era of growth. We hear from across the board even from Companies Like google and microsoft, tech companies. Then the multinationals with the exchange at 4x. How much has 4x impacted eli lilly . You can expect it did hit our top line in a significant way. We revised our guidance for 2015. The line item guidance we did not change our overall Earnings Guidance for 2015. That remains at 3. 10 to 3. 20 on a nongap basis. The reason is even though our revenues are coming down from those sales in countries that have weakened currencies versus the dollar we actually gain a benefit from the cost of our inventories that sit outside the United States. So our gross maherrgin increases. That tends to balance things out. We did not change our Earnings Guidance this year but it certainly is hitting our top line. Hi john. This is fred. Hi fred. We are rooting for you because youre a big believer in rnd. Youre a very courageous ceo. What are the hopes for that alzheimers drug thats in lillys pipeline . Well when you look at the field, fred weve been doing research in alzheimers now for 26 years, believe it or not. I feel like were wheel of fortune where you turn the pieces over and eventually you spell something out. I feel like weve got vanna there turning the pieces over and i think were starting to make sense of this beta amaloy pathway. Other companies in the mix with therapies. Including antibodies were in the lead. In our second phase three clinical trial. We partnered as you saw last year with astrazeneca. Thats in phase two studies right now. Then we have some diagnostic agents and some other potential developments. Were very committed to this area. Its risky. We really dont have today a medicine that provides a real therapeutic benefit for people with alzheimers and we all know we desperately need it. Are we at a point or fred maybe you know. Are we at a point where we know the buildup of this beta amalloy, is that what causes the symptoms of alzheimers or is the underlying cause results in the beta amyloid and you end up with it and it has nothing to do with the underlying pathology of the disease . Joe, at this stage i think what we know is that this beta amyloid tends to accumulate to cluster in the brains of people who later then demonstrate symptoms of the disease. And then develop the disease. Theres another protein called tou which coming after the am boid aloid. The Roche Product crashed and burned with the same concept. So is your concept different . Well there are various types of these antibodice. Some of the antibodies attach to the amyloid. Its a smaller protein. Other antibodies attach to the aggregated or clumped together beta amyloid. It makes a big difference how you attach to the beta amyloid and whether that effectively removes it or whether it causes certain side effects. Yeah. I guess if it just does yours work on the peptide . Yes. Actually is specific for the free what we call the free beta amyloid. Yeah. You dont want to add to the clumps. It would be nice to prevent the clumps from forming if thats whats causing the disease itself. Yeah. So really the big risk that Johns Company is taking is theyre trying to prove the molecule works but also that the cascade is the problem. I think thats the thats right, fred. I think if you work in alzheimers right now, youre trying to validate the pathway and to prove you have a medicine medicine. Thats right. Next time youre on, john well talk about pricing it. Its hard to understand how to just how we should approach this. You look at the global model, thats not the way to go i think. You need patent protection. You need orphan drugs so that Companies Put the money out. You got to recoup your investment, but maybe medicare ought to get a better deal. I dont know. Therest so much Cost Containment, were not sure how to do the pricing at this point. Were all sort of trying to find our way. I think for hard to treat diseases, the cms should do something to incentivize people. If people are not sure that theyll get reimbursed on the other end, then its going to be tough. And for alzheimers, i think so. Then on the other side they dont care what the drug does if its a certain price, its a knee jerk reaction. Thats too much. Alzheimers is really expensive though. If you could find a way to cure it John Lechleiter, thank you. When we return a friend of squawk is helping get to harvard. But first the most clicked on symbols on cnbc. Com. Were back in a moment. Take a deeeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Ahhhahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. See why speed matters, at aflac. Com. Theyre still after me. Get to the terminal across town. Are all the green lights you . No. Its called grid iq. The 4 51 is leaving at 4 51. They cut the power. Itll fix itself. Powers back on. Quick thinking traffic lights and self correcting power grids make the world predictable. Thrillingly predictable. You just got a big bump in miles. So this is a great opportunity for an upgrade. Sound good . Great. Because youre not you youre a whole airline. And its not a ticket youre upgrading its your entire operations, from domestic to international. Which means you need help from a whole team of advisors. From workforce strategies to Tech Solutions and a thousand other things. So you call pwc. The right people to get the extraordinary done. I dont know if i would have gotten that answer correct. Were back. Chipotle is raising its bet on pizza. Expanding to kansas city. This is now its first move outside of colorado. Chipotle also owns chop house Southeast Asian kitchens and they have that in d. C. Apparently this is called pizza local. And you can customize the pizza. And its working in colorado this year. Is there a connection . I dont know. Okay. How close is your nearest starbucks . Good question. It might be more important than your morning caffeine fix. Home values rise when a starbucks hits the neighborhood. Appreciated 96 between 1997 and 2014. And theyve made the correlation. In new york city you cant go more than two blocks. Do we have a starbucks . Yeah, we do just around the block. Yeah. Theyre everywhere. You cant go anywhere. No. We should tell you one of our favorite humans of new york is helping little humans get to college. He started a campaign to raise 100,000 to try to send middle School Students to visit harvard. In five days nearly 37,000 people went online and donated over a Million Dollars to this cause. Thats enough to send the incoming sixth graders of the academy on visits for 25 years. Also enough to launch a scholarship. Last week stanton sent out a photograph of an eighth grader who was fantastic. If youve been following in different news. Helped fulfill her dream to expose students to higher education. Brownsville has the highest crime rate in new york city. The Campaign Ends on february 5th. Coming up more of our special hour on modern medicine. Up next the chairman and ceo of celgene will talk Cancer Treatment and many many things. Stay tuned. Well be right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back to squawk box, everybody. Among the stories were watching this morning, big Economic Data on deck. Well get the first read on Fourth Quarter gdp at 8 30 a. M. Eastern time. Lower gas prices are seen boosting consumer sentiment. Jay z is taking on spotify. Bought Swedish Company for 56 million. They own spotify rival whim which is popular in scandinavian countries. And eli lilly out with earnings this morning. The health care giant Beat Estimates by 2 cents with adjusted quarterly profits. Revenue was slightly below the streets forecast. Ceo John Lechleiter told us it has an impact on the top line but they are not adjusting Earnings Guidance for the year. Dartmouth college attempting to curb dangerous behavior among students. They are banning hard liquor on campus. Forbidding pledging at fraternities and sororities. And they must take a four year Sexual Violence prechbs program. Thats a big move far school like dartmouth. It is. Fraternity culture. Its a thing. I was part of a fraternity. Maybe its a generational thing. In universities across the country where it disappears. But no hard liquor on campus. So they will be checking . It sounds a little bit like prohibition almost. Its going to be difficult. What do you do off campus . So many live off campus. It just moves everything off campus. Right. At college i learned that beer was a much better i mean by the time you drink enough beer you can barely move. You can, but its much more dangerous. When i was at cornell, by the end of the time i was there they had people that were authorized sort of like bartenders who would come to if a fraternity had a party, they would id you and put a bracelet on you. It was a whole thing. This is another degree. When i was there it was animal house in boulder. Biotech stocks have been doing really well. Maybe none beentter than celgene. Almost a 96 billion market cap. Beaten for the past five years. Celgene has been one of the standouts. Up more than 50 over the past years more than 300 over the past five years. Chairman and ceo of celgene is with us. Very pleased to have robert hugin on. I cant believe weve never had you on before. I drive by celgenes headquarters all the time. Its right near some great golf courses that are out in the area. Yes. Anyway welcome. And for years ive watched celgene go to 96 billion largely on multiple mylnoma. Something that almost cures patients. You think about the changes of patients today from just 10 12 years ago, it was a death sentence. Now were talking about people many, many large majority of the patients dying of other things in the meantime. Its just dramatic change. Its producing breakthrough therapies. Were fortunate. We used that initial success to broaden our pipeline. And now weve got a great exciting future. Youve done some other interesting things. Off great drug for cancer. But theres different ways of delivering it. And you found a better way to deliver it which could be a big thing. Its called abraxane. Its been just exciting. It allows us to build one of the most robust pipelines in the industry on myeloma. This is fred hassan. Congratulations. Because you really are now big pharma even though youre called a biotech. Youre larger in size in market cap than many of the old pharmas. The old big pharmas. What is the secret to your success . Is it the selection of the portfolio . Is it the culture . Or is it just pure luck which is also important in pharma . I think its a lot of different factors that lead to success. But good people matter. People have to make the judgments of where to invest your money, what decisions to make scientifically and medically, but also i think you have to be forward looking and embrace change. This is a world where the pace of change is accelerating. We think about our company the last five or six years. We have totally changed the rnd paradigm. The relationships of collaborative partnering there is what we think we have the right technology. And sort of just keeping ourselves. We look to find other people that share our vision in the areas that we think would make disruptive breakthroughs and partner with them embrace that. And so i think its also the culture of seeking really disruptive technologies. Dont be afraid of the future. Embrace it and go for it and play to make that big change. People are excited about the Crohns Disease drug. Its early. Just entering phase one. Entering phase three. Yeah. Its a big it is if the results in phase three are anywhere near like the phase two results, the treatment of crohns will be dramatically changed. Whats the name of this one . Its ged301. It doesnt have a branded name yet. But its just dramatic. Its autoimmune. Yeah. And people dont realize how disabling it it is. How many does it affect . A Million People in the developed world. Its a horrible disease. In terms of the way you research this, you cant really do a trial. Yeah. I think we will have the ability to do placebo trials. The disease waxes and wanes. Were going to do a 52week trial. Were going to have good induction. But were going to treat right through. The interesting thing about this product is we dont know how long it works for because in initial studies, patients stayed in a high level of remission far long period of time. It will really change the concept of remission and maintenance. This may be the one treatment that takes care of people for a long time. And the phone calls and the emails we get about teenagers that suffer from this its really a life changing disease. I want to ask you about express scripts. They want to get into the cancer business or we dont know what theyre going to do exactly. But we saw what they did in december in the hepatitis c world to gilead. What does that mean for you . Are people angling already . Whats going on . You know i think this is a world where everything should be valuebased. And theres not any revolution or revelation to people today. Its always unless 10 15 years its been that way all around the world. The u. S. Is no different. It is incumbent upon us to discover and develop and commercialize breakthrough products that really make a difference in patients lives. And you have to be able to justify the value of your product. We have to then ensure theres a system that allows access to patients to breakthrough therapies. We cant let the system stop that from happening. How do you feel about a drug company doing that . I think doctors should make decisions best for patients. But the system also has to provide the incentives to make sure we have a fair way of providing the cost reimbursement for people. I think we have to be careful for this whole discussion. We have to do its on a fact basis. The percentage of costs from pharmaceuticals and health care its not really risen. Were talking 9 10 of pharmaceuticals. Even the congressional budget recognizes when you have increasing use of pharmaceuticals, other medical services under medicare and medicaid actually decline. We have to be careful that we dont throw the baby out with the bath water. We have to invest where we take risks. The revolution that you all talked about earlier in bringing together Information Technology to revolutionalize is accelerating. Were just the beginning of the great breakthroughs. With all the Cost Containment parameters that we talk about now, you need to be able to work with regulators and with medicare to make sure you get reimbursed. I mean, im not saying you need lobbyists but you need to be able to tell your story why a drug costs 120,000 a year. Its going to get harder and harder. The knee jerk reaction is this pill costs nothing to make. You need to tell the whole story. You more than need to tell the story. In our company you cant be a world clas clinician. You cant be a world class commercial person if you dont understand pharma economics. This is not something you do in a silo. The Value Proposition has to be in the Clinical Research in your regulatory process. It is all about access. And you need to do that throughout the process. Its part of the fabric of your company. You have to depend on government to do the right thing here and have cooler heads prevailing on how you approach it. Not a heavy handed approach. I think the important thing is that pharmaceuticals are not growing as a total in cost that much. Theyre going in line with inflation over the last five years or so. Theyre really 10 , 12 of the health care system. More than in other countries overseas. This is a bioscience country. This is the country that should support bioscience. And the thing to also keep in mind is were in a race. Aging population increasing cancer risk, alzheimers we were talking about, diabetes. Versus the innovation and pace of revelation, weve got to win that race. Because if we dont, we have even more expensive. Were part of that solution. And thats what were committed to being. Thank you for finally joining us. Hopefully well see you again. And if we see you in some other city at some point, maybe you can come on the show too if we happen to be in the same place. Thank you. Thank you. Great to be with you. Thank you very much. When we come back this special modern medicine edition of squawk box continues. Brent saunders will join us to talk about changes in the far that business and consolidation in the industry. Take a look another equity futures at this hour. S p futures off by close to 10 points and the nasdaq down by just over a point. Stick around. Squawk box will be right back. Welcome back to squawk box. Actavis has done over 100 billion in m a over the last 12 months alone, yet it has had zero inventions over the past year. Just hit an alltime high this week. Ceo Brent Saunders is here. Hes on the cover of the february issue of Forbes Magazine there. You like that title there . Wall streets drug dealer. He joins us now to talk pharma growth and big medicine. Let me ask you about what i just read. The zero inventions part. How are we supposed to think about those two pieces . Im not sure thats truly accurate. I mean we have as a company our Legacy Companies whether its been act actavis have discovered medicines and have launched many. We launched several last year. Were going to launch five or six this year. We just dont do the basic discovery. But innovation is a continuum. We do the clinical work and we get it launched and figure out how to make it and scale it up and do that work is that not innovation . The question should be what should be the model . Valeant when you were competing with, came on our show and we had discussions after discussions about this idea of now rnd. The rnd should be done effective effectively by startups then you should buy them. Or you should have larger companies. Whats the right answer . See, i think you have to be committed to rnd and innovation to be successful longterm in our industry. However, you have to do things that you have a comparable advantage doing. And so for us we didnt have an advantage in discovery. We had plenty of access to early stage molecules from universities, from venture back companies and the like. However, as were completing the acquisition of allergan they have discoveries and were going to keep that. In fact, were going to have a budget of 1. 7 billion this year. How much do you think m a as a strategy for the company . It really isnt a strategy for our company. It isnt . Weve been inquisitive. You cant argue with that. Youre going to be one of the top ten Drug Companies in the world as a result of all these transactions. That is true. But we never planned to do it. In fact allergan was not a part of our strategic plan. It was put into play through a situation. We were opportunistic because we had a relationship and it fit strategically with what we were doing. It wasnt like we were out trying to buy allergan. It was something that was a remarkable opportunity because it was a company that shouldnt have been for sale. It was such a wellrun company with such great people and such great products. It needs to be also said that brent did a terrific job turning around bausch lomb and he got to learn the eye business well. When you know the business you have more confidence. I know one of your thoughts is the last ten years the industrys really been operating in turmoil. Its been a very difficult time for any business to be out there. Things are changing and shifting. I just wonder how the two of you think that means changes for this industry too. Yeah. So brent, what i was saying was the last ten years the return on investment on rnd has not been that great. Probably below the cost of capital. And also the industry has had to go through a lot of difficulties with pairs and really some big restructuring issues as well. Overall sgna is now down quite a bit i think a thousand basis points. And the industry has restructured. But the big controversy is is this a time to invest in rnd because we have all the sciences coming together and the i. T. Coming or is this the time to be more watchful and just opportunistic when things come along . No, i think it is a time to invest. However, i think there is turmoil. Mainly because theres overcapacity. There was overcapacity in the commercial side of the business. There was overcapacity in the rnd side of the business. And so kind of basic economics. As pressure comes into the system as the customers consolidate consolidate. Youre going to need to take the slack capacity out of the market. And so should you have seven or eight Drug Companies targeting the same molecule and same mek anymore of action or should you have two or three . And thats how you get the drugs. Theres a lot of money thats spent unnecessarily because theres so much capacity in the market. The counterargument would be if you have five or six products you have a numerous auction. Andrew wrote a huge piece on the valeant model versus the way youre supposed to be doing it. And i think it was classic andrew because it was about the social value oh boy. No in a good way. The social value of what a drug company is intended to do. Is it intended to do rollups and cut costs and reward shareholders or is it intended to spend a lot of money on Research Whether you win or not because the public good is served down the road from maybe sometimes not the most profitable ventures . Yeah i mean look. I have deep respect for valeant. I just dont necessarily agree with that business model. At the end of the day we have to invest in rnd. Its the only way to get Sustainable Growth and get that shareholder return. And also you have the side benefit of doing good things for the society. Weve been dancing around one issue around this table. We havent totally got into pricing. Sort of. Where do you both really stand on who should i mean weve talked about how medicare its very hard to push your prices down. Should there be a mechanism that allows us to have lower prices in the United States, for example . I believe in a free market. If we allow for a free market it will continue to make us want to take greater risks, o go for some of the tougher medical needs. Thats the issue, though brent. If you cant if medicare cant negotiate prices its not a free market. Its almost crony capitalism. Thats the whole point. Is that a problem . Well i think you have to look at how the system actually works. You know when you think of medicare medicare mostly pushes their formularies down to a United Health care optimum or what have you. So its not just crony capitalism. Theres a lot of intermediaries that play in it. A lot of Drug Companies signed onto obamacare because they knew this was going to be the outcome that they wouldnt be subject to being negotiated down by medicare. We feel the pressure all the time. We have a Medicare Part d drug. We feel a lot of pricing pressure. And we have to negotiate with the health plans. The question id like to ask different pharma ceos. Your margin in the u. S. Relative to elsewhere is broadly speaking what . Whats the difference . Its kbrt. I know. Ive never heard anybody give you an answer. Nobody has. Is it 10 higher . 40 higher . We dont do it that way. But you know the answer. Of course we know the answer. But you dont want to answer. Wed have to follow the rules. The end of the day it is better here. But thats why all the innovation is here. Thats why the science jobs are here. Can you tell us what the margin is . Margins are higher in the u. S. Because the innovative drugs get paid for. But if you look at a Market Basket of products versus canada, lets say, its not a lot different because generics are a lot more expensive in canada. The big picture might not be so simple. The innovation is still what really matters here. Because american patients get access to innovation much faster than anywhere else in the world. Okay. Brent, thank you. Write down january 30th when i used one of your columns and cited it to ask a question. Its amazing. January 30th 2015. How many years have you been on the show . Progress. I saw you get a little teary. I got excited. Coming up the animal orchestra is back for one day. Theyre making super bowl picks. The video you cant afford to miss. I dont know if thats true. Anyway, thats next. But to get from the old way to the new youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. Excitement for sundays super bowl is building. You can feel it in zoos across the country as they are getting in on the action asking animals to predict the winner. In ft. Worth, salty the crocodile is making his prediction today. Zoo officials decorated two raw chickens with the colors and logos of the Seattle Seahawks which is kind of a chicken, that hawk is. And the new england patriots. Salty leapt out of the water and grabbed the seahawks chicken. In iowa rooty the rooster picked the seahawks. In florida a pair of man tees split. One picking the patriots the other with the seahawks. And in memphis, the panda is taking new england. As for the squawk box animal orchestra, they are staying neutral in the super bowl after the Miami Dolphins failed to make the playoffs this year. Thats their favorite team. I was thinking they like it because hes an animal. Dolphins. He could play in the orchestra if he wanted to. When we return a i was going to do a segue, but its not a good one. Jeff bewkes is going to talk to us about consolidation in the media sector. Squawk box returns 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. Barbara just bought a bike. She wrote a tweet about it. You cant learn much from that. But take data from millions of tweets combine that with your companys supply chain and sales data. Apply ibm analytics and expertise, and all of a sudden, you can learn which bikes to build what to make them from, where to sell them. Because barbara and the world just told you how to build a better bike. Theres a new way to work and its made with ibm. Traditional media pivoting to survive in a digital world. We got a great name. Weve got a great team. We got a great logo. And weve got a great name. Now we just need an idea. Lets pivot. Lets pivot. Time warner chairman and ceo jeff bewkes talks cable unbundling and why content is still king. Data that could move the market. Its the first read on gdp if the Fourth Quarter hits the tape as 8 30 a. M. Eastern. We will bring you the number and the instant reaction. Plus the craziest super bowl bets in vegas from Marshawn Lynchs fines to the color of Bill Belichicks hoodie. Were going to break down the odds as the third hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Welcome back to squawk box, everybody. This is cnbc first in business worldwide. Im becky quick along with joe kernen and Andrew Ross Sorkin. In our headlines this morning, shake shack is making its public debut. The burger chains ipo pricing at 21 a share. The offer values. Dont miss the ceo of shake shack. Theyll be joining squawk on the street later this morning. The country dropping its key Interest Rate to 15 . Thats down from 17 for rate cuts to stimulate growth in the sanctions hit economy. Also listen to this. Measles was declared eliminated in 2000. But the disease is making a comeback. Bad news. The centers for Disease Control issuing a warning last night for americans to get vaccinated. The cdc said 2014 saw the highest number of measle cases in two decades. It can spread among unvaccinated children. The disease can cause complications like blindness, ear infection, and pneumonia. Fred hassan is with us. There are 84 confirmed cases of measles just in january in the United States. This is coming after an outbreak at disneyland. Or people that got infected there and took it with them. I think there are thousands of people who are probably exposed at this point. Whats going on . This is ridiculous. I mean this is a 200yearold battle. Weve got to get over this. I think weve got to rely on science. And i really do believe that the cdc and the fda need to come out front and explain the facts. The benefits far, far, far outweigh the risks. All this nonsense about different side effects thus preventing people from getting vaccinated, thats a terrible disservice. I think the thing that concerns me the most about it is if you choose not to vaccinate yourself not to vaccinate your children. You are putting not only your family at risk but others at risk. Measles is a disease contagious days before you show up with a rash. You expose all the people you come into contact with. And there are people who cant get vaccinations. Children below eight weeks old, if you are someone who has a weakened immune system. Youre not at a position you can get the vaccination. And if you are pregnant thats a very serious issue at that stage. And i really think we as a society should sometimes discuss freedom of choice. Lets look at a place like singapore, its mandatory. You are not only responsible to yourself, you are responsible to others around you. We should have that discussion here in this country as well. If there wasnt this move away from vaccines do you think measles would be back . It probably wouldnt have gotten a toe hold. Wouldnt have had a chance. Even if youre at the 95 level, it just will not come back. Theres just enough there. Its like polio or something even worse. How about complications from blindness and other things . Its ridiculous. Absolutely not acceptable in the 21st century. Okay. Were going to pivot from measles to the world of media. The fcc has voted to redefine broad band by raising the minimum download speeds. Companies like netflix have been supportive of higher speeds. It means more potential for subscribers to watch its online content. Well talk about the value of video content with a guy who knows about it. Jeff bewkes the chairman and ceo of time warner. Also fred is with us. You are a board member. Thank you for being here. A time warner board member. Are you the head of the Comp Committee . Im on the Comp Committee. So you have to be nice. Thats how this works. Thats why im here. Theres a lot of deep mutual respect. Lets talk here. Recently dish announced this sling tv project which effectively begins the unbundling process to some degree. Youre part of pit. Its not completely unbundled. 20 basic project. Cnn is a piece of it. But espn is now getting unbundled for the first time. And youre trying to go over the top with hbo. When are we going to hear about exactly when that this year. This year. How do you think it changes the economics longterm . Does it mean that content is going to be worth more or is it more like music . Contents getting worth more all the time. Theres more people watching it. Theyre watching it longer. And if you think about your own viewing habits youre probably following your favorite show even more closely than you ever did because you can watch it whenever you want. You can watch two or three episodes at a time. And you can do it not just on your tv if you dont want that big High Definition experience. You can be watching it on a smaller screen on the subway or Something Like that. So whats happening all over the world is that tv contents Getting Better and people are getting more support about it. There are other ways to find if you want to get advertising, thats one way to do it. If you want to pay for the channel you like you can do it that way. So its giving you more choice. Its giving you more quality. Its kind of an explosion of activity. And now weve got the internet which is a way to deliver tv even in more optional environments and manners. So basically its good in a worldwide matter. I can see why it works for the next couple years in people who control the bundle or people who are unbundling. But at some point does the economics of the whole thing break down . No. Its Getting Better. I would challenge this bundling idea i dont know what the viewers are thinking when they are about a bundle. Is it laundry . What is it . Its basically you think about your television dial you have hundreds of channels and choice. And thats very valuable. Because if your house, different people want different things. Everyone has their favorite ten or so channels that they watch. Its just that your ten are different than your wifes ten. And your kids are different yet again. So i dont think were really looking at this quote, unquote, unbundling. I think were talking about more choice. So if you want the most choice or the most convenience, you go watch in your house and keep watching as you leave the house. Youre going to want as many channels as you can. I still dont have enough. I got like 1200 and i want and if i had to pay for each one individually, i think my bill would be higher wouldnt it . This has been a good deal. Youre getting more channels and the price of it really has not gone up. If you think about what you used to pay for your Long Distance plus your television and then broadband came youre using more. Youre getting a Higher Quality service. And your average payment for the minutes youre using is probably flat or going down. I wanted to ask you about the merger mania thats been going on in this business. We have the comcast Time Warner Cable merger out there. And the at t directv. It feels over the past couple months theres been shifting winds in terms of how people think or whether they think those deals are going through and when. Where are you on that . Well were not in those deals. I know. Wheres your head in terms of whether those deals get approved and when they may get approved and what it means to you ultimate will i . Okay. I think excuse me what you see because its taking a little while is that i think a proper concern of how do we get a broadband infrastructure in the United States thats a 21st century infrastructure. Youve got all these people you want more device use, mobile use. All of this provides broadband upgrade. And so we want to make sure that there is competition in the world of broadband providers. Sop you dont want to be down to just one or practically one or two. So you need to have effective competition. But you also need for the health of these companies whether its verizon, comcast, directv, they need to be able to be able to get a return on the investment thats to create the broadband infrastructure. So i think policy has to foster competition and it has to preserve returns because if you take video use in the United States on broadband every night, right now were using up about half the broadband capacity in just a couple of video channels like youtube and netflix. And if were going to see which we can obviously see all these other Television Channels going on broadband, if we dont have more capacity if those Provider Companies dont invest billions of dollars more in a much more vibrant broadband system we wont have what we need. Weve spoken to Randall Stevenson about this. He says at t is putting a freeze until they figure which direction the fcc is headed. He thinks youre going to be looking at years of Court Decisions on top of this that these things will be tried out in the courts will take years of time. Are you doing a similar sort of watch and see what happens and wait before you spend money before you get to that . No. Because were not in the did in the actual cable business. So what weve been doing for many years, the whole last five years as many other sectors have been a little flatter. In the Media Business making tv shows and movies. Weve been just increasing the amount that were investing, the increase of the number of shows were making the quality of whats going sboon into all of our shows is going up. I think thats true not just of time warner but a number of others. But then hbo over the top too. Hbo is a great example. Because theyve got more new shows in the pipeline than theyve ever had before. And the biggest hit theyve ever had. Game of thrones is a bigger hit. Its on the air now. Its coming back in april for those that want to set their dvr. I want to play you something and get your reaction. Earlier this month we had mel karmazin on the show. Heres what he had to say about a deal that he thought should take place between time warner and cbs. The deal that should get done that should be absolutely would be the best deal that i would even invest money in would be the combination of time warner and cbs. Okay . That is a match that makes such great logic. Hows mel karmazins logic . Well, it sounds like he already has invested money. I think he probably has kept a bit of his cbs stock. Hes waiting for you. I appreciate that a lot of people like to talk about these megadeals. Thats not really how you make money in the Media Business if you look at the history of it. There probably have been more misses than hits when giant combinations like that have been tried. We never talk about any particular merger because then youd ask me about five more and if i didnt say exactly the same thing about each one, youd wonder. Thats not how were growing time warner. Youve done a spectacular job. You look at the stock and you are now back above. The question though becomes this, though about sort of the larger question for time warner. Have you made the company more powerful or more vulnerable as a result of getting rid of the cable piece of the business and getting rid of the print piece of the business . Well we think that the verdict is clear because the market for all of us watching this network, we know that the market is always right. And what the market looks and says is that the value of all these companies independently in their stock is more valuable than how they would have been and how they were when they were back together. Thats true because the gains in time warner earnings have been more than any other Media Company in the last five years. Same thing is true of our cable company. The Magazine Company is now the biggest independent. Magazine company is doing very well because that industry is a Slower Growth industry than tv. Its now one of the great performers in that business where if you put it next to a Television Company given the strength of tv trends any Magazine Company would be the slowest growth part of a tv company. So i think its very clear that were stronger in our current more independent silos. But the real thing that time warners got is focus, tv production, networks movies. And yet we are the biggest in every one of those categories. Its not as though we need to add something in order to perform the way we have. Jeff the super bowl is coming up. I dont remember the last time we were all talking about commercials. I dont watch commercials anymore. In fact, i try to watch as much nbc as possible but i might not watch that much broadcast television anymore. So this is a unique moment when im going to watch a super bowl and im going to watch the ads. But other than that i could go 364 days without seeing a commercial or a network. Hows everybody going to get paid if its not from commercials . Well, you know first of all i think what youre saying when you watch the super bowl commercials is you like to watch a good ad. Right . Yeah, the ones ill skip if i have a choice. Youre going to transition between the old media where there are all these ads during the breaks that werent aimed at you. And in the new media, it knows what youre watching and it has an ad that youre interested in. So when you target you get better data you can have effective advertising. And were just in the middle of a transition from one way where a lot of it was wasted that old saying. You know i dont know where half my ad dollars were wasted. Thats what were basically in the process of fixing. Its going to be better for the advertiser and viewer. Be as much money when its said and done. Youre going to need to schedule your kitchen breaks because the ads will be so good you wont be able to leave the set. I have a question then. In pharmaceuticals the big differentiator is rnd and i think in your area its content. How does one maintain that vibrancy in content even as you get bigger and bigger how do you get the content to be different than the other guys . Well thats been happening is the biggest talents, writers, directors, actors who used to go we all know this. They were all on the big screen and theater. And now really increasingly theyre working more in tv because you can watch think of your favorite show. You can watch 20 hours of your favorite show your favorite characters, and that means you can make the show different. You can make it deeper. You cannot have it be so formulated where every eight minutes theres a crisis and then they go to commercial. Thats how its Getting Better. And the consequence is with all this mondayey coming in and its happening globally so whatever you make for the United States is now of interest worldwide. Youre just getting basically more investment more quality, and therefore more excitement for the viewers. I want to ask you about yahoo this week. Because yahoo is now spinning off alibaba. Its going to be on its own. Youre on your own in a way. Youve been part of aol or with ao aol, so you know. Do you think that company has a future . There was a rumor they were going to buy cnn. Yahoo . I never heard that rumor. I should watch this show more. You said you watch this. I do watch the show. I should just watch it more. Everybody should watch it more. So youre asking whether yahoo has a future . What do you think of yahoo on its own . You know i dont know enough to say exactly how strong it is or not. You know yahoo aol, msn network are all sort of in a general portal business and theyre all trying to evolve. Theyve got pretty big numbers in terms of who uses them and the advertising. But i couldnt tell you where its going from here. I know compared to that for them television is a better did bet. Yeah. Have you figured out the way to get paid for cable with millennials some day . Where do they go . Will they be back . Thats a good question. There are more millennials using broadband tv and devices. And so it has always been true that when people in their 20s go out of school and they try to get a house, it takes them awhile to sign up for cable. That always was true. Now i think its getting a little different. Because your question is right. Whether they ever really want to pick up all these channels. But the thing thats really important is whether they get attached to this show to cnbc. And they dont have to have it in a cable channel in the future. They may be able to get it in a either a smaller bundle over broadband. And so long as theyre watching and theyre paying for the subscription, i think youre going to have a good business. But thats the key for getting them to pay for subscriptions. They are used to getting everything for free finding it online somewhere. But youre younger than i am andrew. Are you used to getting everything for free . Im a cheapskate. Id love to get things for free. But the carriage fee is key. So once you unbundle and the carriage fee becomes in question right . I would argue for cnn, advertising is what what percentage of the revenue is actually advertising on cnn relative to the carriage fee . Much smaller on advertising. I think primetime advertising on cnn cnn by the way is up more than any other news channel this year. Its 10 . Cnbc primetime is up more than any. I dont want to quibble. I would never try to disagree with you. But the subscription fee, lets test what were saying. Plenty of people have signed up for a new thing called netflix. Plenty more have signed up for hulu plus. Those are subscription fees. Those are very decent businesses. Thats what happened with hbo 20, 30 years ago. Hbo in the midst of all that just had the biggest year its had in 20 years. You know so the freedom is really a way to say it. You bring up a good point. Amazons got its Subscription Services too. Are they all going to exist or does somebody win out . You know lets look at what happened so far. So we got 100 million cable videos up. Weve got a Record Number at hbo. It went up more last year than 20 years. And we added close to 40 million u. S. Netflix subs at the same time. None of that took away. Well have to look at it on younger people but youre in the middle of a transition where clearly the programming is very good. I mean if i wont do it its too selfserving to talk too much about adult swim one of our networks. Weve got more 18 to 34s watching. And younger than that. He shouldnt be watching but he is. And when that channel is available on demand more effectively, youre going to see more people watching it. And youll have people of that age that say, you know, ill make a choice to sub vibescribe to that. I want to ask you a high minded question. This is stark contrast. I remember cnn everybody remembers cnn and the way they changed the world. It existed to bring us news as it was breaking. Now if you were e ward r. Murrow and you cynically looked at the 24hour cable channels now, none of them do it without a point of view now, documentaries at night, its almost not economically possible to do the Public Service aspect of i dont know. You think its still possible to do it without a point of view . Look at the last two weeks or three weeks with overseas. When something is happening, theres a huge habit not just in the states but all over the world and not just on television but on your mobile device of going to get your news from whether its bbc or cnn and i think theyre doing a better job than ever before at bringing you breaking news. And the question becomes when there isnt huge breaking news or even when there is and people are off watching a game show what is you know how much do you follow fewer ratings versus how much do you in our case we numerous tienlmes of the week make the decision dont worry about the ratings, follow the news. Because we want to serve our subscribers because most of our business, most of our money coming from our subscriber habit not from advertising. So its a good thing that advertising is not the only determinant about whats on television. Were going to leave the conversation. Dont be a stranger. Were neighbors now. I started work right here. Thanks for being here this morning. Thank you. Thank you for forcing him to come here. No, he was really looking forward to it. He loved it. Want to do it every day. Squawk box regular jeff bewkes. When we come back this morning, data that could move the markets. Stick around. Squawk box will be right back. Welcome back to showdown jerry rice here with 8 year old Andrew Hunter debating who will win the big race between the tortoise and the hare. What do you think andrew . Rabbits are faster. Its not a rabbit, its a hare. Whats the difference . Maybe figure that out before debating the best wide reciever of all time. Wait, are you Odell Beckham jr. . 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Dow looks like it would open down 78 points. S p 500 looking down about 15 points. But it all could change when we get the numbers. Back in a moment. The problem is some of its in this lab. Some of it is in her head. Some of its in this new journal. And the rest of it is in your personal medical history. Ibm watson can not only read this data, but understand it. Its trained by doctors. And its always learning. It can help find hidden correlations and help your doctor recommend Treatment Options for you. Theres a new way to work and its made with ibm. We are just seconds away from Fourth Quarter gdp. U. S. Equity futures having weaker through the morning. You can see right now theyre down. 85 down for the dow. Rick santelli has the numbers. Up. 6 on employment cost index. But the big number gdp, a two handle. 2. 6 . 2. 6 . Many were looking for between 2. 8 and 3. 2 . Our last time around the block was 5 . Lets look at the internals. Assumptions strong at 4. 3 . Theres the silver lining. Thats significantly more than the 4 we were looking for and a full percentage point bigger than the last. We were expecting close up to 1 . Last look up 1. 4 . Unchanged. That really is something big. And the pce quarter over quarter, up 1. 1 . What as expected. You have to go back to the Second Quarter of 2013 to find a lower im sorry. Of course other than the minus 2. 1 . Of course were going to be looking at how the side is going to potentially save the day. Its a broad number. It takes into account things like transfers from the government so i dont know how much it is in the micro sense. But in a macro sense, we have to call this final quarter of 2014 a bit of a miss. It seems to underscore how we jump to inventory bill to inventory bill. Heres the big news in Interest Rates. We are now under that very significant 171 close from the 15th of january. So it makes it a trifecta. We now have all the key maturities below numbers. And the only jump to the sovereigns. Back to you. Thank you, rick. Steve leisman is on the west coast this morning San Francisco, where hes going to be interviewing San Francisco fed president. Good morning. Yeah. The cci is not showing a whole lot of change in the year over year rate, andrew. But i think the story here is it does kind of contradict the negative number we had in december. The notion of waging falling. I didnt get the business spending and the inventory numbers. That strong Consumer Spending number that rick talked about seemed to be Even Stronger than what was pretty much estimated. That plus 4 number. Inventories could have gone either way. And one of the reasons why economists were a little nervous about this number prices having falling so they didnt now how inventories can be valued. Well see if that gets adjusted over time. Ill look at the inventory. Some of this is estimated. 2. 6 would be the first i think it was six out of the last seven weve been above 3 . We had those two strong quarters. But really the devil is going to be many the details here, andrew. Okay, steve. Thank you. Steve, what is the connection between the fed and John Williams . I dont i dont is he is he a is he someone that i mean he has a big interest in that . You know my interest in music. So its just basically trying to bring the two together. Is he involved with the new star wars there . I cant think of a good joke with fed policy and star wars. Normally you could. Its early, isnt it . I could. It wouldnt be funny and it would be a reasonable attempt and i dont have it. But i will tell you youre one of eight guys that made that John Williams joke. He is of course by the way the San Francisco fed president and we will have an interview with him oh that John Williams. I knew you knew him. You didnt make that clear. I thought maybe you knew him. But hes the San Francisco hes a voter this year. So were going to want to follow him. Hes going to sit down for an interview on street signs. Steve, what is the First Quarter gdp going to be . We dont have an estimate on that joe. Theres no tracking yet in terms of the cnbc rapid update. But im seeing again folks saying around 3 again. You take that in a minute, wouldnt you . I would take you know first of all this is above trend in terms of the ability to lower the Unemployment Rate. But still we were looking at 3 . All the data coming into it we have 3. 2 in our rapid update. I would take 3 in a heart beat. That claims number was that going to be reversed . Yeah i mean that was partially distorted by the mlk holiday. And the seasonal adjustments around it. But i will say a bunch of folks breathed a sigh of relief in the sense that heading up to that, people were saying dont pay a lot of attention to it. Now its coming below even despite the seasonals, theres a bit of a relief that were not really having issues. I will say that torsten schlock, he said thats equivalent to a 5. 4 Unemployment Rate that well get next week. So thats heading down towards that level that the fed thinks is really the natural rate of unemployment. Okay. All right. Thank you, steve. Guess what . John williams is doing the seventh star wars. The fed guy . No. The other one. Oh. Okay. Dont they just have to use the old they replay the same . No. They say hes signed on for the scores. He returned to score it. Hes 82 years old. Is he really . Yeah. Looks much better there. Thanks, steve. Said that like ten times. The dow is on pace for its worst month in a year despite the rally yesterday. Well see what happens in the last trading day today. But were starting off down about 60 which came back a little. Lets talk to senior portfolio manager. Everybody said 8 to 10 for the year. Not to say we wont do that bob, but january started out like we kind of paid some forward in the last quarter. Did you feel that way . I certainly did. You might remember that happened last year when we had the hit last year proving that we borrowed some. I think weve done some of the same. 8 to 10 earnings is tall for this year. Of course numbers have come down a little bit on the wake of the further decline in oil prices. Their head winds, i think one of the confusing items right now, joe, is whats good for the economy is not necessarily good for the stock market. We can argue the lower prices good for the economy. But at the moment, not particularly good for earnings. Because of s p oil related, weve got a lot of producers now which is a good thing for the country too. But well see that in comparisons year over year for their earnings. Part of it is a timing issue. The hit to energy and related earnings from the decline in oil prices is nearly immediate. The benefit to everybody else consumers in particular is stretched out over time. So you have this immediate hit and the longer ramp to the upside. And that back and forth and that tradeoff i think is giving the market and a lot of investors confusing. Its not easy to figure out. You think that we do see the fed go up in june or september now . This year for sure. I saw a poll. 34 of investors think not until 2016. I think its this year in part because theyre starting at zero. Its not a low Interest Rate. Its a zero. We got to zero because of the emergency. The emergency in my adjustment is long past. They need to get rates where they belong relative to the economy which in my mind is low but not zero. Bob, this is fred hassan. Just a quick question. The oil prices have an effect on the inflation index. But the pattern on the core inflation, is that going up or is it flat . I think flattish. Maybe down a touch. I think inflation will be another confusing subject this year. Headline inflation thanks to oil will fall. Core inflation as you mentioned, flattish. But wage rate inflation is going to start moving up. Probably 2. 5 this year. And so when we talk about inflation, were going to have to be very clear what were talking about. This is a very confusing period. Its sort of the transition in my view from the first half to the second half of the business cycle. Okay. Bob doll thank you. Well see you in the studio one of these days. And like we always say, may the fed be with you, bob. Hear hear. Thanks. Youre welcome. Okay. When we return social media in the big game. Twitter and facebook and other sites will be flooded with everything from kickoff to commercials. The head of the nfl new york joins us to discuss that after the break. Stamps. Com is the best. I dont have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps. Com you can print real u. S. Postage for all your letters and packages. I have exactly the amount of postage i need, the instant i need it. Can you print only stamps . No. First class. Priority mail. Certified. International. And the mail man picks it up. I dont leave the shop anymore. [ male announcer ] get a 4 week trial plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. Do y ou like to travel . Im all about free travel babe. Thats what i do. [ female announcer ] fortunately, theres an easier way, with creditcards. Com. Compare hundreds of cards from every major bank and find the one thats right for you. Creditcards. Com. Its simple. A few days until the super bowl and history is already being made. Odell beckham jr. Setting a guinness book world record for the most onehanded catches in a minute. He completed 33 with the help from drew brees. The espn televised event was a recreation of a visa commercial that digitally imposed three quarterbacks throwing to larry fitzgerald. This time it was for real. He actually did it. Thats awesome. It is. Thptink about when you let him use both hands. And you know what . Isnt it weird i went to one game this year and i saw the catch. I was at the game and saw the odelldell beckham catch. I feel like forrest gump. Im there for sosantellis rant. Im there for so many things. Youre part of history. Before sundays kickoff much of the action takes place in the sports books. Thats where hundreds of prop bets surrounding the super bowl are taking place. Dave briggs is very lucky. Hes already there and has that story for us from phoenix. Guys an estimated 115 million expected to be wagered on super bowl xlix with the patriots a slight favorite and 73 of the action so far going on new england says sportsbooks,. Com. The real fun starts with the more than 300 prop bets on the big game. Before it starts you can bet on if Marshawn Lynch will be fined. Odds say yes he will. Color and style of hoodie Bill Belichick will wear. They say hell ware a agree cutoff version. How many times will tom bradys supermodel wife been shown. The over under is 1. 5. Sorry, guys. But the over under on how much times the deflategate scandal will be mentioned is three. Who color of gatorade bath will soak the winning coach . Orange the favorite. And afterwards whos headed for disneyland . Brady to be the mvp followed by wilson and lynch. All right. Were just two days away from super bowl xlix. Social media is already on fire. Tweets involving the super bowl for this month 52 from last year. In the latest deal with youtube with the executive for media for the nfl. Man, oh, man, brian. What a year right . But maybe a game that everybody hoped wed have at the begin og they have year and now were going to have it. Yeah. Its been a good year so far. I dont know who youre cheering for, but i think weve got a good one. I cant pick. I really cant. People want me to say you cant go for the patriots now because of this. And but look at how both of them got here. Look what russell had to do to get here. Look what brady had to do against the ravens to get here to set this whole thing up. I dont know. Its like it was in the stars or something. Well, i think thats one of the attractive things about this game and the super bowl in general is the story lines are just so good and how these guys got here and the things they did to get here are good. But as i say, i dont cheer for teams. I cheer for tv ratings. So well have a winner. The whole football, this whole thing, you know 457. I dont know what happened. I dont know how it happened. Ive seen people say baseball has really got the upper hand now. Then i think about if it was a pound below but you look at whos the home run leader now . Whos the alltime home run leader . Can you answer that question for me right now, brian . I dont think i can. I dont know who it is. I dont know who it is. Because i dont know whether to say barry bonds. I dont know what to i mean are you kidding me . So these problems rise to the same level that other sports have been faced with in the past . Look i think people love to talk about things they feel passionate about. And people feel passionate about the nfl. They feel passionate about their team. They feel passionate about this week. And i think people find a lot of things to talk about. So this is just one of them. In other years, its a twoweek period some of us are ready to not look at the sports page because theyre so hungry for stories and Sports Writers have to crank it out every day. At least theres been someone to pine on and they certainly have. I think thats right. But i also think if you think where a lot of the fans are spending their time and you talked about it on social and twitter specifically but in social in general. Theres a lot of talk about the game. Theres a lot of talk about the stories as you mentioned of how the seahawks got here. And i think, you know maybe what the fans talk about and what the media talk about sometimes are two different things. But thats okay. We stay focused on the game and we stay focused on really why people are tuning in. Thats good. So overall nfl even with some of the problems i still you know, i worry about head injury and parents worry about their kids playing the game. Youve got a lot of daunting challenges still. And then people point to Roger Goodell and what he makes and his relationship with bob kraft. Is all this going to fade . Look i cant predict the news cycle. I think we spend most of our time really thinking about making the game better making the game safer, and really bringing this content to fans who love it. We dont spend a ton of time worrying about what people might write or what theyll talk about. But i think theyre going to write it. Yeah. But we understand our position in the sports landscape and we understand the responsibility that comes with it. And i think youve heard the commissioner say when these are issues we are going to lead on them and we are going to do our best. On head injuries rerecognized theres concerned out there but we also saw this is a sports problem in general. In keeping all people who play sports safe kids or otherwise, is a responsibility we all have. Well continue to work hard at that. Will we ever have a wednesday night football where the london i dont know what would they be . London bangers and mash play the mexico city i dont know will we ever have anything like that . Will it be every night some day and will it be global . No. Well, it certainly could be global. And we work very hard to make the game global. But you will not see wednesday night football. You will not see it every night of the week. The reality is is you can only really play football once a week. And there are natural windows that we will play these games in. So you will not see football every night. We like the windows we have. Okay. Yeah, itshave. Yeah its you know when i think about football is it its a jewel and not everyone feels that way sometimes. But nothings going to aggregate eyes like sunday. When people say, well the college game, you know, it was big but only got 35 Million Viewers. Wow, that shows you how powerful it is. And its going to be a great game. Hope is it a great game. I dont see how it cant be with these two. Look, i think it will be close. We had 111 Million Viewers last year, highrated and most huge super bowl we had. The game wasnt as competitive as we would have liked it to be. Hopefully well do better than that this year. Its interesting, you had jeff bewkes talking about content and changes in the media landscape. I think one thing came through, i think jeff would probably agree, is that people will find content and they are attracted to the best content out there. I think sports in general, are one of the only things left if not the only things left that can aggregate these types of audiences and i think well see that sunday. Brian, thanks. We look forward to it. You will too. Its on a great network, too, with the two best guys to broadcast it al michaels and Cris Collinsworth and the rest of the team. Coverage 12 00 noon eastern sunday on nbc. When we come back jim cramer from the new york stock exchange, well talk about the week that was and what hes watching at the open take a look at futures at this hour because they are in the red. Dow look likes it opened down 105. 102 points at this point. Well come back in a moment. Financial noise financial noise financial noise welcome back. Chevron beating the street. The company cutting 2015 Capital Budget by 13 as it deals with plunging oil prices. Down to the new york stock exchange. Jim cramer joins us now. Hoping to ask you. Google and amazon after the two stocks reported yesterday. Google used the term discipline four times in the Conference Call. People have been feeling like theyve been spending like a drunken sailor. This is a an 18 revenue grower selling 17 times earnings. I want to own it. Amazon amazeing. I didnt expect this quarter would show profitability. Also once again, starting to get some real discipline. Talking about invest, not spending. Used the word spending over and over last quarter. Not anymore. Two companies i think theyre chasing, tired of their stocks doing nothing, except going down and making astand here. Its very important. Charitable trust owns google. Wish we had more. Amazon proved they could do it with the results, jim. I wonder if this is a standard theyll keep coming up to or is it we can do it when we want to or keep investing and this is what happens. Right. What i call episodic profitable situation. They just they and raise it they can lower it. They can break out amazon services. This is a Conference Call weve heard you and we know that you just dont want us to act like a private company. Thats the same thing with google. Both companies were all right, we know we screwed up were not going to do it anymore, we do care about profitability. That was the first time. I mean google literally, one point said we care about profitability. What were you doing before that . Talked about shelving google glass and monetization the super bowl commercials, watching them on youtube over and over already a breakout quarter for both. Google obscure, so many onetime items, its impossible. Amazon, the stocks going to be up big. When the stocks up 40 probably goes up 70. See you in a few minutes . When we return shake shack to begin trading. Danny meyer ahead in a little bit. The lightest or nothing. The smartest or nothing. The quietest or nothing. The sleekest. Sexiest. Baddest. Safest,. Tightest,. Quickest. Harshest. Or nothing. At mercedesbenz, we do things one way or we dont do them at all. Introducing the allnew cclass. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. What can your fidelity greenline do for you . Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. Time for one quick thought from our guest host this morning, fred who has been here all morning. What are you thinking . Andrew we can call this a life zins ofscience of century or the century of the empowered consumer. Now they can learn about health care from the web, they can take greater interest in their own health, be more focused on managing issues better. They can be better educated because they go to the doctors office. This is the century of the empowered consumer. Fred thank you so much for spending the morning with us. Really really appreciate it. Time for squawk on the street. Fries with that shake fries with that shake a new york city hot dog cart. Today on wall street. Shake shack public at big board. Talk to founder danny meyer and Ceo Randy Garutti late art post 9. Welcome to squawk on the street. Im Carl Quintanilla with Jim Cramer David Faber at new york stock exchange. Futures lower on the miss in Fourth Quarter gdp. Earnings to get through. Oil below 45. And the