Transcripts For CNBC Squawk On The Street 20130123

He calls it, they pulled a congress. Waiting for goodow, and a lot of others said sticking their heads somewhere else. Its trough. Jim, thanks for coming on. Well see you on the set in pebble. Thank you for having me here. I appreciate it. Thank you for coming. Join us tomorrow. Squawk on the street is next. Good wednesday morning. Welcome to squawk on the street. Im melissa lee, with carl quintanilla, jim cramer and david faber here at the new york Stock Exchange. Take a look at u. S. Futures. We should note the dow is posting its bst january in 17 years. We are looking to go higher on the dow here. Investors are awaiting the house vote this afternoon on postponing the debt ceiling. News in europe, David Cameron vowing a referendum on whether britain remains in the eu. In japan, longest losing streak in two months. China awaits data, thats out tonight. The road map in the u. S. Starts off at the golden arches. U. S. Samestore sales up 9 for mcdonalds, helped by the dollar menu and mcrib. Ibm and google surging premarket. Google gets its price target raised by six firms this morning on better than expected earnings. Coach getting pummeled this morning, blaming its big earnings miss on weakness in north america during the holidays. It says it is transforming itself into a lifestyle brand. Apples results tonight after the bell. Could this be the quarter that marks the bottom on the stock. Will tim cook talk about the next omg product in the pipeline. Well start with mcdonalds. It earned 1. 38 nds the Fourth Quarter, it exceeded estimates. Ceo don thompson said for the near term, mcdonalds expects top and bottom line growth to remain under pressure with january global comp sales expected to be negative. Jim, its come a long way since the mid80s here. Still pressure on margins. The dollar menu is tough to sustain. Youve got to put yourself in the heads of the buyers. I think the buyers say, look, in the end, it was better than expected. The stock was a terrible performer last year. They have to get it right eventually. It cant be as terrible as it was in 2012. Not a great reason for me to buy. But obviously the market is cheery. Somebody wrote me back on twitter, saying, im not loving it, im look it okay. Like it. The u. S. , interestingly, was not the problem this time around. It may have had something to do with being open on christmas day, pushing the mcrib in december rather than january. Give us your enthusiasm level. I dont have much. I just think that there are a lot of stocks that have moved up a great deal. So you might be looking for a stock that hasnt moved. This one hasnt moved. You could argue theyre starting to get it together a little more. They obviously promoted the dollar deal. It brought people in. Again, i think people are really searching for something to buy. Theyre willing to buy things that arent necessarily high quality here. I think there are a couple of questions when it particularly to december comps. Last december was a very tough quarter because it saw 9. 8 rise in sale. But they pulled the mcrib in december. In terms of the store opening on a day by day basis, it may not necessarily be comparable theres the mcrib. I havent had a mcrib in five years. I know. But you speak about it very enthusiastically. That is true. The other issue at mcdonalds is what a lot of other Food Companies hf highlighted, and that is rise in costs. Brinker yesterday talked about it. Theyre in the casual dining space as opposed to the quickserve space. When you talk about rising costs, you have to wonder about margins for mcdonalds. Look, take a look at some of the stocks coming by the ticker. Novartis is up. The chairman leaves. So maybe something good happens there. Parker reported one of the most disappointing quarters on friday. Everything was bad. Everything. The stock went up. This is just part of the animal spirits moment. You get caught up and say, all right, im going to find a reason to justify buying mcdonalds. Im going to say that im not going to look through it. They beat the number. And thats whats been going on. Yeah. People find reasons to buy. Because they want to be in this market. Thats a reflection more of the market itself. Thats my point. At what point does that potentially end, or is that something thats going to be sustainable . Go into some of the quarters and say, look, dont worry about the second half. Dupont yesterday wasnt that great. But the top number was good. Like mcdonalds. She came on, ann coleman, said good things about the second half, tio margins bottoming. All of a sudden youve got a story. If somebody downgraded dupont today, people might say, thats my opportunity. People want to be in stocks that are still down from their highs, whether it be the october highs of last year or the highs of 2011. The question i have, is this a mcdonalds story, is this a sector story . Do you not like the restaurants in general . It seems a lot of the headwinds that face mcdonalds face the rest of the industry. Maybe it extrapolates the rest of the industry has problems as well. Chipotle did have problems. Chilis, nothing exceptional at all. One thing tossed out, theyre not building any chilis. We have enough chilis. Saturated. We dont need anymore. Were overchilied. Or chilied just enough. In all of American Media is the graph on the cover of usa today. Likelihood well trim spending in the next six months in eating out, 59 . Thats a large number if you look at the next six months. The Consumer Confidence would back that up. Look, i go into mccormack and watch that stock all the time. Thats when you want to cook at home. That does very well. I also see stocks, again, like pinero where people are going out and liking it very much. Darden seems to be missing the execution. People arent going to olive garden as much as they used to, red lobster. Very uneven whats going on. Yeah. On the brinker call they talked about disconcerting trends of people not going out as much. It seems like its overall, jim, you make the point, people want to chase the dips. The tenyear is up above 18. Vix at a fiveyear low. I think people are being worried to being led to slaughter. You dont think thats happening yet. Coach is bad, no two ways about it. Coach is terrible. So coors goes down. I think at the end of the day, people say michael coors is winning. Because nordstroms didnt report a bad number. Tiffanys. There is other jewelry thats good. Execution is playing a big role. The execution for coach is horrendous. Its horrendous. I dont really know what happened. Lou frankfurt is a good manager. I just cant grasp it. Its been going on for a while. It was an 80 stock in april. Right. Now its a 50 stock. Obviously taking a hit in the premarket, the luxury goods maker said it earned 1. 23, below forecast. Revenues also missed as jim said, lou frankfurt said the Holiday Season proved challenging in north america. Comps down 2 in the quarter. Over the last decade they said we built coach into a leading accessories company, now transforming it into a Global Lifestyle brand anchored in accessories. Thats anchored in couponing, which is what i hear theyre doing. I find when look, theres many ways to tell to put a little lipstick on the pig. This was just nothing that i want to buy. Maybe someone says, you know what, next quarter will be good. But i just id like to have a Little Something to hang my hat on here. I dont have it. Accessory or lifestyle my fossil. July 31st of last year, it opened down 19 . Wow. I dont know if you remember that day. Weve been down this road before with these guys. Theres a level of consistency thats starting to bother me. Whats that reflective of. This is a Management Team that has been lauded for years as having been ahead of the curve, having appropriately merchandised this company. And so how do you suddenly start missing it . Is it focus . Is he doing Something Else . Whats going on . Uggs was great for a long time. Developed the rockport brand, and then it cooled. Maybe coach, like tiffany, is old. Maybe theres an old theesis in this market. Maybe its oversaturated. Frankfurt did talk about maintaining their pricing strategies, despite the retail climate which protected their brand. It sounded to me not like couponing, but maybe the opposite, maybe they didnt coupon enough. Someone about six feet from me opened a bag and it was couponed immediately. She went on i was like thinking exactly that, that theyre preserving. Nicole was saying, listen, you can believe that, or your eyes could be lying, because ive got a coupon for my coach bag. We need a nicole cam is what we need. We could just go to her all the time. This is not the coach bags that you can get on canal street. Those seem like the kate bags that i see on canal street. They may not be as not as high quality . No, like the watch i bought down there for ten bucks, which worked all the way to the subway. The whole way. Wow. Sounds like a block or two. Once you got on the subway you couldnt get off the subway, it broke. But i got at least a solid six minutes. How much is that per minute . 5 a minute . Does it make you want to buy kors more or less . God bless you. Thank you. You have something i dont want to catch. Im actually very healthy. But sneezed. I think that, you know, what happens here is by midday, someone comes out with a, hey, listen, i talked to kors, or its a quiet period but i think its okay. Look, this luxury end is very challenged. I would rather buy nordstrom than kors. I dont mean to punt like that. I dont mean to slide with my leg and trip and read like that. Like tom brady who wears uggs, which, by the way, is a mistake. My pal . Thats true. We do hang out together. Yes. And married to supermodels. You take your life your hands when you say, listen, i know kors is good. My supposition is kors is doing better than coach. That doesnt necessarily produce something thats good, because ive got so Many Companies that have reported really good numbers that you can buy. Like a travelers. I think travelers can go dramatically higher. Travelers is an insurance company, its really boring. It was an unbelievable quarter. So i switched directions, played generals and said, i would rather not buy kors, i would rather switch to insurance and buy a stock that could go up dramatically. Jake fishman is a great businessman who doesnt promote himself. Lew frankfurt is on tv a lot. I love lew. Everybody here on tv loves lew. Fishman knows how to put together a quarter. You love lew, dont like the stock. I like david novak. People sell young. Even though coach wasnt bad in china, will they now sell young. Because people extrapolate everything. Were going to get to google and ibm and talk apple tonight. In the meantime, weve given you the lowdown on mcdonalds. How is business at pinera . Well talk to their coceo. And james gorman live from the Economic Forum in davos. What will he do for an encore after his firms blowout quarter. Futures trying to muster enthusiasm here with the dow opening up 33. Squawk on the street back in a minute. Analysts were encouraged by a rebound in online ad prices. Theyre expressing concern that the faster growth is growing in googles lower margin businesses. Fourth quarter products of 539 a share. And growth in emerging markets. Big blue said it used current earnings below wall street estimates. Ibm and google helping to put juice under the futures this morning, and helping the dow on its streak. It is the best january. Dow up 4 so far. Ibm is a its a reset for us. Because we spent a lot of time talking about sales. And the idea is if the sales are to good, you should sell the stock. Ibm is the exact opposite of that. This stock has moved from 125 to 200 on not great sales. What theyve done is make a fortune with what they sell. When you have Gross Margins for software youll make a lot of money. They had an aggressive fiveyear plan for 2010, because 2015 you earn 20. Now its going to be easy. It was a lot best call. People recognized that they figured out a way to do acquisitions, buy back stock, do a good dividend and make a lot of money. The bears countered today, how long do you sustain relatively flat revenues. Right. With bookings that are showing snamaller and smaller growth year over year. The answer is, you wont have to sustain them because theyre going to go higher. I was gratified by ibms call. By the way, jim was not on the call. I also like that level of confidence, frankly. But this was a terrific, terrific layout of what theyre doing right. Social clout, selling some hardware, new products coming out. I said, why is that stock going up . Sales were light. The answer is, because they are making fortunes. I think the question this morning is on valuation. I know isis Brian Marshal said, what do you pay for a Mature Company with minimal Revenue Growth that promises about 10 eps growth. He came to the conclusion that around 190 its fairly valued. Which is below where its trading right now. It doesnt help us. Where does that get us. Obviously what were trying to do mcdonalds, ill pay 87 for mcdonalds. Dupont at 43. Youve got to deal with the reality, which is that people were surprised. The last quarter was really bad. And on the Conference Call, people said, wait, what happened . The answer is, well, business got a little better. We said there was pushback on some orders. Sure enough, it was pushed back. I think were all struggling to deal with the realistic nature of how can we justify these moves. How many stocks have been downgraded because they hit the price target. The answer is, in a real bull move, which i think is what were having, you end up saying, 3m, i downgraded in 92, i guess i have to upgrade at 105. United technologies. When they reported immediately, the stock was down. It was like, no, the orders were gray. Im not trying to alibi the market. Im saying the analysts better provide some value out of here. Im not getting it from a lot of analysts who are saying, you know what, i really like if home depot goes to 47, im all over it. Thanks for nothing. We should mention alice raising their price target on google by a lot. By a lot. Reporting after the bell yesterday. In speaking to a couple of the owners of that stock this morning, you did come into the quarter with relatively muted expectations. Someone said to me if we dont see at least 10 sequential growth from this company, maybe it doesnt deserve a growth multiple. Cpc rates of decline are slowing. The cost per click, while at the same time you have click who are growing. On mobile, youre more likely to click if youre looking for something, looking for the movie opening, looking for the restaurant. Youre more likely to click through. More opportunity perhaps from mobile in a sense. Generally speaking, it seems to have been a positive quarter. And being well received by investors. Theyre talking about profit. Theyre even in china, by the way. Thats interesting, because people dont think about them in china. This was a great line, just a bit of color on motorola. Just to remind everybody, we do care about profitability. Ive often spoken about this company being in its own world, where they dont want to play by the rules, but here they go. Motorola is not profitable yet, but theyre taken the loss down appreciably. Were not in the business of losing money. I love that quote, that was my favorite quote. Amazing how many businesses have had to say that outright. Instagram, google. Its a good starting point. Look, i thought the mobile was really good. If you come away from the quarter saying, another one. We were down 100, and we know what were doing, and weve come back. Facebook, we didnt know what we were doing. Give the benefit of the doubt to google, because that last quarter was not so great. This last time they did a good number. I like the number. Yesterday we showed you how cramer was right about the fed back in 2007. Youll want to hear his take on some stocks worthy of mention. Futures moderately up here. More squawk on the street when we come right back. But we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. 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I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. About six minutes to the bell. Were waiting in earnings, jim, the mad dash focusing on rails, too. On squawk this morning, csx and norfolk southern, this is an endless story about how coal is killing them. Down 18 , 19 . Listen to the president. The president is determined to make us a less coalbased country. And ive got to tell you, this is a coalbased country. But ksu, kansas city southern, okay. They have coal. But they also have auto. The other guys have auto. But they have mexican auto. There are four new gigantic plants being built in mexico. They have tremendous business with sand to fracking to get oil out of eagleford. This is the one. I know its up a lot, but people want growth, carl. Only kansas city has growth. Csx did make comments on auto. Growth would be good, but not as good as the back half of last year. Auto is up a little. How often can you shoot the lights out. They do favor general motors. Im saying that the rails as an indicator of the economy, may be failing, because they are so coalbased. But Union Pacific reports tomorrow that is less coalbased and i think they blow it out. Union pacific is a winner. Interesting point. Well get a lot more after the break. Stick around. Well see how mcdonalds opens for trading now that weve got their earnings comps. Speaking of restaurants, well talk to ron shaich about the state of his business and whats new at the chain. [ maleu turn an entrepreneurs dream. Into a scooter that talks to the cloud . Or turn 30million artifacts. Into a hightech masterpiece . Whatever your business challenge, dell has the technology and services to help you solve it. Whatever your business challenge, i have obligations. Cute tobligations, but obligations. G. 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Utfs, talking about, ive been worried about the helicopter. They guided that up. The orders for otis were very strong. Yeah. Youve got spare parts. Its been the bain of a lot of companies existence. You talked a lot about the danger of the downgrade. Bernstein ups costco. Even they say valuation is still elevated. Currency less than a drag. Heres the value added. What do you do. How do you sneak it in. How do you get back on that horse. [ bell ringing ] celebrating the release of their new album. And celebrating indias 64th republic day. Wow. There you have it. Looks like most of these s p 500 companies opening in the red right now. Shares of dell are moving slightly higher, david. That is all over the newspapers today. Of course, a day after you first reported the microsoft dell combination. Microsoft in talks, as we told you yesterday. Of course, not much new to add at this point. Many of the news organizations also having their own reports here after we told you about it. With the conversations involving microsoft investing. What could be as much as 3 billion. I was given a range 1 billion to 3 billion. The deal itself continues to move forward. My sense is, having spoken to people close to the transaction, if we dont hear something perhaps even by the end of the week, you may start to see temperatures rise among investors, oh, is there a problem. Prices still, my understanding, still being negotiated. We talked about a range of 1350 to 14. Bloomberg is out with 1425. Theyve added a quarter to their range in terms of who theyre talking to. If you look at dell at this price, time, value, money, risk, everything else, 1311 on the stock, you know, not clear how much upside there would be from here on. Lets call it a 14 deal, even if they get to that point. Are they talking to the Justice Department . I dont think so. Microsoft has made plenty of investments in the past, whether it be a nokia in some regard, or comcast many years ago, or even Apple Computer way back when. Not to mention barnes noble. I dont know if you talked to the Justice Department. Well have to see. As i described it, and sources told me its going to be a mezzani mezzaninelike financing. Not necessarily a straight common equity of any kind, or straight equity in this overall leverage buyout. I think we need to wait and see what they end up with. Microsoft is competing against hardware at hewlettpackard. Now microsoft, someone could say theyre going to get preferential treatment. Dell, maybe reduce windows 8. I think its problematic. It leaves them as a creditor minority investor . I wouldnt like it if i competed against dell and saw that. I wouldnt like it. You would look at google instead. Google, by the way, you talk about chrome. I love it. There are so many things i loved about the google call. If they can get the temperature thing down, it will be the First Company to put somebody on the sun. Theyre still driving cars, im telling you. That was a big part of the call. Your pocket super computer powered by google. Pocket super computer. The chrome. The wonderful chrome. There was so much to like here. Im not being facetious. I think google is a great company. When the numbers first came out, you saw the revenue miss and then you look at the cost per clicks declined much less than what analysts had anticipated. So that certainly was, you know, a bright spot. Total advertising revenue up 19 . Were seeing the stock trade higher in todays session. Facebook goes higher. I dont know why that would be a takeaway you know, mobile in general, more of an opportunity, a growing ecosystem. Everybodys more comfortable with the ads and clicking through ads. It used to be digital dollars for your right. It was digital dollars for analog dollars. And then people started to get across the margins. Its funny, people at home are probably saying, i picked up the paper and they said google is bad. It was. The story read, listen, google missed. Ibm missed. I mean, its much more sophisticated than that. There are Different Things like apple, were looking for different metrics. Does apple cannibalize with the mini, did it cannibalize the ipad. People keep making that mistake, and the headline writers keep making that mistake, its why so many of our viewers are confused. I thought google was bad. No, google was terrific. Asking what to do with annies today. Recall on frozen pizza. Metal shavings found in the dough, not the finished product. The metal shavings thing is a bummer. You never want to see that, whether it be a pharmaceutical product, or no. You dont want those iron filings, or iron flings when i was a little kid, when i had my first chemistry test. J j 40 knew . This is almost difficult for a year or two . What do you do when you have a hip already inside you . Cramer does. Really . Its a shame. You have to sue them in a class action sue. J j said theyll replace it. This is a really horrible thing that has happened here thats been perpetrated on people. Many people went in and had these devices, they were supposed to last a lifetime. They lasted about as long as as that watch i bought on canal street. I do want to get back to apple. The call had just begun, and we did learn more during that call from verizon. The activations alone of apple products, apple phones did seem to be a positive for apple. Some people trying to look into the google quarter and see a read there. There you look for traffic acquisition costs. Which did not go up that much. Now, its somewhat complex, but google splits its how much it gets from the advertiser with apple when its an apple device. They get a much bigger take on an android device, that is google for obvious reasons. Android is their software. Their acquisition costs which had been 6 not that long ago had been trending up dramatically, but flattened around 7. 3 . Some are taking that as a sign that people are accessing more ads on android de voivicesdevic. What did you think about the maps comments . How much people loved the google maps . I loved it. The google map product, if you havent used it, its so spectacular. You can look up your house. Ive looked at your house many times. Really . And ive been waving to you. My mexican house is on there. When youre in a foreign country, its extraordinarily valuable. Its fantastic. It gets the eiffel tower right, i can tell you that. Thats kind of an easy one. You would think. Not necessarily. Business up 22 . Mobile ad rates, a lot of things to like about the google quarter. Research in motion, by the way, surged to a fresh 52week high in the session. Higher by. 9 of a percent. Citi out today reiterating that we acknowledge the fact that sentiment is going to improve going into this launch on january 30th. But the reality is, sell through actually matters. How many devices will they actually sell, which is why citi is sticking by its sell rating. 18. 08 is a high in this stock. Ray is very much a part of what im talking about for 2013. R. I. M. Used to be at 70. I can buy here. Nokia used to be at 50. I can buy here. Hewlettpackard down 44 . Lets call the bottom. Best buy, cant be that expensive. This whole idea of give me something thats not at its high is pervasive in this market. Pervasive. Brian shactman is on the floor with a whole lot more this morning. Carl, interestingly, dow up 48 points. But if you took how ibm, the dow would be negative. The s p is basically flat. You have some strength in the nasdaq, which is positive. But again, a lot of that could be fueled by google. Big companies with big positive earnings driving the overall market here. The dow, especially, weve talked a lot about coach. Look at the collateral damage, if you will, from some of the luxury retailers. Tiffany, ralph lauren, sachs, all down. Tiffany more than 1. 5 . We talk about the new highs. The transports has been airlines. U. S. Airways, lcc, strong numbers on the top and bottom line. That stock up about 2 in early trade here. I want to add a little insight into annies. Well off the premarket lows. Still up about 90 from the ipo. Maybe some of that jpmorgan came out and said well lower our estimates, but were going to reiterate our overweight rating, and encouraging people to buy the dips on this stock. Obviously down significantly, but well off the premarket lows. Eli lilly, stomach cancer drug did extend survival rates beyond the placebo, but only by two months. It was not positive enough. Thats why its trading down 1. 5 . Whenever im down here at the floor, jim, i like to keep an eye on the dividend raisers and what the companies are doing with their cash. Wells fargo, comerica, increasing dividend close to double digits. Basically wells fargo said they want to do more. Were just waiting for approval from the fed. Back to you. Brian, i thought wells would go up more. This stock seems to be cursed. No matter what they do. People seem to like it. A great point that you raised. Thats what we should be looking at. Lets go to Sharon Epperson at the nymex. Wti prices under a little more pressure than brent crude at the moment. As you mentioned, this is after a very overbought condition, technically were looking at multimonth highs here. Were watching whats coming out in terms of china data. Saying that chinas oil demand was at a record level in december. Well get pmi data from china that will give us more indication of perhaps where the Oil Market May be headed. Right now, though, a lot of the market is focused on whats happening right here in the u. S. We told you about the nebraska governor approving part of the keystone xl pipeline that would be going through his state. The Obama Administration has to weigh in, and that could take until perhaps after march, until they actually decide to do that. This is a pipeline that will take 830,000 barrels of crude oil from canada, oil sands to the texas gulf coast. But a number of analysts weighing in on what this will mean for oil prices today. Were looking at Morgan Stanley saying that when you look at what is happening with, not just the keystone pipeline, but Pay Attention to whats happening with the seaway pipeline, theres still a glut of oil from oklahoma because of whats coming from canada. That is going to maintain a level of this spread between brent and wti in the midteens for the first half of the year. So thats what they have to say about it. Back to you. Thank you, Sharon Epperson. Panera bread has given competition food for thought. Ron shaich on what is new at the fastfood chain, coming up next. And this mornings early movers. Top of the list, intuitive surgical, up 9 . Shares of panera bread up 14 over the last six months. The franchise set to announce Fourth Quarter earnings in early february. Ron shaich is the cofounder and ceo of panera bread. Ron, were hearing variety. People arent going out as much. Two, theres been tremendous food inflation. Why am i not hearing either one of them from you . Well, the truth is, jim, we just keep chugging along. Paneras been a positive factor that has driven the success of this company for many, many years. I think as you know, last quarter earnings were up 28 . Comps were strong. We continue to move forward. Ron, some of the same commodities that some of the other guys who were really grousing about are very important at panera. What did you do to make it so that youve mitigated that increase . Well, were reasonably diversified in our commodity basket. Were not at the effect of any individual commodity. And frankly, weve had enough Pricing Power that weve had the ability to adjust prices, at least in accordance with inflation. Okay, ron, also, were hearing from a lot of the restaurants that they already have too many restaurants in the United States. Youve got room to open a lot more paneras, dont you . Well, weve continued to open a bakery cafe every 72 hours or so, for the last half a decade. And we continue to be able it do it, jim. Were going to continue openings as long as consumers respond. The truth is, consumers have been visiting paneras, the volumes of our new cafes in 2013 have been the highest in our history. Excuse me, our volumes in 2012 were the highest in our history. 2011 were also the highest average weekly sales wed ever seen in new stores. Our productivity continues to get stronger in new cafes. We continue to open. Ron, when i read between the lines on your commentary about pricing, to me it sounds like youve been raising prices. But at a certain point the consumer could push back. Are you getting to the point where you might be concerned that this flexibility in pricing is running out . Well, melissa, weve been adjusting prices consistent with inflation. And when you recognize that paneras average consumer has got an income of 75,000, essentially, our consumers are not going to save their way by brown bagging their lunch back to financial health, shall we say. So i think that consumers understand inflation is part of the package. And are willing in modest dosage to accept it. Its certainly been the history of panera. In fact, we Quarterly Survey Consumer Sentiment on value, and the value scores on panera have remained over the last five years. Ron, are you seeing a movement lets talk about the health. Youve got some very wellposted calorie menus. Youve got a 417 calorie asian Chicken Salad that is terrific. Are you seeing people staying away from the high calorie and going for the low calorie . Jim, you know it. Just like your investors, consumers are intelligent. They understand. All they want it do is be treated with respect and dignity. The way we do that is we give them the information. There are others, a broad swatch of paneras menu that is very good for you, low calorie, low fat, really very, very good. You can eat very well at panera. There are also items that are inactual gent. We let you know to make your own decisions. How about bread. Because a lot of theres a commodity. I know you talked a lot of times about how youre able to make it theres no surprises with things like bread. Costs. Yeah. We post the calories on bread. I think that the important thing about panera is that bread is where we come from. Were artisan bakers before we started. All of our food has to be as good as what artisan bakers would produce. Now, you may not come in and get bread at every occasion. You may decide thats not the way you want to eat it, you may want one of our specialty salads. Right now were doing a power spinach salad to die for. Baby spinach in a light dressing. Its really good. I encourage you to come in and try it. Ill probably do it this weekend. Panera cares. I like panera. In boston, should i visit that one when i go to visit my daughter who lives a block from you . Were opening our fifth panera cares. This is an extension of our community efforts. As you know, weve had phenomenal success by being part of 1,700odd communities across america. We got very involved in the issues of food insecurity. We donate all of the leftover bread and baked goods every day because we bake anew. When you recognize that one in four kids in america dont know where their next meal is coming from, you understand the issues. We decided to open and join the Community Cafe movement. What that means is these are cafes of shared responsibility. No set prices, jim. You come in, its a full panera experience, you pay for it, however you want, in a donation bin. The amazing thing, we served 1 Million People in these cafes, 20 of consumers pay more. They pay so someone else can enjoy the panera experience. 60 leave the suggested donation and 20 leave less, significantly less. Theyre the ones who are in need. Bottom line, were able to elevate and provide an elevated experience for everyone with dignity. Thats terrific. Ron shaich, chairman, coceo, panera bread, the best performing restaurant stock of the year. Thank you so much, ron. Good to see you. Thank you so much, jim, melissa and carl. Revenue expectations, coach chairman has High Expectations for the company. And had this to say in the Earnings Press release. Over the last decade weve built coach into a leading International Accessories company. Were now transforming coach into a Global Lifestyle brand. Anchored in accessories. That brings us to this mornings squawk on the tweet. Coach has already wristlets, which carl has on right now, hats, belts, key chains, and even accessories for your iphone and ipad. What other accessory could help them become a global brand. Weve got your responses throughout this morning. Its been a tough four months for were going to find out. Apple investors. Could the iphone makers get a bottom of the stock. But up next. The stock market can be quite a circus. And we have the ring master. Jim cramer and his 6 stocks in 60 seconds, taking center stage when squawk on the street returns. Days like today, we need a segment called 160. But we can only settle for six this time. Senovas is a stock a lot of people were speculating in. Cheap bank stock. A bunch of guys dont like it. I think theyre wrong. I think this is going to go higher. Texans tough to read . Its like, if things arent so bad, they guide below the street. Thats not the way to get the story home. Unilever. This guy may be the greatest consumer Package Goods guy. And weve got the mini dios. Good luck. Matt pharmaceutical. All eleallergen wants to own migraine market. Kvh. Be careful. Theres Equity Offering coming. So youre going to be looking through numbers all day long. Whats tonight . Well talk about derivatives of the rails. Because even though the rails have coal, theres other parts of the rails that are making a lot of money. And were going to look into them. Busy day shaping up. Always. Very exciting. Of course, we know who reports after the bell. Apple, netflix and a lot more. Well see you tonight, 6 00 and 11 00. Well talk Morgan Stanleys Ceo James Gorman from davos, switzerland. Keep it right here. Obligations. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. At optionsxpress were all about options trading. We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free3month e ibd™ subscription when you call 18882800149 now. Optionsxpress by charles schwab. Welcome back to squawk on the street. Lets get a road map for the next hour. Well start with some tech. Google posting better than expected earnings, helped by a boost in ad revenue. Companies leading the tech sector right now, is there still time to jump in. No love for luxury. Coach sales disappointing the street. Shares are sinking today. Are the cracks in the high end getting even bigger. Jpmorgans jamie dimon speaking about the whale trade. Well go to davos for his comments. Simon hobbs is out on assignment today. Hell be rejoining us tomorrow. We look forward to that. Breaking news for you now. Imf in with their outlook. Hampton . Good morning, david. Lets get right to those headlines. Updated outlook from the imf. It saying among other things it looks at Global Growth projecting to increase in 2013, but at a more gradual pace than the previous projection back in october of 2012. Policy action in the u. S. And europe have lowered the acute crisis risk, but the recovery is going to be protracted and delayed. It notes japan did slide into a recession, but the stimulus measures there are expected to boost growth near term. Modest growth expected in some emerging market economies, others still struggling with a lack of external demand and domestic bottle necks, overall the imf saying if the crisis risks do not materialize and financial conditions continue to improve, Global Growth could be stronger than projected. However, the significant Downside Risks remain, the setbacks in europe, and excessive near fiscal consolidations in the United States. Concerns about like the sequester, entitlement and tax reform. Policy action must urgently address the risks in the u. S. The key imf forecast headline numbers, 2 growth for the u. S. In 2013, rising above trend in the second half of the year. The forecast for europe, that area revised downward. Expected to contract by. 2 of a percent in 2013, rather than expanding by a modest. 1 back in the forecast in october. No downgrade of growth in japan, despite renewed recession there. Forecasts still for 1. 2 growth in 2013. And finally, the prescription for china, sustaining a rapid growth, progress on market oriented and structural forms there and more emphasis on private consumption inside china. Back to you guys. Hampton pearson, thank you. Google shares up sharply this morning after the company Beat Estimates in the earnings, setting a surge in ad sales profit. Both gentlemen this morning have raised price targets on google. You raised your rating to 900 a share. The price target, that is. Youve got a buy rating on the stock. In terms of google, the valuations at this point, 16 times forward pe, motorola still in your words a work in progress. Why should investors get in the stock right here . Well, for a couple of things. Remember, motorola is really a work in progress, but a very new acquisition. Youve got to focus on the core search. Its still growing 15 , 20 , even after 10 years or 12 years of business. Displays a brandnew business for them. Theyve only been in it in the last three, four years. By our estimates its already doing 6 billion to 7 billion Gross Revenue for that division. So, you know, a few years ago, a couple years ago, google was beaten over the head because people were talking about it being a onetrick pony. The search is not now decelerating all that much. They have this really great growth story in display. Only number two to facebook. Motorola is a work in progress. Theyre not out of the woods there for probably several quarters. But we think investors understand that. And theyre buying it this morning despite that. James, youve raised your price target to 7. 70 from 7. 40. As yousef said, theres healthy growth in paid clicks, in costs per click. The decline was a lot less than what the street was expected. Total ad revenues up by about 19 . Why neutral on the stock . Yeah, i mean, again, the revenue trends are good near term. They came in the way we expected. Stronger than expected revenue trends. I think thats going to help the stock near term. I think, you know, over the longer term, you still have to look at the fact that estimates on a consensus basis for 2013 are lower now than they were six months ago. The stocks approaching 7. 40 from under 600. Margins, once again, seem to be something which come under pressure, compressed again year over year in the quarter. I think thats a longer term concern that investors have. Whats the longterm economics of the business as google keeps investing in it. Yousef, facebook shares up sharply this morning on the back of google. Is it that mobile is improving, that people are actually mon monetizing off mobile . Or google is actually taking a share and could be a challenge . I think google is probably taking shares, but not from facebook. We actually believe facebook remains our topic. I think the reason its up is what google numbers tell you is that advertisers are willing to advertise. Mobile is not the risk that everybody thought it was, either for google or facebook. And consumers continue to spend. And back to the valuation issue, you really have to look at google relative to the overall market. This is still a company thats growing 15 , 20 with improving margins over time. And yet if you strip out the cash, its trading cheaper than the s p 500. Its trading around 12 or 13 times on the 2013 numbers. So we think its cheap. To what steextent, if any, investors should keep in mind, obviously not returning any cash, 48 billion to shareholders, they can occasionally take such as a Motorola Mobility that surprise people at the very least. Is that at least part of your construct when you approach this stock . Yeah. I mean, i think that is an issue. Look, google is growing, what, 24 on an applestoapples basis in 2012. Its a very fast growing company. Theyre still in growth mode. So they need that cash to be able to have the flexibility to make acquisitions, or investments big and small to grow the platform. But there is the risk that they do things which investors dont immediately see the value in, especially when they have that much cash. James, im just curious, what is your top pick in the space, compared to google . I covered the advertising in the media market more generally, so i think right now, theres an Advertising Agency in the ticker itp, thats attractive, because its a play on Global Advertising growth. Theres potentially a lot of margin upside there, which could make the valuation fairly attractive, you know, whereas i think its harder to see what the margin upside is for google. Obviously theyre different businesses, but you asked for my top pick, and thats what it is. Guys, weve got to leave it there. Thank you. Coach getting pummeled after a big miss on earnings this morning. As the lux re retailer claims, its becoming a lifestyle brand. What does that mean for the highend name moving forward. Jamie dimon speaking out live in davos on the whale trade. Well bring you those comments a little bit later on. The [ male announcer ] dont just reject convention. Drown it out. Introducing the allnew 2013 lexus ls f sport. An entirely new pursuit. Shares of coach slumping this morning. If 14 is a slump, after missing earnings estimates on weaker than holiday sales. They said theyll be transforming coach into a lifestyle brand. Jennifer davis joins us this morning on the cnbc newsline. Jennifer, good morning. Good morning. Obviously a lot of people have words for coach, frustrated shareholders. You think this is something of a rebuilding year for them, right . Yes, i do. And i see this weakness as a great buying opportunity. Very strong Management Team. We believe in the longterm viability and strength of the brand. This year theyre making investments in, as you said, kind of expanding into more of a lifestyle brand. Also acquiring their sarah palin distribu thir international distributors. We saw sales slow down over the Holiday Season across retail. So i dont think it was anything unique to coach. When they say lifestyle brand, can you what do you think that means . What are they doing differently that they werent doing before . Theyre going to expand more into they already have this in the stores, but theyll expand shoes, jewelry, you know, coats, more apparel. So extending beyond just handbags. Making a bigger presentation of some of the other items in the store. When you look at what the u. S. Did, the negative comps, that hasnt happened very much in the past decade, margins flat, you look at what people are saying kors and highend retailers are taking away, isnt there some skepticism that bleeds into your model . Theres obviously some investor skepticism. But with this negative comp, i really see it as a function of weak traffic over the Holiday Season. And that was not unique to coach. When you say not unique to coach, there are those who believe, and were looking at michael kos right now, that theyve been taking shares of michael kors. That the coach needs more vibe, so to speak for its goods, kors in fact has it and people are going there. I think kors is a new and exciting brand. And i think that there is some definitely some interest there. I do believe theres probably some share that is going to kors. But i think both coach and kors can be viable competitors at, you know, high profit margins. Jennifer, is there any concern on your part that perhaps coach in the United States, its not the highend luxury brand it once was, that because its gone so hard and fast into the outlets, that its sort of cheapened the brand . I dont think so. The outlets is really a different channel and a different customer. You know, coach has always been an aspirational luxury brand. Its always been in that 300, 400 range, which is lower than the high end. And there hasnt been a lot of competition in that space. People seeing that coach has done very well, and more competition has come in. But coach really is the dominant player. Like i said, very strong Management Team. And very sbrong brand. So i think that, you know, theyre going to continue to do well. Finally, jennifer, you have a buy. I think the price target is 70. Has that changed as of this morning . No, it has not. All right. Jennifer, thanks so much for that. We continue to watch the names were paying attention to today. Frankfurt has High Expectations for the company. Over the last decade weve built coach into a leading International Accessories company. Were transforming coach into a Global Lifestyle brand anchored in accessories. That brings us to this mornings squawk on the tweet, what else could coach offer to become a Global Lifestyle brand . Tweet us squawk street. John paulson, Hedge Fund Manager best known for making big money when he called the collapse of the housing market, now calling the bottoms. Paulson said hes bullish on the u. S. Economy due to housing. Kay kelly is here and shes got more on that story. Kay . Yes, interesting talk last night at the 92nd street y. They had contradictory views on the economic outlook. John paulson bullish, anchored in his theory that housing is going to do very well this year. That weve seen a strong recovery already and thats likely to continue. He pointed to a couple of things. He said Mortgage Rates are at an alltime low. The number of houses available on the market are at essentially a tenyear low. So its a very attractive time to buy. He thinks this will all put pressure on building efforts and well see a much stronger recovery in terms of building new homes than in quite a long time. The most positive change in housing, he said, since the lehmans brothers collapse in september of 2008. He thinks the stock market rally we saw last year and seeing so far this year is heartening. He thinks stock investing is much better in terms of an individual investor opportunity than credit investing, if you look at the overall returns. He also said hes very positive on the u. S. Energy market. That were seeing quite a turnaround there. He noted that chemicals, petro chemicals, and other Energy Related stocks may benefit from this recovery. Unclear whether hes investing in some of those names. I looked at his last 13 app, i didnt see a ton of presence in that market. But thats several months old. Unclear what hes doing at the moment. Hes a little less bullish on credit. He thinks well see recovery there, in terms of use of credit cards and auto loans around mortgage purchases this year. But his macro outlook, hes not as excited about credit as he is about stocks and housing. Kate, as you have reported over the last couple of years, mr. Paulsons macro call, so to speak, has not been particularly good. His stock picking has really lacked a lot of press. If im listening at this point, im tempted to say, given his track record over the last couple of years, maybe i should take the other side of that trade. When i was tweeting about this talk last night, i got harsh responses from people, including paulsons bullish stock market thesis, the best evidence ive heard yet to short the market, and who cares what this guy thinks. No doubt his assets under management have essentially halved since they peaked about two years ago. Hes seen redemptions and doubledigit setbacks for two years now in his umbrella funds. His gold fund has also had a hard time. This is the man who made 590 for the year 2007 alone. And then another 20 or so on his subprime or risky Mortgage Market short in 2006 and 07. Hes obviously got other ideas now he feels strongly about. He feels strongly about gold as well. He thinks this will take three to five years to play out. He said since he got into gold in the spring of 2009, its up about 80 . He thinks its a great way to play inflation and with the expansion of Central Bank Activity which shows no signs of abating, still going on in one form or another, he thinks thats a way to play it so you get a better return than you would in cash. Right. Big in bank america, little early in terms of when it got large. Thats right. You and i reported it when he started to pare that back dramatically a couple of years ago. And european debt also, on the wrong side of the take on that. I dont remember him being in the housing trade, whether Home Builders or housing derivatives, like the suppliers, et cetera. Because some would argue the biggest run in those stocks is over. I didnt see a lot of exposure to that. I dont have it in front of me, so i cant say he has none of those names. In his equities, what you see is the gold holdings. Whether its anglo gold, hes exposed to a lot of these names. He got in almost two years before the top in august of 2011. So he was able to take some money off the table i think then and enjoy some of those gains. But hes still in it. Weve obviously seen a bit of reversal to where were off those 1800 levels. Again, he thinks this is going to play out over the course of years. He says theres a very strong correlation between Central Bank Activity, you know, expansion of their Balance Sheet and inflation, and if thats the case, gold is poised to do much better. But whether that takes three years, five years, perhaps even a little longer, you guys, anybodys to say. Well see if investors have the patience to wait out three or five years at this point. Thats right. All right. Kate, thank you. Thank you. Still ahead on the program, Morgan Stanley ceo live from davos after a blowout Fourth Quarter. Whats next for this big bank. Apple out with earnings tonight after the bell after a 20 drop in shares over the past three months. What are investors really looking for in tonights report. Back in two. [ indistinct shouting ] [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. Weather outside, there is a bitter chill from the midwest over the east coast. A live shot of chicago right now. Where its cold. But new york also cold, facing temperatures in january this morning, windchills below zero throughout the region. In fact, a special Weather Report out moments ago says winds and low temperatures may bring the windchill to around 5 below. A little bit later on today. The current temperature outside the Stock Exchange is 13. It was 15 at reagan international. Guys, that is the coldest since 2009. And embarrass, minnesota, minus 30. So it could be word. Two words. Long underwear. Thats the key, man. Talking about the weather, of course, this very, very cold temperatures, as you might expect, it is impacting the price of natural gas. Lets go over to Sharon Epperson at the nymex. The heating fuels in general are definitely going to be beting from increased demand because of these cold temperatures that are going to last for the better part of this weekend. Well probably see colder than normal temperatures for the rest of the month. For much of the country. That is the latest report coming out of Weather Services international. We are looking at natural gas, that really has had a tremendous runup in the last week or so. Actually, in the last couple of weeks, its up 20 cents. It hit a sixweek high yesterday. Were consolidating around the level in natural gas and traders say anything above 360 today, well look at 375 at the next key level for natural gas prices. The fact remains when you look at what is happening with natural gas and with heating oil, natural gas definitely benefiting a lot more. Heating oil, youll remember, is a proxy for diesel fuel. Very much dependent on whats happening with the refinery situation and the oil market. Even more so than whats happening with the demand for heating fuels. So natural gas is really the commodity to watch when youre looking at these weather forecasts. And traders behind me in the natural gas pit watching very carefully. Back to you. Sharon epperson, thank you. The hottest trade of the year, it is gaining ground against the dollar this morning after the bank of japan announced details of an easing plan. Lets get to money in motion. Kathy, good to see you. This was the trade that seemed everybody and their brothers were in. Short yen, long japanese stocks. Were seeing a bit of a reversal over the past couple of days. Is it over . Is the short side on the currency squeezing it higher here . I think its basically pocket taking. The boj needs to deliver everything on point. The decisions begin to open in 2014. It wasnt enough for the markets. Youre seeing profit taking. Youre also seeing u. S. Yields under pressure overall. Thats weighing on dollar yen. These two point factors is causing a bit of a pullback in the currency. I dont think thats the up trend i dont think the up trend is over. We still have over the boj to bring in a new governor that is going to be a bit more aggressive. As we go to the april nominations, that could lead to a little bit more yen weakness. On top of that, re havent seen the pullback in the trades as much as you would think after such a big move. I think fundamentally were potentially headed higher in dollar zsh yen. Were back to levels we saw back in may. We basically unwound the entire trade that resulted from people entering the trade probably in the fall, to now. So at what level would you go back in . I think you need to give a little more room to downside before going in. Around 86 is a good value point. We could continue to see a little more profit taking. I like going long dollar yen at 86 with a stop below 84. 50. And a target of 89. Thats right below the key 90 level. Im not too sure if its going to have enough momentum to burst above there. I think we can revisit that level. If the bmj is successful at getting inflation to 0. 5 , that would be consistent with the 95 yen. Kathy, good to see you. More currency trades. If you want more education about currencies, check out currency in class at cnbc. Com. Slow and steady may be true for wall street, as dividend stocks topped into the top performers in 2012. One hour into trading this morning. Ibm is by far the biggest gainer on the dow, up 6 on quarterly earnings. That beat the street above consensus. Shares of csx up 3 on the railroad operators, better than expected Quarterly Results. The tech earnings parade marches on as we gear up for apples numbers after the bell. Apple has been sliding over the last three months. Although, research in motion is on the rebound. How do you play these two names. Eric jackson is an apple and r. I. M. Holder. Hes also a forbes columnist, jones us on the newsline. Welcome back. Hey, carl. A lot of discussion about people being afraid to step into apple before the numbers. Worries about the first decline year over year and income at about ten years. Is that going to happen . It might. I think the headline will be that they meet consensus, which is 55 billion in revenues. And 1350 in eps. I think that will initially cause some consternation and worry. It wouldnt surprise me if the stock were to sell off after hours today on that news. But i think in the coming days, we could see that quickly reverse, and the stock start to rally as people start to say, hey, these numbers arent actually so bad, and start to look ahead to the positive news thats to come in 2013. That will depend on the guide, as they say. And whether or not these component order rumors are true, whether or not its enough to move some of your iphone estimates into the coming quarter. What do you think theyre going to say about these reports weve gotten that theyre slowing down production . I think they will probably take those headon. I dont think they typically dont comment on all the rumors that tend to come out about apple. But i think they would probably address what their supply chain situation is, and probably nip that rumor in the bud. You know, wed like to hear lots of other news about possible new iphones this year. Were hearing reports of multiple iphones. It would be great to hear about a china mobile deal. But those are things that typically dont get mentioned in a lot of detail before theres an actual announcement. Eric, to that point, thats exactly what i wanted to ask you. In terms of trading lower in the afterhours session, if they did meet, and if they do their typical guidance, which would be a sandbag essentially coming in below consensus estimates for the full year, thats what theyve done in the past. Lets say they do that once again. We see the selloff and you say in the next few days apple shares pick up steam. But on what . Because theyre not going to talk about those new products. Thats not typically what they do. Theyre probably you know, they may or may not address the component issues. What is the catalyst at this point with the sentiment so low on the stock. There are not those people willing to give them the benefit of the doubt anymore after earnings i think its going to be a release rally, melissa. I think people are going to look back at the last six months where the stock traded down from. And sort of say, okay, now i think the worst is over. We didnt get any kind of, you know, calamity in the earnings column itself. Dont forget, a year ago, january earnings call, apple disappointed investors by not meeting expectations. The stock sold off for about a day, and then it ripped from 420 to about, i think it was 636. Speaking of ripping, eric, melissa and i were talking about the break during your views on r. I. M. And when you made the turn from short to long. Right. From bear to bull. Did you get this exactly right . Be as honest as you can. The. I wish i had. You know, i think the time to go long the stock was late summer, last august or so, and september, when the stock was really kind of left to die at around six bucks. I got in in november. So i didnt participate in the first part of the bump up. But i felt for a long time, especially over last summer, that the sentiment was so negative on the stock, and people were just forgetting about it. I think ill be the first to sa was short the stock, because there were a lot of mistakes the company made. But you have to be able to see the kind of positives as well that the company does. And it got so cheap, that i think on some good news, and excitement about the new phones, thats what led to the run in the last couple of months. The stock, as you know, is up 40 since its october earnings, up 50 over the past three months or so, eric. At this point has the pendulum swung too far the other way about being overly optimistic in the valuation . Theyve got a platform that they might try to license, but the questions are, to whom would they license and there are questions as to whos going to buy that as well. Right. I think the consensus view is, as soon as they announce this phone next wednesday, the stock will immediately drop. And it will never return to these levels. I think most people think its going to be another palm or nokia. I think we could see a pullback for a few weeks after the product launch, because they might say its going to be a couple of weeks before it ships. Something like that. But i differ from the consensus in that i do think there will be buyers. I think the big difference between palm and nokia and r. I. M. Is that r. I. M. s got 80 million customers out there who have stuck with the phone this long. And i think if only about a third of them buy this new phone, it will be a home run. And theyre predicting theyll lose 50 cents a share this year, if they sold Something Like 20 million or 30 million, youre talking 3, 4 a share in earnings. Its just going to be a good story that nobody sees coming. Right. But since you entered the trade, you must be up around 30 , or somewhere thereabouts, eric. At this point, dont you have to take profits, after that kind of gain . Yeah, i you know, its been a good run. I think the stock was about 9 in november. And were getting close to 18 here. I do think like there will be a pullback in the next few weeks. That wouldnt surprise me at all. Theres definitely a time to take the profits. But im just saying that i differ from the consensus view that says, you know, this is all hype and smoke and mirrors and this is destined to fail. I think youve got to differentiate there are differences between palm and nokia and r. I. M. So finally, eric, youve got two names between r. I. M. And apple, where sentiment has been negative. The stocks obviously on different trajectories. But where is the better money right now . The risk here is definitely research in motion. If you can stomach it and willing to put up with the volatility, i think youll be better rewarded this year, if you stick it out. I think if they do come through and the existing base does buy this phone, i think it could go to 30 to 40 by the end of this year. Apple cant see that kind of return. But i think at these levels, you know, getting into apple now is you dont have to lose some sleep about it. The way that you might with r. I. M. Yes. Lose more sleep is probably the operative term. Eric, thanks so much. See you next time. Thanks. Eric jackson, ironfire. Still ahead, inside the golden arches. Mcdonalds is looking to regain its heat, but can it continue to sizzle. Were taking a look inside the quarter, plus the chairman and ceo of Morgan Stanley joins us live from davos later on in the program. So stay tuned for that. [ man ] ive been out there most of my life. You name it. Ive hooked it. But theres one. One thats always eluded me. Thought i had it in the blizzard of 93. Ha never even came close. Sometimes, i actually think its mocking me. 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[ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. I have a cold, and i took nyquil, but im still stubbed up. [ male announcer ] truth is, nyquil doesnt unstuff your nose. What . [ male announcer ] it doesnt have a decongestant. No way. [ male announcer ] sorry. Alkaseltzer plus fights your worst cold symptoms plus has a fast acting decongestant to relieve your stuffy nose. [ sighs ] thanks [ male announcer ] youre welcome. Thats the cold truth [ male announcer ] alkaseltzer plus. Oh what a relief it is [ male announcer ] to learn more about the cold truth and save 1 visit alkaseltzer on facebook. Medical Testing Company moving lower today. That would be quest diagnostics, down almost 6 . This on a couple of pieces of news. The company cut its forecast for revenue and earnings in 2013, citing a couple of things, decline in reimbursements and pressure. A couple of hospitals moving their lab testing inhouse as opposed to putting it out of house which would be served by quest diagnostics. The company missed by a penny earnings in the Fourth Quarter. The reason, fewer people taking tests because of superstorm sandy. David, back to you. Thanks very much, Mary Thompson. The recent rush for dividend paths has made that space quite attractive. Those straying away from the volatility in the market has found a haven in the stocks. Should you be setting your money in that group. Bob manages over 40 billion in assets. Nice to have you here. Thank you. I would imagine one threat to that portfolio is if we are in a significantly rising rate environment. If that is the case, how do you change or position what has been a strongly performing sector in the last year . We focus on Dividend Growth rather than a level of yields. Thats where people have gravitated to. Focusing on dividend growers, were still finding value. Our portfolio is trading to a discount, which is a benchmark. We feel theres upside potential should the economic recovery continue to gain ground. Taxes on dividend, not that great, but does it perhaps forestall what had been hopes for willingness of u. S. Corporations, say lets keep the dividend going up up up . I think it was a great outcome, we only went to 20 . But thats only for the incomes above 400,000 for singles and 450,000 for couples, for people under 200,000 and 250,000 for couples still stays at 15 . I think that story is totally intact. What is the greatest indicator for the companies . We focus for companies that have low debt to cap, that have Free Cash Flow over their financing needs. And also the company expressing a rising Dividend Growth. We also find that managements are more in line with Dividend Growth because with options being phased out in favor of restrictive stock, theyre in line with shareholders. You mentioned policy risk. We got off relatively easy versus expectations at year end. But weve got three months here of discussing more tax reform. How much risk is still built in . I think now its going to be more of the risk is rather than revenue side, its going to be what the spending cuts come through. I dont think theres going to be a lot of risk with the demographics needing retirement income. Weve done work that shows a couple reaching age 65. One of them has a 50 chance of living to age 92. So thats 27 years of income needs, and whereas fixed income when rates go up, your coupons not going to go up, but dividends over time have risen by 1 to 1. 5 . Im curious about your criteria in picking stocks in terms of Dividend Growth. Apple fits every single criteria except growing the dividend, would not nosily fall into your fund. So is that true . Is it in your fund . We dont own apple. First, we dont every stock that goes in has to pay a dividend. Apple only became eligible late last year. But what we look at is apple being kind of a very crowded trade late last year. Growth investors were in it, Value Investors had started buying it. We would be the last probably the last buyer resort. We actually passed on that. Are you looking at it once again im just curious, because there are so Many Companies out there with a lot of cash on their Balance Sheets and theyre deciding whether or not to pay a dividend or pay a buyback. If they pay a dividend, they might get incremental buyers like your fund. Right. In our meetings with company management, we actually asked them what is their policy. We like to prefer companies that say they want to pay an increasing dividend year in, year out. Like an ibm in the technology space, ten years paid a 14 cents dividend. 2 yield doesnt excite a lot of people. But last year it was up 10 cents, still yielding 2 . The growth in income over the last decade has been phenomenal. If we do get a big substantial increase in economic growth, or Growth Stocks take over as the favored theme among many investors, i would think that would portend not great performance for dind. Divide more defensive. It protects on the down side. We do get the debt ceiling as a pullback, our fund will do well. In that growth market, well tend to lag performance. Well still participate, but not to the same extent. Bob, thanks for joining us. Thanks, david. When we come back, looking to escape from the daily grind of the city. Robert frank takes you to a private island 15 minutes from manhattan. It could be yours if youve got something close to 20 million. Back in a couple of minutes. [ male announcer ] some day, your life will flash before your eyes. Make it worth watching. Introducing the 2013 lexus ls. An entirely new pursuit. The financial elite are meeting at the Economic Forum in davos, switzerland, this week. Jamie dimon sat down with our own Maria Bartiromo. We have more on that interview. Maria . Hi there, melissa. That inte. This morning i moderated a panel and it was a big debate on how the Financial Services sector will evolve. People like axel weber, who you will hear from later on the closing bell. Basically believes the big banks are going to have to split up. And the imf believing the same thing and then theres jamie dimon who continues to defend the large bankingtype situation to encourage constant financing of corporations all around the world. Talked a bit about that. The panel did get a bit feisty about that, but then we came to the discussion on the london whale and that pay cut we heard about from jamie dimon last week, and he said he was told by the board that he would be taking a pay cut given the 6 billion trading loss. I asked him if now that that is behind him will we put this entire issue behind or should shareholders expect more . Let me ask you, news last week that you took a pay cut as a result of the london whale trading loss. Would you say now that this issue is officially behind you or are there still ramifications around the london whale i didnt take it, i was given one. Which i think is appropriate. The board had a tough decision to make. We had a record year. We had one terrible mistake in the year. Look, weve fixed the problem from a financial risk for the most part. Weve cleaned up cio and weve changed procedures to make sure we manage the Company Properly Going Forward. What kind of changes might we expect Going Forward . Last year i think 1. 8 trillion of capital or credit for consumers or businesses. We had a problem. You know, weve fully acknowledged we undressed ourselves in the public. The rest of the bank is pretty well controlled and pretty well managed. And now the bank looks forward to the Federal Reserve ccar event. In march we will hear from the Federal Reserve on whether or not they will be able to pay out more dividends, do buybacks. We are expecting to see a Dividend Increase out of jap mo jpmorgan although he did suggest perhaps the buy back would be lower, smaller, than the buyback the bank did last year. I only assume that possibly that has something to do with the fact that the stock has run up. As the stock gets more expensive, he takes his buybacks down. Well see about that. Were expecting news out of jpmorgan and the entire Banking Sector Going Forward but, of course, we are also looking at real debates to continue as far as what happens to the major banks in the coming years. I would say in the last two decades the whole sector was really benefiting from a wave of positives like deregulation, like globalization. In the next decade its completely different because were actually going to see more regulation. Were waiting on any news out of dodd frank on the volcker rule, how does that affect j. P. More gand and the other major banks and were waiting on new information on the basel. The basel rules in terms of liquidity and capital were a lot less onerous than many of the banks expected, and that was discussed today. I would say the end result of the panel and the discussion from all the bankers i have spoken to today, melissa, is that they are not saying they dont want regulation, but they want the right regulation. Ill tell you the entire audience today in the panel agreed. They felt that you have so many regulators and bureaucracies today, it does make business Going Forward tougher and tougher. So well see change. In a little while im going to sit down with james gorman, the ceo of Morgan Stanley. Hes in the middle of a restructuring of his investment bank. That interview live right here on squawk on the street. Ill send it book to you, melissa. Thank you so much, Maria Bartiromo. Tweet time, what innovative accessory could help coach become a Global Lifestyle brand . Tweet us at squawkstreet and well get your responses after this. [ male announcer ] when we built the cadillac ats from the ground up to be the worlds best sport sedan. People noticed. The allnew cadillac ats 2013 north american car of the year. For a limited time, take advantage of this exceptional offer on the allnew cadillac ats. But we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. At legalzoom, weve created a better place to handle your legal needs. Maybe you have questions about incorporating a business youd like to start. Or questions about protecting your family with a will or living trust. And youd like to find the right attorney to help guide you along, answer any questions and offer advice. With an a rating from the Better Business bureau legalzoom helps you get personalized and affordable legal protection. In most states, a legal plan attorney is available with every personalized document to answer any questions. Get started at legalzoom. Com today. And now youre protected. How about your own private island minutes away from your Corner Office in new york city. Robert frank is back on set to explain in todays Million Dollar minute. Thanks, carl. I think we should have some video coming up here. Cue it up. Is d and a house that sells for 19. 9 million. Its about an hour north of manhattan. Lets take a look. Looking for a Weekend Getaway . How about your own private island . This secluded highaway is 50 minutes from manhattan. Were sitting on petra island and there are two properties here both designed by Frank Lloyd Wright. It includes a cottage and a Main Residence with more than 5,000 square feet. The deck space totals more than 2,000 square feet. Its almost like youre on a ship here. Youre out in the water, you dont see any land, and its so peaceful out here. Its amazing. Bringing the outdoors inside, wright used a rock theme throughout the house. The house was literally built around this billion year old piece of granite called whale rock. Its where the house, the rock, and the island become one. Its 11 acres and priced at 19. 9 million. So whats interesting about this house is the controversy around it. Frank lloyd wright started building this house in 1949. Started designing it, then the owner ran out of money. So all he had was some sketches. Fast forward to 1996. The current owner because some sketches of the house, completed it. The Frank Lloyd Wright foundation said you cannot all this a Frank Lloyd Wright house. So a lot of back and forth lawsuits. So this house officially is called a Frank Lloyd Wright inspired house, and the current owner saying its basically like playing a beethoven symphony. The foundation saying you cant cull this a Frank Lloyd Wright house. Whoever is going to buy this for nearly 20 million is going to buy it for the island, for the house. Its 11 acres. 11 acres, pay that in the hamptons, you pay 50 million for 11 wellsituated acres. This is in put number county so not quite the hamptons. Frank lloyd wright inspired house. Its upstate new york, but again you can feel the Frank Lloyd Wright influence. He sketched it. It feels a lot like his houses, but theres some interesting controversy behind this house. Private island, theres no dispute about the hedge. Thats for sure. You have it all for yourself. Thanks a lot, robert. Melissa, whats coming up tonight . We have jen gundlach. He went short apple back in may. Hes also in the short yen, long Japanese Equities trade. Well get an update on that. Were tracking the afterhours action in apple and netflix and ed morris will come on and talk to us about oil, where its headed and nat gas given the cold weather were experiencing. Big show tonight. Cant wait. See you tonight. See you a little bit, david, assuming you dont break nor news today. You never know. Wrobt, see you later. Here is what you missed earlier on. Welcome to hour three of squawk on the street. Here is whats happening so far. Our anticipation is were going to see slow, steady growth Going Forward. Theres no reason, and we might actually see some pickup in the second half if some of the fiscal issues in d. C. Are dealt with properly. Mcdonalds is out with earnings. Taking a look at the dow component, coming in with numbers much better than had been expected. Thats the sound i think of melissa. I havent had a mcrib in five years. But you speak about it enthusiastically. That is true. And you get caught up and say, all right, im going to find a reason to justify buying mcdonalds. Im going to say that im not going to look through it. They beat the number and thats whats been going on. This luxury end is very challenged, and i would rather buy north strom. Coors is doing better than coach. That doesnt necessarily produce something thats good because i have got so Many Companies that have reported really good numbers that you can buy. Updated outlook from the imf. Its saying it looks at Global Growth projecting to increase in 2013 but at a more gradual pace than the previous projection back in october. Good wednesday morning. Were live at post 9 at the new york Stock Exchange with a pretty interesting day shaping on the markets. The dow is looking at its highest intraday level since november of 2007, and creeping in with it, about 400 points of its alltime high. S p and still a little stubborn down a point and change. Nasdaq is up number ten on pretty good news from tech. Speaking of which, google gaining after posting strong earnings and surging ad revenue last night. Ibm and amd trading sharply higher after strong Fourth Quarter results. General dynamics in the red after posting a Fourth Quarter loss thanks the impact of slowing defense spending. The company guiding well below forecast. Morgan stanley Ceos James Gorman will join us live from the world Economic Forum in davos. Find out what he has to say about the economy, the state of banking, and a lot more. Then theres coach taking a hit. The company blaming its transition to what its calling a lifestyle brand. Is that just an excuse for a bad quarter . Well break down the numbers. Then well go inside the s. E. C. Find out how whistleblowers are playing a terrorist ing ing a p. And the house is set to vote on the debt limit. We have a member of the ways and Mean Committee to tell us if he thinks that vote will pass. Mcdonalds beating estimates. There are concern over the expected Sales Numbers for january which the company says are trending negative. Nicole miller reagan is Senior Research analyst at piper jaffray. Nicole, good to have you back. Thanks, good morning. Impressive quarter or not . It was okay. I mean, impressive quarter for the Fourth Quarter in that december came in positive given how difficult the comparisons were, yes. But like you just said in the intro, january is a little bit of a concern. And january, like december, pretty tough comps. I dont know if there is a tougher comp than what theyll face this month, right . Thats right. I mean, i think the power of this brand is their ability to have, you know, pulled forward what they did in the Fourth Quarter knowing they were going to lap that difficult compare in december, but thats exactly what they did do is just pull forward the comp, and now its a little bit lackluster. So its really just some timing shifts here. We obviously this is an increasingly important space on the margin front. A lot of consternation about the dollar menu, even about what some people call selfinflicted wounds. How much of that is on their tail even though the stock is managing to hang onto the into the 90s. Is that going to change . I dont see that changing. I mean, i think that there is a defensive play here to some degree. Were seeing a lot of investors interested in the dividend stocks within the restaurant sector. That being said, if you can take the risk and youre looking for the beta, competition is fierce and as big and great as mcdonalds is, they cant really offset the macro on the competition and i kind of like what burger king is doing with their buy one, get one free promoti promotion. You favor that over mcd right now . We do have both in overweight. I think theyre different investment profiles. Again, mcdonalds is a safe haven defensive play. Burger king is very contrarian, very misunderstood, and not well covered. Interesting. How about the macro picture. The u. S. Showed some improvement. We were talk this morning about how the u. S. Was sort of mcdonalds Silver Lining where it was the source of trouble for a company like coach, but why would the u. S. Be doing better than asiapacific, which for a long time was outpacing the rest of the world . I think that the consumers have really anybody that was going to fall out, has fallen out. Theres nobody left to drop out. And so now its just, you know, where are you going to show your loyalty from a consumer perspective and to some degree theyre still chasing those promotions. Speaking of promotions, does there need to be a change in strategy when it comes to pricing . Right how long can they keep this dollar menu as competitive as they are . I dont even know that its technically a change in the surprising strategy for which mcdonalds is the best. We have thn working with a third party for more than a decade and they understand pricing tiers better than anybody in the industry. That being said, what you promote and how you promote it absolutely has to change. It has to be dynamic, flexible, and focus on value. Yeah. They have a new obviously a new ceo in don thompson. They have jan fields is out as the head of u. S. Do you think the management there is showing signs they understand the problem or are addressing the problem . I think so. Theres going to be a lot of questions on the Conference Call thats just starting right now around the Human Capital structure, but, you know, this is a team thats, you know, very tenured, and they tend to put good people in those spots, and, you know, thats the one thing that we always look to is whats the brand equity, Human Capital trumps financial capital, and, you know, i would definitely bet on mcdonalds and not against them. Nicole, have fun in new orleans. Nice Football Game going to be played there in a couple weeks. Well see you next time. Thank you. Nicole miller reagan join us from piper. Coach slides after its Quarterly Results this morning. The company saying its transitioning to a lifestyle brand. Hey, herb. This is one of those deals, i go through a ton of releases this time of year. Im looking for trends and ekts cueses. Anything that is sticking out like a sore thumb. And with coach it was just so obvious when you read through the earnings release. When you saw that quote where they said they are transforming themselves into a Global Lifestyles company anchored in accessories. The minute i saw that, yes, carl, i did tweet it out, and i also did say to myself, it is game over for the story of coach as we knew it, mostly as a fastgrowing handbag company. One look at the companys earnings and sales growth and its really easy to see why the company is trying to position itself and spin itself with this story. Look at this chart. It is off a cliff. Sales growth of 3. 8 last quarter. That compares going back with 10. 6 , 12 , 16. 6 , all in the midteens. The same with net income. This clearly caught analysts offguard, and on coachs earnings call, one analyst flat out wanted to know if the transition is the result of bad market conditions. The company said the transition to a lifestyles brand has been going on for two years, but going back quarter after quarter, call after call, Investment Conference after Investment Conference, went back through those transcripts. I never saw them say once they were transforming themselves into a lifestyle brand. Just that they were transforming themselves into a modern accessories brand with the word lifestyles used several times. I have to tell you guys Something Else here, and that is look at the margins. Operating margins, still very strong, but as Keith Mccollough tweeted out, he said, look, sales, Earnings Growth falling and high margins not a good combo. Back to you. Does it sound to you, herb, like they want to be coors . Is that whats lying under all this . Its anybodys guess. What it sounds like is they got to do something, and theyre putting the best spin they can put on this story forward today. Cramer thinks there might be a thesis in being old, like a tiffany, having been around for a long time. And, by the way, i think you have probably said it, lou frankfurt is going to be on later today on closing bell. It will be interesting to see how he spins it there, and if we can catch him in the spin if it is a spin. Maybe he can come up with something good here. Thanks a lot, herb. Herb greenburg back at headquarters. The chairman and moceo of morga stanley, james gorman will join us live. You do not want to miss that. Bu, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, theyll find some retirement people who are paid on salary, not commission. Theyll get straightforward guidance and be able to focus on other things, like each other, which isnt rocket science. Its just common sense. From td ameritrade. Theres this island and its got supercute kangaroos. Barrow island has got rare kangaroos. Chevron has been developing energy here for decades. We need to protect their environment. We have a strict quarantine system to protect the integrity of the environment. Forty years on, its still a classa nature reserve. Its our job to look after them. Its my job to look after it. Lets get to Maria Bartiromo joining us from the world Economic Forum in davos, this time with Morgan Stanleys ceo. Maria . Hi there, thanks so much, carl. Im with jam morgan right now. James, its nice to see you again. Great to be here, maria. Thank you so much for joining us. I want to kick it off with really what youre doing at Morgan Stanley. You have talked over the last week about the repositioning in deleverage mode. Tell us where you are in the process and what we could look forward to in terms of your continuing to deleverage and reposition Morgan Stanley. We felt last week was an important time to reflect on the changes that we made in the past, but more importantly the opportunities go forward. We called it deliberately a pivot moment. We felt for our employees, clients, investors to understand that we are confident as a Management Team about the direction were now headed in. Specifically the potential to buy the rest of smith barney and create one of the top three Wealth Managers in the world coming on the back of very strong earnings was an exciting possibility for us. We wanted to lay that out there. The hard decisions we have made over the last year and a half and will continue to make. Reducing the amount of capital we have tied up in some of our trades businesses because improving those returns is a function of both generating higher earnings from the higher revenues but also reducing the capital needed to support it. So these were parts of the plan. We thought it was time to lay it out there, be clear about, it lay out some goals for our investors to see, and move forward. The market obviously responded well. The market responded very well in terms of the stock price. We had seen the entire industry rally, and Morgan Stanley was really the leadership in the last week certainly. Let me ask you about the smith barney, buying the rest of smith barney. It seems its such a sweet spot right now with you having so much money moving into equities and being an enormous sales force. What kind of opportunity does that present and is that a 2013 affair, finishing that acquisition . We hope so. We have an application in now. Its obviously subject to Regulatory Approval by the Federal Reserve, and well find out in time whether thats approved or not and if not we have a longer term schedule over two years to buy it in, but were excited for the reason you talked about. One, weve done the hard yards. We spent three years integrated what was nearly 40,000 employees. Thats effectively finished. Number two, the markets, as you point out, theyre recovering. Investors had Something Like a 15 increase in their 401 k plans last year. Housing prices have recovered. The net wealth effect is increasing the confidence of investors to participate, and theres obviously a rotation from bonds to equities. So the story and the opportunity there is tremendous, and importantly were wellpositioned to serve our clients. Its interesting because for a long time we kept saying, oh, all this money sitting in money markets and this money on the sidelines and were finally seeing a move back into equities. Do you think its sustainable though . And what is it based on . You said housing has turned, but are we actually seeing a fundamental change in the economy that actually continues this market rally . Firstly, we manage 1. 8 trillion, and whats been interesting to me having been in and watched this business for a long time is how stable that money was through the whole financial crisis. That told me that as soon as investors got the sense this thing was turning, that money would move back into equities, it would be actively invested. Thats what were seeing. On the broader economy, ive been bullish for several months. I believe the markets are reflective of the macro environment. The three big issues that have been out there the last couple of years were, one, the turn of the u. S. Economy. Its clearly happening in my view. Number two, that europe has bottomed and the risk or the fear of a breakup of the euro is not likely anymore, and thats clearly the case. I think draghi has done a terrific job. And number three getting through the leadership transition in china and further stimulation in china. All of those three things are more positive than they have been at any point in the last several years. In no doubt about it. In terms of europe. You have the election in italy, bonds due, interest on the bonds due in spain. Do these represent hiccups do you think . I think theyre just challenges or marks in the journey. Look at what the progress has been in europe. The progress with the fiscal constraint in portugal, in ireland, in spain. The role monti has played in italy and the leadership hes given that country. The steadfastness of merkel in germany. The fiscal restraint in the uk. All of these are saying we get it collectively. We need to show restraint, but we need to restructure at a pace our societies can absorb so were going to have a continued series of steps. Theres no big bang answer. Speaking of the u. S. For a moment, a number of banks are getting out of fixed income. Youre sticking with it. Why . Even though weve seen a big dropoff in fixed income and equities have been the place to be in terms of flow. Yeah. Honestly, there are very few if you really peel it back, there are very few that are actually exiting fixed income. What a lot of them are doing is bringing down the amount of Balance Sheet and, therefore, capital required to support that business. And, frankly, i think weve been as aggressive as all but a couple in that regard. And we laid that out at the investor call the other day. The reason is pretty straightforward. Its a heart of business to generate returns given the amount of capital you need. So pick the parts of business that are most attractive, focus on those, and pull the capital out of those that are least attractive. At the same time you and your colleagues in the industry are facing more regulation Going Forward. Yeah. Versus a very different story certainly for the past two decades. Tell me where the onerous parts of this regulation are. What are you waiting to see . Is it the volcker rule . Are you expecting were going to see regulation get tougher and how do you deal with it . I take regulation at two or three different level. S theres the two or three things that really matter. Its the agreement around capital, liquidity and the restraints on leverage. We have doubled our capital, doubled our liquidity and cut our leverage by twothirds. That really matters. Then theres the regulation that matters but isnt at that level, its at the Business Unit level. Will derivatives be traded through exchanges or not . How much business can you have in Merchant Banking under the new volcker rules . Can you own hard assets in commodities businesses . Theyre Business Unit specific and every company will deal with those on their own merits. So youre expecting in terms of the basel regulations, that was less onerous than anyone thought. Are you expecting this issue to be behind for now . Well, i think its still onerous to be fair. All of the banks are operating with much higher capital liquidity than they were precrisis, but we and most of us have already adapted to that. So the big stuff has been dealt with. Now were working through the various parts of dodd frank, the local idiosyncratic regulation by country and foreign insution. There will be tenders coming from that. For example, we have reduced the amount of cal tal we put into our various banking activities. We have closed our proprietary banking activities. These are real changes. You have said a lot of positives about the u. S. Economy. What about around the world . Are you seeing opportunities . Where would be the best use for your capital . Well, i think firstly you have to look at china. Its the second largest economy in the world and in not too many decades will be the largest. Theyve come through a l leadership transition. There will be enormous demand to build a domestic demand driven economy so china is a huge opportunity. We forget about india, indonesia, and brazil which remain very important growth engines around the world, but what really matters right now, what really matters is the u. S. And what really matters in the u. S. Is the u. S. Consumer, and what really matters to the u. S. Consumer is confidence. So leadership out of washington is the primary driver behind Consumer Confidence which will drive consumer behavior, will drive the employment, and that will be the worlds engine of growth. Quick final question here. Your brokerage business profits more than doubled. You have a good story to tell with the recovering and repositioning. Now investors want to know about buybacks and dividends. What might we expect . Our focus from a Capital Planning is strategic. Lets get the smith barney business under our wing, own all of that, and generate the benefits for our shareholders. Then well move on to discussions with buybacks and dividends. James, its good to have you on the program. Great to be here. Good to talk with you. James gorman is ceo and chairman at morgan. Ill send it back to you. Great stuff. Maria in davos. The house planning to vote on the debt limit in the next hour, but some conservatives are waging a lastminute battle to defeat the proposal. Republican member of the house ways and means can go, congressman aaron schock will join us live a little later on. [ male announcer ] dont just reject convention. Drown it out. Introducing the allnew 2013 lexus ls f sport. An entirely new pursuit. Tdd 18003452550 after that, its on to germany. Tdd 18003452550 then tonight, im trading 9500 miles away in japan. Tdd 18003452550 with the new global account from schwab, tdd 18003452550 i hunt down opportunities around the world tdd 18003452550 as if im right there. Tdd 18003452550 and im in total control because i can trade tdd 18003452550 directly online in 12 markets in their local currencies. Tdd 18003452550 i use their Global Research to get an edge. Tdd 18003452550 their equity ratings show me how schwab tdd 18003452550 rates specific foreign stocks tdd 18003452550 based on things like fundamentals, momentum and risk. Tdd 18003452550 and i also have access to independent tdd 18003452550 firms like Ned Davis Research tdd 18003452550 and Economist Intelligence unit. Tdd 18003452550 plus, i can talk to their global specialists 24 7. Tdd 18003452550 and trade in my global account commissionfree tdd 18003452550 through march 2013. Tdd 18003452550 best part. No jet lag. Tdd 18003452550 call 18007903801 tdd 18003452550 and a global specialist tdd 18003452550 will help you get started today. Shares of apple up more than 1 ahead of the big Earnings Report tonight after the bell. Could be the First Quarterly profit decline in almost ten years. Estimates call for eps of 1,347 a share, revenues of 54. 73 billion. Travis mccourt joins us on the line. Good morning. People stepping in front of this, are they misguided or not . I dont think so. I think this is a bit of an overreaction of fear. You know, in our mind nothing much has changed since the summer. It was pretty obvious in the summer their yearoveryear growth was slowing down pretty dramatically. Stock ran up from 600 to 700 pretty quickly on rumors of big builds for the iphone 5 and now the stock has sold off on rumors of very big cuts on the iphone 5, but i think the sell through of the actual products are kind of, you know, similar growth rates as we saw this summer. Yeah. When you get the release in your hand or on your screen, what is the number you will look to first . Is it iphone for the quarter and if so whats your number . Were at 48 million which i think is consensus. I think the guide and weve gotten enough data points from verizon and, at t, and across the world where that seems pretty reasonable. You know, i think the question mark really revolves around the march guidance. Theres a couple of things that will make this march a little more difficult than last march, primarily last march apple shipped in a couple million iphones into the channel to build channel inventory. Also last march was the china launch quarter, where this year the china launch quarter was in december. So march is a more difficult comp and thats the harder one to judge in terms of, we know and Everybody Knows seasonality is going to be a little steeper decline in march this year in all likelihood for the iphone, but how steep that decline is is kind of the debate. Interesting. Classically they have tended to provide conservative guidance, and i wonder if you think they might take the edge off on that, maybe not guide so conservatively given how much pressure the stock has been under for the past few months. I dont think so. I mean, look, i have a lot of respect for this Management Team. I dont think they are doing things to drive nearterm stock psychology. The question will be when they do guide conservatively, will people still believe that its just typical apple conservative guidance or will they, in your opinion, overreact and maybe believe its the real deal. That is a good point. And so much to watch for, whether its china or new products tonight as well. Tavis, thank you for your time, well see you later on. All righty. Tavis mccourt. As the house gets ready to vote on raising the debt creeling in the next hour, well talk to a house member of the ways and Means Committee and why the no budget, no pay provision is so important but is it constitutional . Squawk on the street will be right back. The european markets are closing now. As you can see, mostly red around the continent today. Lets bring in Michelle Carusocabrera to tell us how the uk and Continental Europe closed. The huge story in uk, David Cameron announcing he will get the british vote in membership on the European Union. That sounds like an existential threat to the 27member bloc as it currently stands, doesnt it . Keep in mind cameron said he would allow the referendum to happen sometime between 2015 and 2017 if hes reelected. Ill lose 20 pounds in six weeks if i eat less and exercise more. That being said why mean to minimize what he said. The mere fact hes putting it on the table highlights the struggle the European Countries face. If your country does not like certain policies imposed by the bureaucrats in brussels, what do you do . The uk does not like the new financial transaction tax because they are the only ones who a large degree with any Financial Transactions to tax. But he did it in a way that really isnt threatening, at least not yet. So another piece of news thats key, spains Central Bank Says the countrys recession got even worse in the Fourth Quarter contracting 1. 7 . This is spains second recession. Its economy contracted from 2008 to 2009. A terrible recession. We covered it a little bit for a couple years, now suffering through the double dip. You can see the ibex moved barely today. The country of portugal borrowed money today. Its the first time its been able to do so since its Financial Rescue in 2011. Report indicate investors were willing to lend them 10 billion euros. They were able to lower the interest rate. They may less than 5 for the . Their fiveyear paper. Here is the tenyear yield. The ceo of i kia giving an interview, saying what some years ago took two to three years now takes four to six years. We also see theres a lot of hidden obstacles in different markets and also within the European Union thats holding us back. Thats the huge Swedish Furniture store with the beautiful blue all over it. Back to you. Maybe they can move to bulgaria or russia. Everyone is doing it. See you later. Michelle carusocabrera. Lets get to Mary Thompson with some news this time on whirlpool. Stock moving higher, up 2. 5 on the news that the u. S. Trade ban panel gave final improve to impose antidumping duties on washington machines from south korea and mexico. The u. S. International trade Commission Voting 60 in a case brought by whirlpool that said the company had been materially harmed or was threatened with material harm by those other manufacturers. So, again, you can see its stock popping on the news. One of the best performing stocks of the year, last year, too. Lets bring in brian shactman. Weve had a bring of positive days, nine out of ten, in fact. Dow is up. A lot of that is ibm and microsoft. Interesting you say that, carl, im really focused on the s p. Those are specific stock stories driving it. Tech is driving whatever rally we have today. Talk about ibm driving the dow, good for about 70 pointsplus and google powers the nasdaq. Microsoft up a percent plus apple. Pulled back a little from earlier highs. Well see if its a sell on the new situation with matheir earnings numbers. United technology and 3m at heightest levels since 1945 courtesy of our research team. This is a lot of iconic names hitting historical or multidecade highs. You go to heinz dating back to 1946. Clorox, 1972. Cvs, 1968. Sherwinwilliams, 1964 and Union Pacific seeing highs not seen since 1969. Facebook, zuckerberg was not born in any of those years. Up again today, 1. 5 . Off the highs of the year. Thats a onemonth chart. Up double digits. Now about 17 , 18 below its ipo price. That is not out of reach. Finally on the negative side, hospital stocks him some new highs yesterday. It seems theres some sentiment at least on the technical side theyre overbought. All of them getting beaten down pretty good today. Thanks so much. Meantime, some House Republicans unveiling legislation this week that could suspend the debt ceiling until may 19th. That sets the stage for a possible floor vote sometime today. Our chief Washington Corner john harwood is live in washington with more on that. Good morning, john. Good morning, carl. We have a fascinating test coming up probably within an hour of the evolution of this House Republican majority. What im talking about is the proposal that you just made reference to to suspend the enforcement of the debt limit until may. The leaders have attached to this a provision that unless budgets are passed by the house and senate, the pay of members of congress is going to be withheld. Nobody knows if thats constitutional and Everybody Knows it is a cover for a strategic retreat from the principle that john boehner articulated earlier that the only amount of debt limit increase thats going to pass is going to have dollar for dollar spending cuts. Thats very hard to do, for democrats, for republicans, for anybody in washington, and so hes backed away from that, and now hes going to try to see if he can pass it with republican votes. The importance of this principle from a democratic point of view is theyve broken with the idea that the debt limit is so important that it needs to be enforced. Thats why Senate Democrats say they will pass this next week by an overwhelming margin if it passes the house. The white house says it wont block it and house democrats, if you read between the lines, theyre urging their members to vote against it, but they dont mind this proposal one bit. Here is chris van hollen, the ranking democrat on the House Budget Committee today. The good news is that our Congressional Republican olleagues have finally recognized that america must pay its bills and meet its financial obligations without condition. The bad news is they only want to do that for three months. Just read the title. To ensure the complete and timely payment of the obligations of the United States government until may 19th. Now, if this passes the house today, you could pretty much bet that the existential threat that many in the markets have looked at from the potential doomsday scenario of a default is simply going to melt away in front of o our eyes. However if it doesnt happen, we dont know how john boehner will find a way forward. It happened on plan b and the deal only got worse from a conservative point of view. Well see how conservatives make pragmatic decisions today or not on voting to pass this bill. Fascinating chess game happening right before our eyes, john. Thank you so much. Want to bring in congressman aaron schock, a republican representative from illinois. A member of the house ways and Means Committee. Congressman, good morning to you. Good morning, carl. You heard van hollen reference that language, the complete and timely payment of obligations until may 19th. A good idea or not . Well, mr. Van hollen is trying to have it both ways. Here is the guy thats the Ranking Member of the Budget Committee. He was the chairman of the Budget Committee when democrats controlled the house, and guess what . They didnt pass a budget. So now democrats are acting like, oh, this is no big deal. Senate democrats are saying, sure, well pass a budget. Why arent they say in the last four years . Its because they dont want the American People to see how much taxes they want to increase in order to balance the budget, and the fact that theyre not willing to make changes to medicare and Social Security to save them. The problem for us in the house honestly, carl, is that weve been negotiating with ourselves. Weve put out budgets and passed them. Weve talked about entitlement reform, talked about tax reform, but nobody else is talking with us. The senate has been completely silent. The president has gotten away with just criticizing what the house has put forward. What we have simply said is based on our constituent feedback, which is why is the Senate Getting away with not passing a budget even though theres a law, the 1974 budget act, that requires congress by law to pass a budget . Whats the enforcement of that . Well, theres going to be enforcement after today. And the enforcement is youre not going to get paid like most of the American People do when you dornt do your job. Right. Salary would say go into escrow until the chamber does pass a budget. Questions about constitutionality about that though. What do you make of them . Well, look, we wouldnt be passing it if we didnt think it was constitutional, and the fact of the matter is if the house of representatives passes this with a majority instructing the treasury to withhold our pay if we dont pass a budget, we believe thats constitutional, as does the senate. If you vote with the majority vote, you can withhold our pay. Look, what are we talking about if we hit the debt limit . Were not going to pay military personnel. Were not going to pay all those other things were contractually obligated to do, the same thing with our own pay. If we cant start with ourselves, how can we threaten anyone elses pay . People are making a big deal on this retreat from insisting on oneton one spending cuts. I wonder if you feel the gop is in retreat and if you disagree with that retreat . Of all, you wouldnt get assuming that we can pass this today, that assumes we get 218 republicans to vote yes. You wouldnt have our most arch conservative members, chairman paul ryan of our Budget Committee, eric cantor, john boehner, you wouldnt have them singing out of the same hymnal if we are retreating. We have never been more unified behind a position than we are now. I feel pretty confident were going to pass this today. What this really is is moving away from playing small ball, cutting 100 billion here, 100 bmds there. Were running multitrillion dollar deficits. Weve gone from 10 trillion in debt to 16 trillion in debt in the first four years of this presidency, and we now recognize we got to save this president from himself, and were not going to do it by nickel and diming every two months, three months, four months. Weve got to lay out the vision for america that we have, how do we save ourselves from a debt crisis, and force the senate to put forward their view of how we save ourselves from a debt crisis. Let the senate lay out its tax proposals. Let the senate lay out its entitlement reforms if they have them. And then we can have an adult conversation once the Senate Passes its budget and the house passes its budget. Right. But you say if they have them. What makes you think that there is any more Fertile Ground for reform this week or next week than there was at the end of last year. I agree with you that the senate hasnt had those ideas, which is why were calling the senates bluff today by saying pass a budget or dont get paid. And you see that senator murray, the chairman of the senate Budget Committee is saying, oh, trust us, were going to pass a budget. Chuck schumer this weekend says, trust us, were going to pass a budget. They havent passed a budget in the last four years. So this bill today moving out of the house will force the senate to act, which is something they have not done in the past four years. Right. Finally, congressman, for the most conservative republicans who say even a threemonth extension to may 19th is wrong, are you trying to back them off of that ledge and say we need to speak with a unified voice and at least get this done even if it is a short term . Yeah. Look, i think the reason why jim jordan, the former chairman of the roc, the current chairman of the roc, the Republican Study Committee thats the most conservative members of the republican chamber, they have all endorsed this because they realize that if you really want to fix the debt, if you really want to cut spending, you have got to do big things. It cant just be little cuts here and there. So they agree with the strategy here, which is really to move beyond the debt limit discussion right now that were having and get to the budget discussion, which is really where you make the big fundamental changes. Think about a lot of your viewers today are business guys. How do you make structural changes in your business . Its through your longterm planning and through your budget. Playing this small ball month to month is not a good strategy for us to get the senate to act, to get the president to finally negotiate with us on those big ticket items. Congressman schock, good to have you. I imagine well be speaking a lot over the next few months. Thanks four your time. Look forward to it. Thanks, carl. Straight ahead, well go inside the s. E. C. , talk to the whigle blower who blue the lid off one of the biggest scams on the street. Were back after a break. [ male announcer ] to hold a patent that has changed the modern world. Would define you as an innovator. To hold more than one patent of this caliber. Would define you as a true leader. To hold over 80,000. Well, that would make you. The creators of the 2013 mercedesbenz eclass. Quite possibly the most advanced luxury sedan ever. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz Financial Services. With fidelitys new options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Try running four. Ning a restaurant is hard, fortunately weve got ink. It gives us 5x the rewards on our internet, phone charges and cable, plus at Office Supply stores. Rewards we put right back into our business. This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. Overmany discounts to thine customers [old english accent] safe driver, multicar, paid in full a most fulsome bounty indeed, lord jamie. Thou cometh and we thy saveth what are you doing . We doth offer so many discounts, we have some to spare. Oh, you have any of those homeowners discounts . Here we go. Thank you. He took my shield, my lady. These are troubling times in the kingdom. More discounts than we knoweth what to do with. Now thats progressive. Coming up on halftime, the stakes could not be higher for apple ahead of earnings. Will the company post a blowout or plain blow it. Will washington extend wall streets rally for another three months . Well bring you the debt ceiling vote live. And coach tumbles on an earnings miss. Why does one trader say buy and another say bail . Well debate it. See you soon. What would it take for to you blow the whistle on fraud where you work . The s. E. C. Wants to make it more enticing. Were going inside the s. E. C. In our series crime and punishment. Good morning, scott. This is a big priority for the s. E. C. And it happens to be mandated ander under the dodd frank financial reform law. When it comes to dealing with whistleblower tips, the s. E. C. Doesnt have the best track record. I gift wrapped and delivered the largest ponzi harrys tips on madoff famously went nowhere but now things have changed. I said, holy cow, this is weird. The government doesnt work this fast. I worked for them. Former irs accountant dee dee stone, now in private practice, was handling the books for this man, ron allen, who controlled a string of limited partnerships in dallas. These companies had no sales, but they had all the loans, and the only assets they had were receivables from other related companies. Convinced the whole thing was a ponzi scheme, she snuck into the office on a weekend and found all the evidence in one drawer. You could see where the money was coming in from investors and being transferred out to his companies and to his wife. Were you scared . I was. I was terrified. It was a sunday so it wasnt real likely anyone was going to come in. No one came in and stone brought her findings to the s. E. C. In april, 2011, a federal judge shut down what the s. E. C. Called an 8 million ponzi scheme. Without admitting guilt ron allen and his wife agreed to pay more than half a Million Dollars and dee dee stone collected a bounty under the new s. E. C. Whistleblower program of nearly 50,000. Reluctantly, she says. My job is to protect my clients, so it didnt feel like anything that i should get an award for. Shaun mckesy heads the s. E. C. s two year old office of the whistle bleer. If theres a perception out there that whistleblowers arent welcome at the s. E. C. , one of my jobs is to make sure people know thats not true. The new system is a marked improvement, but just a start. It worries me a little bit that theres only been one award and its only been 50,000. 50,000 is not really going to encourage somebody to put their career at risk and provide information to the s. E. C. Katz now a director at Berkeley Research where he looks at this from the outside. Sean mckesy says people are coming forward. In fact, about eight calls a day on average. What can you expect if you do blow the whistle . One thing is anonymity. Sean mckessy would not even confirm dee dee stones identity even though she wanted to come forward and everyone gets a call back within one business day. Thats policy. Harry gives high marks to all this. He says the s. E. C. Was an antiknowledge agency and now it is a learning agency. Weve got a lot more about our look inside the s. E. C. Tomorrow Gary Kaminski looks at some of the hightech ways the s. E. C. Is trying to stay ahead of the fraudster and on friday we will talk to one of the men most responsible for this transformation as he prepares to leave, robert khuzami, the director of enforcement. You can record about this at investigations inc. It makes you wonder if people are really after the money or anonymity. Thats not a lot. And thats part of the issue. And a lot of companies have said that people are going to come forward just for the money, theyre going to skirt internal controls. The s. E. C. Says that doesnt seem to be happening. That they are going through the channels where they work before they go in, but this whole issue of the money and 50,000 for a tip, 50,000 for all of that trouble, thats something that davidk katz says is an issue an they will be looking at that Going Forward. Netflix gained in the last quarter. Well be talking some nfl x. X. [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] netflix has seen a steady rise over the past few months but what can investors expect tonight from the streaming subscriber number . Julie is live with more on that. The big question is how fast it can grow streaming subscribers to offset growing content costs. Shares are trading higher ahead of this afternoons earnings announcement. Theyre up more than 3. 5 . The number to watch is netflixs domestic streaming subscribers. Analysts expect 27 million in the Fourth Quarter and 28 million in the First Quarter of 2013. And wall street is projecting netflix to swing to a loss of 13 Cents Per Share as the Company Invests in International Growth on 7 higher revenue of 934 million. First quarter guidance will also be closely watched as wall street looks to see how netflix expecting original content to drive subscriber growth. Another area is international expansi expansion. Analysts expect 5. 5 International Streaming subscribers in q4. Its been quite a roller coaster for netflix stock and one wildcard is activist investor carl icahn who acquired just less than 10 of the companys shares this past quaul. Ill be setting down with Ceo Reed Hastings for an exclusive interview which well bring to you first thing tomorrow morning. The quarter had this Christmas Eve outage. It had the disney deal. Theres a lot to ask him about. Seal what he happens tonight. Thanks a lot. Julia boorstin in san jose. Dont forget to tweet us. After missing earnings and revenue expectations, the ceo of coach says theyre transforming in a Global Lifestyle brand anchored in accessories. What innovative accessory could help coach become a Global Lifestyle brand . Tweet us. Reach one customer at a time . Or help doctors turn billions of bytes of shared information. Into a fifth anniversary of remission . Whatever your business challenge, dell has the technology and services to help you solve it. [ male announcer ] some day, your life will flash before your eyes. Make it worth watching. Introducing the 2013 lexus ls. An entirely new pursuit. Executor of efficiency. You can spot an amateur from a mile away. While going shoeless and metalfree in seconds. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. Now this. Will work. [ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. Impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Yahoo just announcing it is buying social news startup snippet for an undisclosed amount. The site can be described at pinterest for news lovers and the acquisition could help yahoo make more of a push into the social media realm. Snippets ceo joined us on squawk on the verge back in november. About 30,000 people creating content on the site. People who are browsing the site for comment have been in the millions so far. Were targeting to get that to more than a million creators and hopefully hundreds of millions of browsers. The end game is to be the primary way through which people share and discover content