Transcripts For CNBC Squawk On The Street 20130225

I do worry about the work ethic thats kind of developing in this country. Food stamps up from 17 to 47. Social Security Disability 3 to 9. Unlimited unemployment benefits. I dont think that was the work ethic that our Founding Fathers thought about. I hope as we recover a number of things, well reestablish the need and interest in working. For me, as far as this whole sequestration goes, i think we need to differentiate between tax hikes and spending cuts. Last year it was tax heights that plunged into a recession. The fiscal cliff was a big deal. Sequestration is not a big deal, because Government Spending needs to go down. The market knows that. If they suspended it and pushed it off, it would probably be worse for the markets than actually having it go through. Gentlemen, thank you both for being here this morning. Its been wonderful. We appreciate it. Make sure to join us tomorrow. Right now its time for squawk on the street. All right. Good morning. Im david faber along with, yes, jim cramer and scott wapner here live from New York Stock Exchange. Carl quintanilla and melissa lee, theyre a little under the weather today. Lets look at futures. The s p looking like a positive implied open. Dow jones also, after that nice rally on friday. Theres a look as well at the nasdaq. As for europe and overnight in asia, there you go. Theres the european markets opening all to the positive. Quite a nice rally, in fact, in germany and france. And in spain as well. Lets see how we did overnight in asia. You see there again, the global rally, if you will. It continues. Lets continue by starting with our road map this morning with the markets as you saw futures pointing to a higher open. Despite signs of weakness in china in manufacturing. Well dig deeper into what is driving stocks. Shares of barnes noble are jumping this morning. The chairman making a bid for the business. Lowes numbers come in strong after getting a boost in sales from hurricane sandy. Plus, were five days away now from the automatic spending cuts. Why isnt wall street showing any signs of worries . Yeah, not much worry at all, right . Were going to talk about that. Futures rallying, you saw it there, the markets looking for a higher open today. The s p 500 posted its first weekly loss of 2013. Markets here in the u. S. Getting a boost from overseas. And lifted by optimism over the italian elections, and prospects for looser Japanese Monetary policy. Yeah, thats it. In a nutshell. I was wondering what it was when i was driving in this morning. Now i know. We can end the show now. I thought it was the Academy Awards plus the fact that a lowes car won in the daytona. But this is much better. It makes me feel more i mean, lincoln, you know, Daniel Day Lewis won, thats lincoln. And the fellow that looks like it should say abe in japan. Heres what i think is happening, okay . There are a lot of people who came in short after the big breakdown in the middle of the week last week. There was no followthrough with the negativity. Instead, there was hewlettpackard, the firstgrade interview last week. Europe is not falling apart. Its just slow growth. China didnt even produce good numbers overnight. Its still not that bad. I think were setting into the idea that the sequester is a larry kudrow bit. Sa saying its small and good for the economy. Larrys got the bead on this, as he always does. He knows more about the budget than anybody ive ever met. It is dangerous and difficult to be short this market, right . Last week we had some big calls. Dennis gartman saying going all cash, now people in the network saying now is the time to get out of stocks. Theyve been proven to be wrong in the near term once again. Even if its a slow march, it still continues to move higher, despite a couple of down days here and there. They do hope, just like the bulls hope, is that bernanke blows it somehow tomorrow at 10 00. And that today is just kind of a breather from the down side. I dont know, bernankes pretty seasoned when hes on the hill. He tends not to he doesnt blow it. The data has not been all good, though. Not that great. No. So i just wonder, are we going to wake up at the end of the week and go, sequester . On the 27th and 28th of march, we run out of money and were going to have to face that again . I think people are tired of slow recognition or do you feel as though, you know what i think theyll solve it. I was with peggy noonan this weekend on meet the press. They say obama just wants to scare us, Congress Wants to scare us too. Were tired of it. We recognize roger was on this morning and he said, people are going to wake up and say, wow, the National Parks are closed . No, theres not enough yes, long lines and travel. Maybe take the train for change, maybe get in the car. I just dont think that there is enough to scare us yet. Meanwhile, the defense stocks are redhot. Uss truman has to stay docked, cant go to the gulf. Lets get some priorities, navy. 250 golf courses, really nice. The other side, comes up with bernanke tomorrow, maybe things are better than the market anticipates. And then how does he actually stop it and can he successfully do it so we dont get a huge backup in rates. It is a real worry. Its got to be. Of all the people who are going to talk about it, isnt bernanke the guy you want tomorrow if youre a bull in this market . Hes likely to go up there more so than some of the other speakers who have been out and around and here and there, making their various comments. Hes likely to tell you that were not going to leave this thing just yet. Hes going to more echo what a bullard said probably last week on cnbc. That was a great squawk last week, you heard a guy who you thought could derail things. Bernanke is still on record saying 6. 5 unemployment. Bernanke is soft, so to speak. He wants to see many things come back. I have more confidence they understand the markets. As a result of you know, when you went on that famous rant that day, many years ago the day they made fun of me in the fed minutes . I heard you and i was in the back of the building wondering what was going on. I thought there might have been a fire. But i thought, theres no way that they can be that far removed from really understanding that were in the midst of the beginning of a credit crisis. Theyre like the warden. They had absolutely no idea. They dont have a connection to the markets, theyre not speaking to people. But maybe thats changed over the last four or five years. That they recognized that theyre out of tune and they brought in better people. I think dudley was involved. Are you really supposed to make phone calls when youre bernanke, youre supposed to make phone calls. If you can make that many phone calls and dis me every morning, they can make a few calls. Give me a heisman every morning. What about the idea of a delayed reaction to the sequester . Yeah, were not worried about it right now, but when you compound that with the payroll tax which may now having an impact on some of the retailers and gas prices. People wake up next week and see about these cuts. They start to feel maybe a little bit differently about their situations, business starts to clam up even more than perhaps they already are. Possibility. But remember, were still were about the pricetoearnings ratio to bristolmyers. Come on. Here in the end, we have a lot of guys come on, the big macro guys, and then it hurts the fabulous quarter. The antitrust department in justice less that deal with dollar. We take a look at lowes. Its easy to poke holes at lowes, except that its up. We have cooper tire reporting a good quarter. I remember there were probably like the 72year period where cooper tire henry ford. Were stuck with the four walls of the canvas, my friend. The tectonic legacy of cezanne is still logging us. And getting in the way of the facts of the real story. Thats exactly why its difficult to be short the market. Because the first time you say go all to cash, you get a lowes, or you get somebody else who hits the numbers pretty well and now were reassessing that again. Hewlettpackard was supposed to be disastrous. What was with them doing that good did they not understand how bad things are . Why did meg whitman cancel the interview . The answer may be its not so bad. Not so bad. Although revenue declines in business, lets not forget, its not like theyve turned the corner and become a Growth Company again, theyre still declining. Thats true. But lets go back to the short case. What was the articulation . It was, it feels right. It feels right. You know, good for the Academy Awards. It felt right that Daniel Day Lewis won. It felt right that jennifer won. First name, of course. The market is not a j. Lar . Is that what they call her . Thats what i just called her. Are you going to say shes a smoke show . Youre going to do that . You said you wanted to catch her when she fell. Thats because im a gentleman and a scholar. That you are. Shares of barnes noble up on the news that the chairman is planning to buy all of the Retail Assets of the company, which includes Barnes Noble Book sellers, and barnes noble. Com. But excludes nook media llc. The book seller is looking to reduce focus on the nook business. David, im going to go to you right off the bat. Im sure you have interesting thoughts. I can tell you a few things here. Its quite early. The company did choose to put a statement out but hes not made a formal offer of any kind to buy this. He owns 30 . There are a number of years ago, there was a there was an attempt made to take the Company Private as a whole. Since then, theyve split the two businesses. Remember, nook includes the College Retail business, by the way. When he says he wants to buy all retail, hes talking about the brick and mortar stors and barnes noble. Com. Thats separate there. They have the investment from microsoft. You have Liberty Media in there still, with that preferred that they bought, having controlled roughly 17 . What are you saying . Its complicated . Too complicated . Its complicated. Listen, these things are Still Producing an even amount of money. The stores are the profitable part of the company, but they were hoping that the nook would turn. But its gottense since the books have intensified. Its interesting. The best buy guy, he wants i dont know, thursday, by the way, the deadline on best buy. Minneapolis tribune said its bee to happen. Okay. Sure. Youve got michael dell obviously doing it. Here he owns 30 . Hes watching it start to disappear. Maybe he thinks he can do it better. What is with these founders not recognizing that amazon remember dell used to be by mail. Amazon took care of that. Amazon supposedly took care of best buy. Amazon is supposed to have wrecked barnes noble. Why do these founders continue to believe now, dells got a business away from that. Is it because like when i took my daughter to tulane, i had to go to the Barnes Noble Bookstore, because they do have this great monopoly at these college places. Its a good business. They do. But i dont know, is it more psychological than economics . Its like, listen, this is my lifes work, i dont want it going down the tubes. Or do you think its rosebud . Is this citizen richio . It could be. Well see. The stocks going to go up today. Dont forget the nook is the key to the future for this company. Well see. Could microsoft have been could all these guys be wrong . Microsoft . Pearson also put in a nice chunk of change in the nook business. What do you have . What do i have . Ive got a lot of devices. My son has a nook. What, are you switzerland or something . Ive got a bunch of mostly apple devices. You dont think well see the situation drag on like the best buy, do you . Nah. There was public reporting of it to make the statement they had. Well see if he comes forward with an offer. Theyve set up a special committee. Well see. Can you believe its a 6 billion deal and it doesnt even come up . I know. In many ways, the deal for ilan, which well be watching closely today, is certainly a lot larger. 6. 5 billion for cash and royalties. Its incredible whats going on. It gets a little complicated over there. Do you own that, too . No, i dont. I was being modest. Hes a takeover guy. A lot of good stuff. Stocks up on the takeover. I dont know. Do you want me to read or do you want to read . Ill read. You read. Since you got the call at 7 00 a. M. To come in today. Look at this guy. 7 00 a. M. He comes in. Thats good, too. He was at the combine. He was at the vanity fair for the oscars. And now youre here. I was the one that walked Jennifer Lawrence off the stage last night. That was you . You hunger games dog. David coston is here with an exclusive look at his report on hedge funds. Find out which stocks matter the most to hedge funds and which ones dont even make the cut. The ceo of Qualcomm Joins us for a first on cnbc interview live from the mobile world conference in barcelona. Lets look at the futures. Its going to be an up monday, at least off the start. More squawk on the street from post 9 live from the nyse coming back when we return in a couple of minutes. Congress back from a break today to decide on the 85 billion in automatic spending cuts, known as the sequester, set to take effect this friday, despite the looming deadline the markets still doing well. American consumers perhaps feeling some pressure. Jim cramer was on meet the press yesterday. He was talking about just that. Take a listen. The fact that the stock market is doing well, despite the gasoline prices are much higher, thats hurting the consumer. Tax holiday goes away. That hurts the consumer. Maybe something is not drastic. Nothing drastic will come up this. Even despite the scare tactics, how right is that, i still feel pretty good. All right. Yeah, look, i mean we were talking about it a bit at the open today. Correctly identifying its 44 billion, the budget still grows. Where its coming out is not smart. I think we all recognize that its not a smart selection. And its so by rote. Spendings too high. I think a lot of people would like it, to hear us get up, the u. S. Army is good, were going to pull out of korea, no more hostage to the north korean craziness. Stop depending japan and germany like it was 1947. We keep hoping that there are programs that are killed, instead of trimmed. And that doesnt happen. But i think the American People are kind of fed up that theres so much spending. I really do. It would be nice if they actually, though, had the wherewithal, the gumption, whatever, to deal with the real issue some people say is entitlements. Roger altman on squawk this morning, i mean, Everybody Knows that it has to be dealt with at some point. The real question is, when, if its ever going to happen. The president has a plan on the table, which is to cut some very important medicare, raise some rates for the various parks, including park you know, the drug giveaway. My dads a veteran, okay . If you go to the va, you get the drugs much cheaper than the government pays full boat in medicare. The government wants to change that. He also wants to do a change in the inflation formula for social security. These are not idle. People want to know the president wants to tax, tax, tax. We could also do this carry interest. When i was a hedge fund manager, i was not able to convert ordinary income into capital gains. Thats the new way to do it. Ronald reagan felt that was one of the worst things you could ever do is be able to convert ordinary income into capital gains. If you believed in reagan, of which i did, you would change it. It should be changed. I firmly believe, some of my friends in private equity disagree. Do you still get invited to the parties that i know you frequent . Maybe not. Youre not going to the hamptons . You go all the way out to montauk . There are still some hedgies out there. No, theyre coming. We try to defend ourselves. Unfortunately, no, money talks. Yes. The first trading day of the week and cramer will help you start it off the right way with his mad dash, coming up next. If you have teenage kids, theyre probably snap chatting. One of the most popular app as. Im going to be really upset when i figure out what it is. This guys not going to be happy with you. Evan spiegel. Hes the ceo and cofounder of snapchat. Hes coming up later on. Futures looking like a decent open on this monday for the u. S. Stock market. The dow futures looking like an implied open of 60plus points. The s p with a nearly ninepoint gain off the open as well. More squawk on the street from the nyse is back in a moment. How do you keep an older car running like new . You ask a ford customer. When they tell you that you need your oil changed you got to bring it in. If your tires need to be rotated, you have to get that done as well. Jackie, tell me why somebody should bring theyre car here to the ford dealership for service instead of any one of those other places out there. They are going to take care of my car because this is where it came from. Price is right no problem, they make you feel like youre a family. Get a Synthetic Blend Oil change, tire rotation and much more, 29. 95 after 10. 00 rebate. If you take care of your car your car will take care of you. Im up next, but now im singing the heartburn blues. Hold on, prilosec isnt for fast relief. Cue up alkaseltzer. It stops heartburn fast. 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Anaphylaxis is serious business. I think you dont have much hope to ever have that drug back on the market. Thats a rare occurrence, see a stock lose 85 . Thats unbelievable. We see it periodically with the onehit wonders like this. But understand that if you buy it at 2. 40, maybe you sell at 3. 50. Weve seen that before. Lets look at hpq. The day after the biggest move up in the stock, that its seen in at least a year and a half, maybe longer. I think its been quite a few years after the better than expected numbers on friday. You spend time with meg whitman. Theres a Charm Offensive going on by the chairman. What do you need a Charm Offensive when shes already performed a bit of a miracle . Why is that that people would still be angry . Its not about her as much as about the Board Members who have been there at least for some time. Lane has a number of detractors. What i think is also interesting is theyre being aggressive in approaching shareholders prior to them coalescing in any way, opposing them. Yeah. Which is interesting, probably encouraging, because it encourages dialogue between the board and who youre representing, the share owners. The man who built wachovia into the powerhouse that it didnt work into, when they target people, do they say, kenny thompson, he should go . Is that it could be that point, sure. We heard a lot from lane originally, but its clearly megs company now that shes running it. And another lady, by the way, we dont talk about her a lot, kathy ledjack. You talk about marisa meyer, hp is run by two women. Those on the Conference Call realized kathy was on that call. A lot of rigor there. Still ahead, macys ceo takes his stand in his companys court battle in the court battle. Is he going to sing gold finger this weekend . Live to the courthouse, thats where were going to go with the latest on the trial. The opening bell just a minute or so away. First bell of the week, more squawk on the street ahead. [ ] [ male announcer ] every car we build must make adrenaline pump and pulses quicken. To help you not just to stay alive. But feel alive. The new cclass is no exception. Its a mercedesbenz through and through. See your authorized mercedesbenz dealer for exceptional offers through meesbenz financial services. [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. You are watching cnbc squawk on the street live from the Financial Capital of the world, where the opening bell is set to ring in just a couple of minutes time. Its going to be a positive monday, at least, gentlemen. I continue to find it rather amazing that people dont realize how amazing the market is. This wall of worry, barbed wire at the top, turrets with machine guns, and it continues to go higher. And the wall of worry is pretty amazing. Indeed. Indeed. Were going to get ready for the opening bell ringing any second now. Yeah, the bells going to ring. What a difference the feeling is from the middle of the week last week, finished with a pretty good market on friday. Here we are again. Opening bells here, 500 realtime exchange, here at the big board, alon usa partners, owner and operator of the crude oil refinery in big springs, texas. And at the nasdaq, gabriels Angels Foundation for kids who are sick. Lets talk about, for a change, lets deviate. Lets talk about the bell being run by alon. Alon is a refiner. We all know that theres a tremendous glut of oil in this country. If you can arbitrage the glut of oil in this country and refine it, you can sell it overseas. Have you seen the amount of gasoline were selling overseas . We hear how dow talked about how dangerous it was to export l g. The amount of gasoline were exporting overseas is extraordinary. We used to import 3 Million Barrels, you know, just six, seven years ago, now were exporting 3 million. And then theres the keystone pipeline. Moves tar sands from canada. Is that down to the president and hes embraced it . It would. But thats for china largely, isnt it . Well, at the end of the day, its doing a favor for the canadians, so the chinese will get a refined product from the refinery. That well could be. Thats the socalled high sulfur, heavy oil. The refineries in the gulf were built to handle the keystone. Nobody thought it would be blocked by a president. So the refiners have a terrible mismatch between the very clean bachen oil and the oil they were meant to handle. Which is the keystone. Its a sophisticated situation. And the environmentals have chosen to fight this, but it would actually lower the price of gasoline if we manage to get trucks on a modified diesel gas engine. Which believe it or not, chesapeake is building. You believe theres more room to run for the refiners, the boleros of the world, who is now up 35 just yeartodate. Im not a chartist, but the charts are very overextended. But the margins continue as long as we have this glut. And some of these guys have refineries where they can take advantage of the cheap oil, refine it and ship it overseas to the highest bidder. One of the reasons people should be talking about the high price of gasoline is this arbitrage. We have a free market for gasoline. Well send it overseas because of the jones act, lets get arcane here, you cant ship gasoline from louisiana to or you cant ship oil because you need american flagships and we dont have any. We dont ship oil in this country. They tend to fly norwegian flags. Where is the bachen oil going, and why . Until more rail lines are built, the midwest refiners are making a lot of money. They only want to get it to the gulf. But because of the sea wave blockage, which should have already been resolved, the bachen oil is so clean, the purest in the oil, say some, has not been able to get to where its most needed. The rail lines take a while to build. These policies that we dont seem to have yes. Are so vitally important. Does the market get it right if we just stay out of the way, or do we need you need keystone, congress and the president to actually put together an energy bill that will an energy bill that would create 60,000 is the average price to get a worker, unskilled, to build a pipeline. But pipelines have fallen out of favor. They said, listen, well let transcanada, ambridge, these are companies that can put up pipelines. The pipelines can be the greatest form of employment. Gas liquids for a factory thats being built, the largest project in America Today in louisiana. Let me switch the conversation, but stay on pipelines. The ceo of blackberry wants to up the pipeline for the blackberry 10. Because sales have been better than expected. The stocks up 4 this morning. Have we h from wall street over and over again . They were supposed to be worse than expected. This is certainly a re version. He said better than expected. Sales are strong thus far. Certainly a plus for a company that for all intents and purposes was left for dead. You look at the chart here and the swoopdown. Its been a decent recovery. I find this amazing. Research notice after research notice said that the sales are bad. He comes out and he has the advantage of having the facts, which always makes versus the gentle checks . Yeah. Well, you know, sometimes the facts do will out, david, in your time as a reporter, how often have you found the Research Analysts being spoton . In general . I would say about 7. 5 of the time. Is that more or less than jcpenney thats more optimistic than i expected. Hes further along in the turnaround. In the wall street journal today, worth reading if youre a jcpenney holder, about his resistance to taking it slowly. That is mr. Johnson at jcpenney. And saying, were going to do it all. Were going to go in, no discounting, get rid of the coupons. Stocks not been terrible. No. Dont they report this week, jcpenney . I think they do. I think people will be all over that trying to figure out if the Balance Sheet problems have been cured. Comps in the end lead to a vicious cycle down. Hes got to break that cycle. Tureko which is pbh, theyve been saying it works quite you know, his business is good with them. So lets see. What do you think the level of desperation is at this point, david, to your point inside of jcpenney from ron johnson, trying to get this thing turned around by any means necessary . Say whatever youve got to say, do whatever youve got to do, show results or he may not be sitting in the chair by the end of 2013. They own a sizeable stake of this company. Everything we hear from mr. Ackman continues to indicate he has confidence in this. Right. Thats important, everything you say we hear. The public story hasnt changed, at least according to him. And i think ornado is in the background. Theyre probably not all that happen about the original investment. When and if that does change, scott, i think youll see him out the door pretty quickly. Really . Yeah. Dont you . I think hes got to have a backing. Bill ackman is a tough guy. Bill ackman can make noise very quickly. You mentioned the by any means necessary there. A term youve borrowed. Malcolm x, as we all know. Why does he maintain the house in San Francisco . Why has he not moved to plano . He said its because of the kids. Okay. Thats terrific. But theres a lot of people working their butts off in plano who would feel better if he did relocate to where the Company Maybe to davids point, maybe it takes a bill ackman on the phone saying, ron, perception is everything right now. And somethings wrong. Right . The reports were, and in one of the papers in the last several weeks, that, what, his work week was shorter than some thought. Maybe it should be trying to put this as diplomatically as possible youre incredible. Because at the half you dont play the diplomatic role, why do you suddenly revert to gandhi . Gandhi . Not the judge, but gandhi. Go on a hunger dont eat the stuff. Hlm was just in. Ackmans been winning in that one. How about the fact that dan loeb seems to be less of a factor in that. He may have sold a few shares, i dont know. Hedge funds sell. Carl icahn can i just say, because youre with me, that i still revert to the icahn, that battle of the titans, the no shame rich people have no decorum. May still be the single best thing business interchange i have seen. Ever. Ever. One can only hope theres more to come one day. I think you own that story. What, four weeks ago, from right here. It was on yesterday. They fascinate me. As ive said many times, especially for mr. Ackman as opposed to the fundamentals of the you stare down bethlehem steel, im looking for an analogy of what your show was like. Truman in the rails. Develop steel. Just when it goes off like this, its right. This floor was an interesting place to be that day. That was the best. Should we mention a couple of other stocks moving. Lowes up, not that much, but what, about ive got it down. Oh, its down. The rebuild is the fema money hasnt even hit yet. Bigger movers are m a related. Ilan on friday did say, were going to return 1 billion in the form of stock repurchases to shareholders. Theyre taking an enormous amount of money from biogen, their one drug, ilan becomes a royalty stream and awful lot of cash. That biogen deal was a big deal. Great memory. Theres also research working, cummins was upgraded today. I think that when you take a look at cummins, theres been kind of a lets say a subtle bear market in the truck business. Suddenly we see activity there. Eaton got a nice push. We would love to see the big truck business come back. It employs a huge number of people. Mary thompson is on the floor here at the New York Stock Exchange with more on whats moving. Mary, good morning. Good morning to you, scott. We have a fairly broad based gain. The markets have come off their best levels of the morning early. The dow hitting the best interday level since october 15th since 2007. As it stands right now, it is still within striking distance of the alltime high of 14,165, an interday level. Off about 130 points from that today. Pretty much everything is participating right now. We have strength in commodities thanks to a slight decline in the dollar. Also defensive sectors like utilities higher, along with banks and tech as well today. One of the reasons traders say what we see is the market is extending at least its gains from friday on this rally because of all the liquidity in the market. They point to things like continued inflows into mutual funds, etfs, all of this helping to continue the rally in the stock market. Contributing somewhat, of course, positive early reads on the italian ecollections this morning. And also the earnings news has been positive. Speaking of which, investors while theyre concerned about the sequester, they say its small for the budget. The traders say theyre not too concerned about the impact there. Better than expected results from lowes. Weaker guidance for the full year, putting pressure on the stock. Hertz global coming out with strong numbers and positive guidance. And cooper tire has a cautious outlook on 2013. Though it says its cautiously optiic. Lets take a quick look at 3d. This is the 3d printer coming in with better than expected results. Its full year guidance weaker than expected. As a result, it is putting pressure on its stock and those of some of its rivals. The dow holding on to a 39point gain. Jim, back to you. I was going to mention six in sixty, that the 3d collapsed last night. We all know that the brits lost their aaa rating at the end of last week. How is that playing out in the marketplace . Well, might be surprised. If you look at our tenyear, we closed at 196 on friday, were up three basis points. Weve touched 2 , being up 4 basis points. 10year yields in the uk, hovering around 216, closed at 211. Its up about four basis points. No big deal there. Lets look where the big deal is. Lets go to affects land. If we look at the pound versus the dollar, we see it is now at a 32month low. If we look at the pound versus the euro, we see its close to a 17month low. If we look at the euro versus the dollar yeartodate, we could see its turned up from 135 1 2, touching 133. So it seems to be in a very roundabout way a beneficiary, and well keep an eye on that, because the euro might find whispers saying, this is good for exports. Rick, i wish you had done that dance you did earlier. I thought it was fabulous. Check out the latest news in metals. Lets go to Sharon Epperson at the nymex. Weaker dollar and better euro seeing better numbers across the board. A lot of people anticipating a better stimulus policy coming from central banks. Maybe more monetary easing there. Also looking at the new election of a fed governor, Central Bank Governor in japan. That may be more likely to favor monetary policy. We have the fed testimony this week, many traders will be watching that very carefully. Were also keeping our eye on iran, new talks about its nuclear program, that could have an impact on the oil market. Keep your eye on natural gas, a lot of coldweather forecasts for the rest of the week, thats really lifting Natural Gas Prices today. Thanks very much, Sharon Epperson. We did want to mention something today, a friend of mine, and someone weve had frequently as a guest here on cnbc, jim woolery at jpmorgan making an interesting move worthy of noting. Because normally lawyers become bankers. In fact, mr. Woolery made the move to jpmorgan. Rob kindler many people know, now at Morgan Stanley. Very senior m a in the m a world. You can go through big name bankers who started as lawyers. Even some having left early in their career. Much rarer, though, to find somebody whos made a name as a banker return to the law. We talk about transactions that are at the heart of many law firms key Revenue Generating abilities, its not so much that theyre practicing that much law, its that theyre doing a lot of deal making like everybody else. Woolery who most recently was in the committee for dell, on that deal to be acquired by mr. Dell, and silver lake, a number of other significant transactions under his belt, leaving to become deputy chairman of another company, and to really try to have that firm become more of a player in m a, stated simply. It will be interesting to see if hes successful. The firm has 470 million or so in annual revenues. Deputy chairman of that company. Now, you know, listen, interesting his choice to leave, take that opportunity to help lead this law firm who has been around for an awfully long time and well known. Its never easy at these large firms like jpmorgan, there are a lot of big egos walking around. It can be somewhat difficult to navigate occasionally. Thats right. I remember in law school, dean clark, i needed to go to him and explain to my parents that i wanted to go to Goldman Sachs. That had always been the case, i know so many people who have gone from law firms to investment banking. What shocks me, isnt this a pay cut . Probably not. I mean, thats because the firms that are focused, or will be focused on tracks as, particularly m a, can actually pay their lawyers quite well. They dont it by the hour, they get we know compensation in the investment banks, obviously at the highest levels. Is it miserable to work many people thought it was miserable to work at a law firm and great to work at a bank. Is it possible, i know this is very touchy feely, is it possible that people just dont like the atmosphere, that banks are targeted in this country, law firms arent. Thats a good point. If we start to see more of these kinds of reverse departures, i would call it, well know theres a trend. But its an interesting point youre making. I remember defending that i worked at Goldman Sachs to my daughter a few years ago. She was like, dad, how could you work there . The pickup were seeing, without a doubt, things are picking up. Yes. Wow. I just put it out there. I loved it. Quality problems with the poultry. And later Goldman Sachs, david kostin is talking hedge funds. Find out what stocks the hedgies short the most. As we head to break, a look at this mornings early movers on a day when the dow has climbed to a fresh fiveyear high. Ibm and exxon mobil having the biggest impact on the dow, but there are early movers as welg. Ive always had to keep my eye on her. But, i didnt always watch out for myself. With so much noise about health care. I tuned it all out. With unitedhealthcare, i get information that matters. My individual health profile. Not random statistics. They even reward me for addressing my health risks. So im doing fine. But shes still going to give me a heart attack. Were more than 78,000 people looking out for more than 70 million americans. Thats health in numbers. Unitedhealthcare. 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Tdd 18003452550 i can even access it from the cloud and trade on any computer. Tdd 18003452550 and with schwab mobile, tdd 18003452550 i can focus on trading anyplace, anytime. Tdd 18003452550 until i choose to focus on something else. Tdd 18003452550 all this with no trade minimums. Tdd 18003452550 and only 8. 95 a trade. Tdd 18003452550 open an account with a 50,000 deposit, tdd 18003452550 and get 6 months commissionfree trades. Tdd 18003452550 call 18662945373. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . In a press conference in china today, yum brands expressing concerns about poultry quality control, saying it will closely monitor suppliers and improve testing. Yum brands vice chairman spoke to cnbc asia earlier this morning. We have created a much better environment than ever before. But we also have to admit that its not perfect. We have learned a few things this time. Its not about legal requirements, any of that. If we implement this system, we should have and could make it perfect. You can say back then the environment wasnt there. Some of the things that it just wasnt there. Testing and so forth. So we didnt do it perfect. But we should have innovated along the way, got better and all that. So those are the things that i think were missing. All right. People who want to know how to deal with a crisis, check david novak. David novak is the ceo has fallen on the sword and said, listen, we screwed up. Theyre doing a big campaign for kfc, their real driver. Impressive man, david novak. You think they get it right. I think this quarter is a disaster. I think that people are prepped for that. So less than a disaster, it will be good news. Stock up 1 today. I love novak. Ive been an aficionado of his stuff for a long time. Shapchat, an app that lets you take and send pictures that disappear. The ceo will join us live at post 9. Thats later. But first coming up, holy krout, thats a huge rubber ducky. What does that have to do with 6 stocks in 60 seconds. Absolutely nothing. But we cant stop looking at it. Squawk on the street will be right back. Welcome back. Time for six in sixty. Six stocks in 60 seconds. Give or take a few. Sbac. Power stock. Be careful. Tomorrow, american tower, worst chart in the book. But i like the company. Black rock. Theyre doing a copper etf. Coppers been a oneway down. This would be very good for copper if they get this. Ip. When cardboard is hot, the economy is hot. Acquisition for mixing more in the cloud. This is good news. Zynga is a really interesting story. Ive got to tell you, nevada, online gaming. The stock goes higher. Not too early to buy zynga. Prgo. The flu season has been now its the flu season helping this generic maker. Youre going to stick around for the next half hour. Ive got game. You do have game. Whats coming up on the big game tonight . Im going to reveal without mentioning any stocks here the gatsby index. With the stocks that are kind of full luxury. Full luxury because its fitzgerald, and that was fiction. Gatsby doesnt really exist. Dont forget montauk where david goes. Chesapeake, everyone said going to be taken over. Look out, theyre starting to sell assets. They sold the mississippi lime asset for less than i think Audrey Mclellan former ceo would have gotten. Is that why the stock is down . They sold 50 . Stock is down almost 22 . To rival retailers. Macys versus jcpenney, and Terry Lundgren will be taking the stand today. It all starts at the top of the hour. Were going to take you there, live. Plus, qualcomm chips in android phones and iphones. Well talk to paul jacobs live from the mobile World Congress out in barcelona. Its a first on cnbc interview coming up. [ 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. Welcome back to squawk on the street. Lets get to the road map for our next hour. Macys versus jcpenney, two retail competitors going headtohead inside a new york courtroom today over Martha Stewart. Were going to take you live to the courthouse. The ceo of chipmaker qualcomm speaking in bars loan a. Hell join us live from spain on a first on cnbc interview. Hacking america. The list of Companies Getting hacked. It is growing. But could it even be longer than you think. Eamon has that coming up. The face of the sequester. Well introduce you to the mayor of one town hit hard by the automatic spending cuts that kick in on friday. You have a face that only a sequester could love. The trial between macys and jcpenney is back under way. Macys ceo Terry Lundgren is set to take the stand today. Courtney reagan live at the courthou courthouse. Actually, macys ceo Terry Lundgren just moments ago walking into the courthouse. Macys is the plaintiff in the case. And Terry Lundgren will testify as soon as the depositions carried over from friday wrap up. Lundgren is expected to testify how he and colleagues at macys were kept in the dark until the night before the public announcement. The lawyers showed the email that martha sent the evening before. Macys case is built around the argument that the deal with jcpenney is in breach of a contract with macys. The retailer did in fact renew its contract with mslo in january of 2012, and then shortly after that, sued Martha Stewarts company, arguing it has the exclusive rights to sell certain categories of Martha Stewart brand of products until the year 2018. In opening arguments, macys detailed the investment in the marketing that its done for Martha Stewart brand of products, linking the sale surge to that effort saying it would never give away that equity to what it calls a downstream retailer like jcpenney. Martha stewart living, of course, wants products in both retailers and will argue that the contract with macys doesnt prevent Martha Stewart brand of products being sold in both, because the contract allows Martha Stewart to sell products in its own store. Thats what will be debated. The lawyers are arguing the store is how consumers will in fact view the jcpenney shop. Much of these arguments go back and forth over these emails. And theyre pretty interesting. Macys showing these emails, saying that ron johnsons intention was to get macys to walk away from the Martha Stewart deal, then later jcpenney showing the same email highlighting different portions, saying Something Different entirely. So really, in some cases here, its a battle of lundgren versus johnson over the domestic diva. David . All right. Thanks very much, courty reagan from outside that courtroom. It will be interesting today, with lundgren there. We look at the markets here, guys. We are within 100 points of an alltime closing high for the Dow Jones Industrial average. What a difference a few days makes. Right . Here we have the dow up 73 points, 72 1 2. Certainly looked like were going to be going in the opposite direction. What do the people that go all cash say, hey, guys, this was an opportunity of a lifetime. I think the answer is, they just go, whoa. Winners today, exxon mobil, hewlettpackard, david, is getting another gain today after whats been a good year. The faber rally. Microsoft is up on some talk by one firm today that, hey, what happens if they break the company up. Yeah, sure. Whats your reaction to that . We havent talked about it. Analysts have got to get paid to do something. Skype has revenues. Xbox is terrific. I dont think steve balmer is going to say, ive had it, im breaking the company up. Maybe if einhorn gets involved. Look, i think this is just a deaf ears call. Steve farmers not going to get up and say, you know what, thats a good piece of research. Im going to split the company up. Corporate america doesnt work like that. I never thought of that before. Wouldnt that in his world be a sign of defeat, right . Waving the white flag . Exactly right. It didnt work the way i told you. I think i can get it to work. So maybe breaking up the company is the best strategy. I remember when people said they should break up pepsi. And fritolay is aligned with pepsi. Good article in sunday. If for you, too. Did you see the sunday times . Steven sanger saying, good for you, good taste. Very interesting. Talking about companies splitting up, lets talk barnes noble. The founder planning to bid for the bookstores retail business. Essentially the bookstore business. That also includes bn. Com, the online presence. But not the nook media business, not selling the College Textbooks either. Acting positively to this potential deal. There is actually no bid at this point. He simply said im interested. But the stocks up about 10 . Lets bring in john, an analyst. John, does it make sense to you, do you think it has a shot of actually happening . On a fully diluted basis he has about 75 of the stock. Hes a quarter of the way there. The company i would watch here is Liberty Media, who on a diluted basis has another sort of 16 , 17 . So if they want to back riggio, they have over 40 . So yeah, it could happen. If they were to sell it at a halfway decent price, people may think theyre on an inevitable decline, but the fact is theyre still contributing the bulk of the companys cash flow, if not all of it, frankly. What is left . What do you make of the nook business . Theyve had repeated warnings, its been extraordinarily difficult year for its digital business. Its a fascinating conundrum, because you just had pearson invest in nook, put in 90 million for 5 , following microsoft putting in over 300. That would value the nook at about 1. 8 billion. Barnes noble which still owns nearly 80 of the company, its entire market cap is just over 1 billion. So the street is totally at a discounting value of any riggio and discounting the bids of the nook. This is a tremendous gap. Given that bookstores may be melting ice cubes, theyre not going to melt for a long, long, long time. Like an oil well, theyll throw off a lot of cash over the time being, i would assume get a return. Although, i dont know, what do you think is an appropriate price to pay for that bookstore business . The stock as a whole, if you take out the nook loss, is 3 cash flow, which many would express is extraordinarily cheap. Many people paid up to five times to buy Retail Assets like this. Can i ask you, you know, i guess at the end of the day, what is the fascination with what appears to be a dying part of the business . Is this a guy whos so entrenched, he cant see through his own blinders as to whats really happening . Whats your thought there . Well, obviously if you look at the music business, and you probably havent been to a record store for a while, and borders went out of business, it would suggest this business is going nowhere. The primary demographic for books tends to be middleaged women. Middleaged women will be around for another two or three decades. Secondly, its not a totally specialist product like music. The stores have broadened and now have kids, they have starbucks in there, and whats fascinating in here, and totally unexplained is why microsoft, which is copying apple and now has its own retail stores, doesnt just look at the whole barnes noble and say we can accelerate our rollout. Theres a lot of its an interesting story and one well be following closely, john. We appreciate your time. Thank you. Thank you. What is this idea, people at home are probably wondering, you announce your bid in the paper that you might do it. Dont you just offer a price . Isnt that the way it works in america . I dont know how this leaked or where it came from or why. But they felt, i think once it was out, the idea that he was putting together a potential bid, barnes noble felt youve got to put something out. The materiality of it. Okay. 30 of the founder is considering. But its fair market. We look overseas now, where voters in there heading to the polls earlier today to elect a new parliament. Polls closed there about 30 minutes ago. Chief International Correspondent michelle carussocabrera. Investors can breathe a sigh of relief about the early numbers that we saw, once the polls closed. Take a look at the italian market over the last week. You can see a big sharp rise in whats called the mib, the index base in millan, went to the high in the sessions. It looks like the outcome will be as expected. Lets show you what the early results are so far in terms of the numbers. It looks like the center left is absolutely in the lead. You can understand that as a proeuropean, proreform party, lets keep it that simple. Monti center left. Berlusconi holding second place, holding on to the unbelievable comeback. It was thouge fall to third place after the comedians movement went to third. The american investor worried about what happens with the italian Interest Rate. In the last hour in italy, the Interest Rate has fallen sharply as a result of the elections. Now, Silvio Berlusconi, he never does as well in the polls as he does in the final election, because a lot of people are embarrassed to admit that they will vote for him. Hes extremely controversial. Youve got to see what happened when he voted yesterday in milan and the protesters showed up and suddenly went topless and chanted out antiberlusconi sentiment. Watch this. The. Theyre screaming, enough of berlusconi. These are feminists from Eastern Europe who apparently werent complaining about the fact that hes been in office already three times and that they didnt want him to be in office again. But have done protests like this around the world against the abuse of women. But certainly berlusconi easily the most controversial figure in modern italian political history, and still hes coming in it looks like right now second place, guys. Back to you. Michelle, thanks so much. Was that Police Brutality . Was that groping . What did you see in that video . Groping . Honestly, what was your take on that video . Im impressed with their ability to withstand the cold. Its snowing and they had their shirts off. Kind of a polar bear tactic. I would like to see more of that video, but i know its just a protest and i feel badly for everyone involved. What is up next . The chairman and ceo, there he is, of qualcomm, paul jacobs joins us first on cnbc to talk about how mobile technology is changing the face of the technology world. And later, are u. S. Companies underreporting Cyber Attacks . Find out why hacking in Corporate America could be much worse than anyone thinks. Squawk on the street will be right baek. How do traders using Technical Analysis streamline their process . At fidelity, we do it by merging two tools into one. Combining your customized charts with leadingedge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. We like this idea so much that weve applied for a patent. Im colin beck of fidelity investments. Our integrated Technical Analysis is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Take a look at the Dow Jones Industrial average. Were about twothirds of 1 away from an alltime closing high on the dow. With todays gain of 69 points. Technology doing pretty well. Ibm, hewlettpackard up, exxon mobil, microsoft was a gainer as well. As we continue this climb of, as you said, jim, this wall of worry. It is a monster move. A lot of people being left behind. A lot of shorts. This thing wont die. There is a show, again, very good ratings, the walking dead. You know, you cant shoot this thing. Shoot it in the head and nobodys been able to do it. This thing has legs. Remarkable how with all of these seeming headwinds that are in the face here of the market, it just does not really want to go down. Cant talk enough about it, because it is quite an extraordinary rally. Significantly meaningless index. The s p is doing fine also. We talked about inflows into mutual, equity mutual funds. They havent been enormous. Its not as if moneys coming out of fixed income. My point is, there doesnt seem to be a broad embrace of equities. We may not see anything that approaches what we lived through in the 90s. But the incredible dividend boost, made the asset of choice for many people. But its not been out loud. I like the fact that its not out loud. The worlds Biggest Smartphone party, known as the mobile World Congress, getting under way, boosting the economy in spain, perhaps, in barcelona. Joining us first on cnbc from the event, one of the great visionaries of our time, paul jacobs, chairman and ceo of qualcomm. Hey, paul, how you been . Im doing real well. How about you, jim . Real good. I want to talk about the embedded connectivity platform you launched for 4g. If i take this, and im a pcmaker or cell phone handset maker, this may obviate the need for dealing with a lot of companies. Is this the onestop solution that so Many Technology companies have begged for . Well, were definitely trying to give people a lot more bandwidth down to the different devices that they want, and thats why its for this internet of everything. So it goes into tablets and computing products. But we also see connectivity going into all sorts of other things around us. Whether its home appliances, smart grid or into cars. We had an announcement by gm today of 4g going into their cars. Were really trying to give people a lot of bandwidth. Theyll go up to 170 megabits down to your device. I have 3g right now, but if i subscribe to a program, lets say verizon gets the nfl rights, i will see the nfl, a game, without freezing, without buffering, right on as if im watching it on my big screen tv . Well, thats a great question. So if youre only one of a few subscribers in that particular cell, then yeah, youll see it with a lot of very high quality. But were also demonstrating a new technology here, which is sort of a successor to what we tried to do with mobile tv. But this runs in the 4g Cellular Network and it really does allow you to get really good quality. Because it does broadcast. When theres a lot of people watching, theyre going to see excellent quality video. Paul, can you cut through the noise for us, if you will . A couple of weeks ago there was a downgrade of your stock. I cant remember which firm downgraded it. But the premise was highend smartphone growth is going to actually start coming down next year, that weve peaked, that were going to start seeing it reverse, that it would Impact Companies like yours. Can you cut through the noise . Well, were not seeing that at all. Were seeing smartphone demand be strong around the world. In our guidance we projected roughly flat, average selling prices for this year. Tremendous growth actually in our revenues going from 19 billion to between 23. 4 and 24. 4 billion for the year. So we really are seeing a lot of growth. And some of it is high end, some of its also the low end market. Chinas going to be the number one Smartphone Market in the world. Theres going to be 5 billion smartphones sold between 2012 and 2016. Those tailwinds are there. Theyre strong. People love smartphones. But youre not worried that everybody at this point, not everybody, but you get my drift here, who wands a highend smartphone, already has one, at least needle movers . No, thats not what were seeing. Were seeing strong growth around the world for highend lowend smartphones as well. Were introducing new hardware. We just brought out a new Processing Technology with tsmc that allows us to have four microprocessors in that chip, up to 2. 3 gigahertz. Guess what, people are vying to bring those out. Gte Just Launched their new smartphone with it. This trend is strong and still growing. Paul, ive got to ask you, what is the secret behind being able to do business, after apple as a client, have samsung as a client, have everybody onboard . Intel has a new iteration today. How can you beat switzerland when these companies hate each other . Because we really work hard on making sure that we serve our partners well. We look into what they want. We talk to them, work with them carefully. And we have the scale that we can allocate resources to their projects, and work on what they want. I mean, we Just Launched a new operating system with the Mozilla Foundation that does the firefox browser. They came to us because they knew we had the Technical Capability to optimize that software and make it work well. We have the technical leadership. People want to be with the leader. We want to be with the leaders on the handset side. It works out very nicely together. Paul, i want to thank you. Paul jacobs, qualcomm chairman and ceo. Does not get enough credit as being the visionary behind why your cell phone works so well. Ive always enjoyed his company and the company itself. A lot of people, jim, love this stock. A lot. Deservedly so. Theyve revolutionized why your phone is smart. This is one of the Larger Companies around. True. But we live by our cell phones now. And people forget that its his technology that has made it so that we feel like i watch a lot of programs on my iphone. And its him. I find most people who come through the halftime show, be it traders or guests or those picking stocks, love qualcomm. Even a guy like the hedge funds like it, Lee Cooperman towards the end of last year said he favored it over apple, as a holder at one point of apple. Likes qualcomm better. Who do you have on today . Gema godfrey, whom i love, as a guest. Okay. From london. Great mind on the markets. Glad you clarified that. Very bright mind on the markets. What do you have on mad money . Right back at you. The cosmetic industry, im going to tell you youve written this off too soon. Thats whats called a tease in the business. I tease from the best of them. That was well done. Well, well done. Ill see you back here tomorrow morning. As long as you want to stay. Well see if carl and melissa, both hope of them are feeling better. Thanks for hanging around. See you, bud. Why some u. S. Companies may not be telling you everything they know about Cyber Attacks against their companies. Later, Goldman Sachs chief investment strategist joins us live with an exclusive look at his latest hedge fund report. Interesting reading. Today is gonna be an important day for us. You ready . We wanna be our brothers keeper. Whats number two we wanna do . Bring it up to 90 decatherms. How bout ya, joe . Lets go ahead and bring it online. Attention on site, attention on site. Now starting unit nine. Some of the worlds cleanest gas turbines are now powering some of americas biggest cities. Siemens. Answers. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. This is the pursuit of perfection. I know what youre thinking. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. Twitter, facebook and apple, just a few of the latest companies to fall victim to hacking. Corporate ceos across the country in fact getting more and more worried about Cyber Attacks. Its an issue i asked hewlettpackard Ceo Meg Whitman about last week. Contrast it back to when i started at ebay. I was worried about a teenager in red deer, montana, hacking into my system. The bad guys get better, and weve got to get better. Its an arms race. Gathering in San Francisco today to better arm their companies against hackers at the security conference. Eamon joins us live there today. I cast hear you back in the studio. If you can hear me, let me tell you a little bit about what were finding out at the rsa conference in San Francisco. About 350 companies that are going to be here talking about Cyber Security throughout the day, and throughout the week here. One of the things that were going to be asking them about here is why does it seem like you cant find much evidence of the problem that the u. S. Intelligence Community Tells you about when they talk about Cyber Security. They say that this is a problem that has their hair on fire, that the entire u. S. Economy is affected by this, companies are losing reams of data. But when you look in the s. E. C. Filings, you cant see all that much Evidence Companies are disclosing or experiencing these kinds of major attacks. We asked the White Houses National Security Council exactly why that is. They said theres a lot of reasons why Companies Might not want to disclose whats happening to them. But they say in fact they are optimistic that just in the beginning part of this year theyre starting to see more and more cooperation from companies revealing some of the attacks that are happening. Guys, still having a little audio difficulty here, so ill toss it back to you. Well be with you throughout the day, here from the rsa conference. Theres more on this subject on our website on hackingamerica. Cnbc. Com. Back to you, scott. You know, scott, interesting to note, the stigma that has been attached to saying, we got hacked, seems to be a baiting. That would be a positive thing. For attacking this problem. Most companies as eamon just said, they dont want anybody to know. For years they havent wanted anybody to know. When the fbi finally comes and says, by the way, weve just tracked youve got something on your firewall, they have not disclosed it. Its been rare. But it is less rare now. But that will be a good thing because youll get cooperation. Youre hearing more and more Companies Come to the forefront and say, this happened to us. So to your point, absolutely, the tide certainly seems to be changing. Meantime, the president s going to speak to the nations governors about the impact of the sequester in about half an hour. As the market approaches alltime highs, well talk to the chief equity strategist of Goldman Sachs about the firms new hedge fund report. Very interesting. [ 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. From td ameritrade. No two people have the same financial goals. Pnc works with you to understand yours and help plan for your retirement. Visit a branch or call now for your personal retirement review. But i am your rmarket data. I know what youre looking for. Im not chained to your desk anymore. Im faster and smarter now. And so much less expensive. I am your market data. And if i do say so myself, i have never looked better. Superderivatives introduces dgx. Data done differently. One hour into trading. Heres the stories were squawking about on the west coast here at the New York Stock Exchange. Hewlettpackard announcing its making a tablet computer that uses the Google Android operating system. It will have a 7inch screen making it similar to the kindle fire. It will cost 169. The average price of gasoline rising 20 cents in the last two weeks to 3. 79 a gallon for regular. Prices up 54 cents in the last nine weeks alone. The tenyear yield sliding back below 2 , now at 1. 999, sliding back, too, is the move weve had on wall street this monday, cut it by half. Yeah. As we were within 100 of an alltime high there. No longer the case. Im not sure why. Maybe berlusconis lead in italy, which well be following closely. The u. S. Market, as scott said, trading higher this morning, but not quite as high as it has been. Fed fears of the sequester countdown. Joining us, Neil Hennessey of the hennessey funds. What are your thoughts about the sequester . Any impact youre seeing in Market Reaction . It would seem at this point, no, but we still have a few more days. Yeah, im not i think weve gone through this so many times, to be honest with you, the sequester will probably be a good deal from my standpoint. The markets i think already priced it in. Weve got to get down to cutting the budget. Weve got to save some money. And the only real way were going to get there is maybe go the first month into the sequester. I can almost guarantee were not supposed to use that word in the industry, that theyll finally get to the table and say, how are we going to do this. Theres not a business out there that cant cut 5 of their budget, or an individual that cant cut 5 of their budget, yet washington cant cut 5 of their budget. It seems as though its totally ignore it. If you look at last week, in three days we lost a little over 1 of the market, then it came back. Its not going to affect american corporations. American corporations are sitting on tons of cash. The s p 500 companies are sitting on 1. 5 trillion in cash. And 1. 5 trillion in shortterm investments, approximately 3 trillion. The reason youre sitting there is they dont know what washington is going to conjure up. So theyre sitting on the cash. What washington really needs to do, and i think thats the biggest headwind here, is give business some type of hope that they can go expand and hire, and the rules and regulations arent going to change on them. A lot of that cash is overseas, not conceivably going to come back unless you get some repatriation holiday. The market itself, were near alltime highs. But you still think its cheap. Why . I think we use pricetosales as a metric defined value in individual companies. If you look at the dow jones today, the price of sales ratio is approximately 1. 3. We use a cutoff of 1. 5. To get to 1. 5 on a price of sales for the dow jones, the market would have to move up another 17 . What you were just talking about before you came to me was the tenyear u. S. Government is paying almost 2 . The dow jones as a whole, those 30 companies, the yield is 2. 5 . The tax consequences are a lot different, say, on dividends than they are in ordinary income. So i think the market has a lot of room to grow. People dont believe in it. You know, david, when you start to talk to individual investors, theyre still scared were going back to march of 09. Im curious about what your conversations are like, neil. We hear theres finally movement into equity mutual funds like your own in terms of funds, outflows taking place for years. But whats your sense of the psychology of that Investor Base that is so important to you . Is there a lot more behind it that they just dont want to get there yet . And will we ever get back to anything approaching what we used to see . Well, i think you will. But to get back to what we used to see, youll have to see their quarterly statements go down in value. Most of the money thats been invested over the last four years has been in the fixed income market. Almost 0 Interest Rate market. At some point in time, rates will go up. Their principal will come down. And theyll move into the equity markets. Right now its a zero sum game, because people that stayed in the market since march of 09, their moneys come back. The markets come back over 100 . Other people arent in it. So its like some people are coming in, but there are other Retail Investors that are up. Theyre saying, this is enough. And theres so much negativity out there in the news that they hear it on a daytoday basis, theyre saying, i made pretty good money, i think ill move to the sidelines. It looks to me like a zero sum game. I know they say more money is flowing into the mutual funds and equity funds, but its not in any way close to what it was in the past. We have jack with us as well, neil, bmos private Bank Investment officer. Great to have you as well, jack. Thanks. How do you see the market landscape as we sit here this morning . I actually look at neil similar approach to neil. Im looking at fair value. In fact, 1500 to 1525 is my yearend forecast for 2013. So interestingly, though, because of the valuation, huge valuation differential between stocks and bonds, were starting to see these investors, arbitrageeures either buying back stocks, buying lbos or doing takeovers. Are we completely underestimating, gentlemen, the power of the sequester . It seems like everybody is writing it off because we havent seen a tremendous reaction yet in the market. The pullback of last week could easily be blamed on the market being spooked by the fed minutes and some worrying the fed will get out of the way sooner than we would think. Jack . Yeah, thats true. I think that part of our forecast does have some you know, 2 to 3 , maybe a little more, government cutbacks baked into our forecast. So our 1500 to 1525 does take some form of a sequester into account. I think investors just want to see progress in washington. And if its either a negotiated progress, great. If its a contrived progress, so be it. I actually think in general, investors are going to take the sequester as a net positive. Just because we are going to start to see some progress in washington. Right. You know, jack, neil and i were talking right before you joined us about the lack of movement out of bonds still. Do you think that the overall Investor Base out there in retail understands the risk that they may be facing . Just like the fact it may not even be this year. Yields below 2 on the 10year. Im curious as to your thoughts on this. Yeah, i think that most investors that we talked to certainly understand that risk. I think that in general, our clients who do want to remain in bonds, we call them an expensive luxury. The fact is, if youre looking to replace a bay check, bonds is the only asset class that offers a specific dollar amount on a specific date. But that said, you know, i do think that investors are trying to, you know, keep their maturities short. Although there is that appeal, you know, that reaching for yields phenomenon going on. So far, no ones been burned. Perhaps investors are a little longer than they need to be. All right. Gentlemen, were going to leave it there. Appreciate your insights, as always. Thanks to you both. Thank you. Guys, the dow is backing off its climb to an alltime high. Lets send it over to josh lipton for a quick market flash as josh, this gain we saw off the open is now almost all gone. Backing off, but still, major indexes close to the alltime highs. Today on the dow, what has been leading the charge higher this morning, it was ibm, chevron, mcdonalds, walmart and exxon. Ibm and chevron the powerhouses behind the dow. The s p 500, utilities a defensive sector, leading the way higher today within utilities, public service, Enterprise Group takes the gold. Consumer stocks, Morgan Stanley Consumer Index hit a new alltime high this morning. The big gainers there, avon and safeway. Back to you guys. Interesting, scott. I was almost kidding when i said perhaps the berlusconi idea, that he could win is pressuring the market. But it does actually appear to be the case. The centerright party in the early results coming in in italy does seem to be surprising to the upside as we like to say. Yeah. And that is look at the 10year. You want a reflection of whats going on in that election, there it is, right there. When you start to consider, lets say if this actually does happen, that berlusconi has now edged ahead, if the results come in unfavorably to what this market wants, you have to really start to wonder what that means for the big picture. The credibility of italys place in the eurozone, and then the eurozones future from an economic stand point. No doubt. Real questions. Nine lives. It would not be good. After the break, is qe infinity failing . Steve liesman lays it all out. That will be next. Mine was earned in djibouti, africa, 2004. The battle of bataan, 1942. [ all ] fort benning, georgia, in 1999. [ male announcer ] usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve the military, veterans, and their families is without equal. Begin your legacy. Get an autoinsurance quote. Usaa. We know what it means to serve. A body at rest tends to stay at rest. 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Nsaids, including celebrex, increase the chance of serious skin or allergic reactions or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. Patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. Do not take celebrex if youve had an asthma attack, hives, or other allergies to aspirin, nsaids or sulfonamides. Get help right away if you have swelling of the face or throat, or trouble breathing. Tell your doctor your medical history. And find an Arthritis Treatment for you. Visit celebrex. Com and ask your doctor about celebrex. For a body in motion. Visit celebrex. Com and ask your doctor about celebrex. How do you keep an older car running like new . You ask a ford customer. When they tell you that you need your oil changed you got to bring it in. If your tires need to be rotated, you have to get that done as well. Jackie, tell me why somebody should bring theyre car here to the ford dealership for service instead of any one of those other places out there. They are going to take care of my car because this is where it came from. Price is right no problem, they make you feel like youre a family. Get a Synthetic Blend Oil change, tire rotation and much more, 29. 95 after 10. 00 rebate. Take care of your carlend your car will take care of you. Has the concept of qe infinity already failed . Who better to ask than our own steve liesman. The wrangling of the fed over the infi ti policy is in inseth undermining the effectiveness of the policy. If the outlook for the labor market does not improve, substantially, the committee will continue its purchases until such improvement is achieved in a context of price stability. The fed would correct a mistake made in previous qe programs. That ended before labor markets had substantially improved. Talk of their ending while they were in place didnt give the markets enough assurance to bank on them in the future. But the fed looks to be doing it again, undermining its own policies by talks of ending them before they have achieved their goals. The fed has said all along it would take into account, quote, the efficacy and costs of those purchases. But those considerations for some members appear to be trumping the economic goals at least for some. Vince reinhart at Morgan Stanley, said, it will pull back on expected qe will be for the onset of tightening. Practically what is at issue is secondquarter, or half trillion dollars worth of qe. It seems likely the fed will continue the qe through june. Now there is talk of tapering the purchases and ending them before the end of the year. The question is whether ben bernanke pushed the board too far and how and if he uses the test to put the policy back on track. Scott . All right. Steve, thanks so much. Steve liesman. As the countdown to sequestration continues, lets look at some of the cuts that will take effect on march the 1st. The mayor of minneapolis is the vice chair of the Democratic National committee. I know your city well. How are the cuts going to impact you specifically . The cuts will hit across the board. But of course, theyll hit where it hurts the most early. Its going to go directly to young people. About 7 million will be cut to education, headstart, those sorts of things. Because the grownups cant do their jobs, the kids get hurt. This crisis is about as real as manti teos girlfriend. The congress cant get its work done. The president stood up at the state of the union, sent all sorts of clear messages about the fact that he would go to all sorts of compromise positions, if we could get a congress that could actually do its job. And in minneapolis, as you know, target, best buy, theyre all announcing their earnings and were beginning to see this shaking of Consumer Confidence again. Theres no reason for people to have any lack of confidence, except for a Republican House that cant get its act together. There are those who say that comments like that are scare tactics on the side of the aisle that you you come from, that pe arent going to be hurt as bad as folks like you say or the fact of the matter is we just dont really know. Sure. Well ask yourself this question. Lets just say the economy was rolling along and that we didnt have the republicans in the house trying to shut down the government a couple years ago, that we didnt have every other month, it seems, some other fake crisis that the House Republicans are creating. Lets pretend that didnt happen. How do you think that would go for Consumer Confidence . Im one block from targets headquarters right now. I know inside target they care a lot about whether people have confidence in going out and spending. People have a lot more confidence in going out and spending if they dont think people elected to the house of representatives are literally unable to govern themselves. That impacts your job. I dont think thats scare tactics. Thats the sad reality of the dynamics of the Republican Party that got hijacked by some people who wont govern and the ones who are moderate arent talking up. To the point that others would make that this is the white houses issue, white house owns this, as you sits and the vice chair of the Democratic National committee, i know you would disagree with that. But it is what it is. Right . Doesnt the white house own this issue . Well, what happened, as you remember, of course, is that congress again was in one of its meltdowns so the president said, okay, lets Work Together with congress and say lets come up with a plan b thats so onerous that no one would ever actually do it. And i think the shocking thing to people is that some of these zealots in the house are so zealous that theyre actually going to go there. So again, we suffer, i mentioned target but im more worried, frankly, about the kids and schools, the defense industry. The whole part of it. Who answer it is the washington way of doing things. Whos paid to get the work done is the reality americans have. Once again congress didnt get their work done. Thats just the reality we are dealing with. Mayor r. T. Rybak is the mayor of minneapolis. The bernanke effect on the markets. What to expect when the fed chairman testifies on the hill this week. Goldmans chief strategist talking about where hedge funds face their biggest bets. [ male announcer ] it was designed to escape the ordinary. It feels like it can escape gravity. The 2013 cclass coupe. Starting at 37,800. How we get there is not. Were americans. We work. We plan. Ameriprise advisors can help you like theyve helped millions of others. To help you retire your way, with confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Lets get to work. Ameriprise financial. More within reach. Welcome back to squawk on the street. It is mondays edition, pre what used to be referred to as Humphrey Hawkins edition of santelli exchange. Theres been a lot of debate over the last several years as to why were still in the doldrums outside of course of the stock market. Relatively speaking, you know, the feel of the economy. Why isnt it doing better . Ive learned a lot about something referred to as counterfactuals. Most of the counterfactuals based on the fed and the current economy is that the fed just probably didnt do enough. Fed should have done more. The economy would have come back. We need to do more. Im going to take a different lane on this expressway. My counterfactual is going to be what if the fed did a whole lot less . Now the problem with counterfactuals well never know, but this is an interesting exercise. There were aspects of the Crisis Management of the fed that i was rather enamored with. I think their commercial Paper Program was a great program. I believe the temporary covering and extension of deposits by the public with regard to the banks, think that was a great step. But beyond that i guess im in a bit of disagreement. But consider what we debate and what we are debating today. What are we debating today, the quest sequester. Prior it was the fiscal cliff. Prior it was the 2011 monster agreement that was almost but didnt quite happen. I call is the horseshoe agreement. Close does count in horse shoes. Remember the great movie dorian gray, where he himself doesnt age, but, boy, you shall see the picture in the attic. I believe that the political landscape, if nothing else, would have been remotely different. If the fed didnt do anything and the economy continued to stall and the fiscal side was in charge, we would have lit a fire under the politicians to deal with issues of the day. Now we can all argue how far or how different Interest Rates would have been without all the quantitative easing and monetary easing, liquidity programs. We dont know the answer. But i can tell you this they might have been low at various periods due to whats going on in europe. But if all central bankers around the globe didnt do anything, my guess is we may have a completely different political landscape, we would have different dynamics. Interest rates would have propelled action. It would have propelled action. The funding of programs. The underwriting of loans. Everything would have been different. We need to throw the ball back to washington because if theres one thing weve learned over the last several years, is that congressmen, as a rule, dont do anything until theyre forced to. So thank you, federal reserve, for the counterfactual to keep them from doing nothing. I guess it is time to beam it back to scotty. Ricky, thanks so much. Rick santelli. Of course thank you for being here today. You are a man for all seasons. Get that call at 7 00 and manage to show up simon is on vacation. I dont know whats going on. Traffic was my friend today. It was a pleasure being here. Well be here for the halftime show as well we have Gemma Godfrey from brooks mcdonnell. Shes a great mind on the markets. Given whats happening with italy and the impacts on our stock market, we started with a gain of 75 points and now it is completely gone, certainly interesting for her to put that all into perspective and how all of you should be trading it right now. The dow and s p hitting lows of the day just moments ago. But what should you be doing with your money . Well have a lot more on that after the break. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. Homewood suites by hilton. No two people have the same financial goals. Pnc works with you to understand yours and help plan for your retirement. Visit a branch or call now for your personal retirement review. Tdd 18003452550 when the spx crossed above its 50day moving average, tdd 18003452550 i saw the trend. Tdd 18003452550 it looked really strong. Tdd 18003452550 and i jumped right on it. Tdd 18003452550 tdd 18003452550 since ive switched to charles schwab. Tdd 18003452550. 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Tdd 18003452550 call 18776568765 tdd 18003452550 and open an account, tdd 18003452550 now with no trade minimums. Good morning. We are live here at the New York Stock Exchange. Lets get you a check on the markets right now. Dow, the s p and the nasdaq. We started off quite well, you might be surprised to know if youre just joining us. Then we started to get these results trickling in from the italian election. We dont know yet. Well get to Michelle Carusocabrera over in italy in a bit. Is it possible berlusconi will take control of the next government . Well see but that possibility is whats been pressuring the market. You see the s p turnaround. The dow only 100 points from an alltime high now negative on the session. Nasdaq eking out a gain of almost. 2 . Theres a look at barnes noble. Their shares are up as a result of Barnes Nobles companys board saying it received a notice from the founder, largest shareholder at about 30 . He plans to propose again, he hasnt actually made the proposal but he does plan to propose to buy all of the assets of the companys retail business. That would essentially be at stores and barnes noble. Com. Moving on to Home Builders. Help rebuilding efforts after super storm sandy. Earnings and revenue exceeded expectations. The home retailers outlook is a bit of a disappointment. The stock kind of doing more of a flatline at this point. Results have been trickling in from italys elections. I want to get now to what has been moving this market. Chief International Correspondent Michelle Carusocabrera joins us live. Shes on the news line from rome. Bring us up to date. Reporter david, in the last halfanhour weve seen numbers improving dramatically for Silvio Berlusconi. We want to caution everybody, this is still very early but Silvio Berlusconi rising in the polls, leads to a lot of uncertainty about whats going to happen to the government here. Doesnt mean that berlusconi wins. It just means it is going to be a lot harder to form a coalition to have any kind of stable government that can push through reforms. Weve seen the italian market which had been up 4 on the initial results, went negative. Its not flat again. 10year yield in italy which is so worrisome to the rest of the world because italy has so much debt, it has started to rise again. Additionally we started to see the euro fall when it became clear berlusconi was doing better than expected. One analyst says a berlusconi win would be negative for the euro. If berlusconi does as well as these numbers would indicate, it would be an incredible comb back. He was left for dead a few months ago. He managed to narrow the lead in two months and now he is really putting in a run for coming out maybe first in the numbers but remember, this is not like auz election. You dont necessarily have a winner like we do. If you dont get enough of the percentage of the votes, youve got to form a government with somebody else and this is going to be very tough. It may mean in a worst Case Scenario we are looking at elections again in another couple of months. Thats the best way to describe the situation at the moment. But it is possible though that berlusconi could become the next leader again of italy. Correct, michelle . Reporter its possible. Its considered remote. Even though he might get the biggest number, that doesnt necessarily mean he can form a coalition of other people to get along to go with him and put him in place. Parliaments are very, very strange compared to the way that we work in the United States. It is possible though. Read the results that youre seeing in the markets right now as unstable government for italy. Got it. All right. Weve got some strange stuff here, too, with the electoral. Michelles going to keep us up to date of course on what is really the story of the markets this morning, whether berlusconis party at least will get the most votes. You heard it will not necessarily put him in the leadership position but create chaos, if you will. Big week ahead for the markets as well. Lets bring in cnbcs Capital Markets editor i always forget thats your title. You got a very special guest with you today as well, i understand. Gary, youre going to be talking hedge funds. Lets bring in caved kostin over at Goldman Sachs. Thanks for joining us. Just out with your yearend hedge fund report. You look at 125 hedge funds, the socalled smart money. 1. 3 trillion of assets. You had some interesting takeaways. One being net loan exposure is almost at a tenyear high. Whats that say to you when you look at that data . I think it is an indication that the lever Money Community is looking at the opportunities in the market. Last year the positions weve identified as those that are mattering most to the Hedge Fund Community were up around 25 last year. I think thats an indication that from the long side, the stock selection, this is an area where the mark has done pretty well and we look at the fundamentals, the economy is growing modestly, earnings are growing and my expectation is the market will reach a new high by the end of the year at 1,575. The idea of taking up the net exposure back to what we calculate as the 2007 highs is consistent with the idea of gaining exposure to a rising equity market. David, well talk about the overall Market Outlook in a second. Just go back to this positions that matter the most. The single biggest position that mattered the most at the end of september was apple. We know what happened between lets say october 1 and until last week in terms of apple. The single biggest position that matters the most right now is aig. So is that necessarily a sell signal at aig, the fact that everybody has that as the single biggest, most important position . No. In fact the strategy following the levering community has been a very successful one, beating the market twothirds of the time for the last 12 years. The reason that we do this analysis and the reason we spend time with our institutional clients at goldman is that this these positions matter and apple, as you correctly identified, was persistently one of the best, the largest great performing stock but it was a stock that continued at the top of the list every single quarter number of years. It was supplanted at the end of the year, we did the analysis for the day that thta just file still ranks highly at three but apples lost its top position. My colleague mr. Fab ler wil tell me thats closet indexing, the turnover is at record lows. Why the turnovers so low . My estimate is that the fundamental reasons why individual Fund Managers own particular stocks is the reason when they take up their exposure, they tend to buy the same positions that they already own. Thats a pattern weve noticed. So as the turnover has steadily decline for the last several years, this is the idea of Fund Managers buying what they already own. Thats i think why the strategy of following the movement of ownership of these positions makes sense over time. David, id love you to explain why following the ownership of the positions is a positive, and yet the hedge funds themselves have underperformed the market more or less year in, year out as an asset class. I think the issue is in a rising market which weve had for the last several years. Short wing of a portfolio has been a strain on the overall performance. Focusing on the long positions is very helpful for understanding those are likely been as an Investment Strategy or trading strategy has been successful. But looking at the performance of hedge funds themselves, the short side has been an issue. I think thats slowed down the performance. In our analysis we look at both the longs and shorts and understanding the matchup. One of the things i find thats sort of intriguing is that when you look at the net positioning of the Hedge Fund Community, Consumer Discretionary is about 20 of the exposure. Which is interesting because in a macro sense there is a lot of concerns about the consumer, higher taxes, whats going on with the consumer, yet the hedge funds tend to focus in this area which makes a lot of sense because thats where the best stock picking opportunities are, in the area of consumer, financials and technology. Thats where most of the hedge funds direct their dollars. David gb we buy into this theory that the biggest long positions have significant outperformance as a standalone, then we look at the biggest short positions, you call them the very important short positions, and you look at the top ten, these dont seem to be sort of specific security short positions such as a macro call on an industry. It seems to be more market shorts. If you look at the top ten what you call very important short positions intel, exxonmobil, ibm, at t, then maybe in the case of gilead it is a valuation call, what do you read into the short positions . I think the idea on the short side, these are really large stocks where there is a Borrowing Capacity where they do republican theres a lot of liquidity in those positions. So if youre going to be short something, try the ability to be on both sides. Thats my conclusion as to why some of those larger stocks in the market tend to show up most frequently in the short holdings. Just going back to the s p. You said 1,575 is the yearend target . Yeah. The previous peak on october 9th of 2007 was 1,565. I think by the end of this year well be at a new high. It is basically earnings. Earnings are going to lift us to that level. Well be at about a 107 of earnings for this year, looking at 114 for 2014. Thats really whats likely to drive us there. I think you got two issues. One on the down side would be margins. Thats a big area of focus for ourselves and portfolio managers. Margins is one potential headwind. And the upside would be from a higher pe multiple from more money flow, reallocating from bonds into stocks which im not anticipating this year. Im interested that you said the earnings is whats going to drive it. You didnt say anything about the fed. I think if you watch the tape i know how you think. If you watched the tape last week and you saw what happened with just the hint of the fed qe ending, you dont think that there is any risk rsh or do you think there is any risk to the fed basically taking away this qe forever and that being the single biggest factor in terms of that yearend s p price target . I do not think thats the key driver for this year. Should that happen thats not the Goldman Sachs view, it would obviously become relevant but thats not our baseline assumption. It is really the idea when you look at the results of the Fourth Quarter and the guidance of management, you look at the comments of the individual analysts that we work with here at goldman, the idea is that earnings are growing modestly. Sales arent growing a lot. It is basically a modest increase, 7 . Sort of consistent with longterm average. Thats whats likely to take the market a little bit higher. David, thanks very much for joining us, as always. We got the bullish goldman outlook for you there, mr. Faber. Interesting. How hedge funds generate output as well given theyre so heavy in some positions amongst themselves. You made the great point, the overall performance lagging the s p, not beating the closet index but those very important long positions where they take the bulk of the alpha generation, significantly outperforming. Macys and jcpenney continuing in their headtohead battle in the manhattan courtroom over the legal rights to sell Martha Stewart brand a and products. Courtney reagan is outside the courthouse. Reporter good morning. Right now it is really a battle of two retailers, the domestic diva and the combination of those ensuing powerful personalities playing out in the New York State Supreme Court behind me. Macys ceo is right now testifying for macys. This is the plaintiff in the case against jcpenney and Martha Stewart. This follows a videotaped deposition of a former executive Vice President from pennys that it appears macys used to establish the fact that Martha Stewart livings financial situation in the fall of 2011 really needed jcpenneys Financial Investment and subsequent 17 stake. Potentially applying some pressure for Martha Stewart to ink a merchandise deal. But nevertheless, macys says it has the exclusive contractual right to sell certain categories of Martha Stewart Branded Products for home until the year 2018. Right now terry lundegren said last year 46 of what macys sold was either exclusive to macys or in very limited supply and that Martha Stewart is a part of that. They have spent extensive amounts of money marketing that Martha Stewart brand and that they would never, in fact, want to give away that goodwill equity to what they contend is a downstream retailer. They are referring to jcpenney. Thats what macys lawyers at least are saying at this point. Theres a lot going on right now. Still a lot more to go. Well hear from jcpenneys ceo, ron johnson, on friday and Martha Stewart at some point this week, although we will not hear from her tomorrow as we originally thought that we would. There is a lot going on. A lot of he said she said and a lot of contractual disputes as to what really is a store, what really is a separate shop, what martha can do and what she cant do as it applies to that contract with macys. David . Thanks very much, courtney reagan. Still ahead, lowes is building a better Fourth Quarter helped by the revote for super storm sandy. Well talk Home Builders and those that provide the goods for them. But first, rick santelli, what are you working on for a little bit later . Today, the wall of worry is kind of a split call. The obvious issues regarding u. S. Economy and the sequester. But italy. Today may be the wall of worries about italy. You know, electing a politician that a lot of people like and whose detractors cant understand why. Why is that so difficult to understand . Many people in this country could identify with that. Will it change the politics of italy . Could it change the politics of the eurozone in berlusconi wins . Im going to have mark grant whisper some answers bottom of the hour. Ients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Voted best Investment Services company. [ construction sounds ] [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] the civil trial begins today in the Bp Deepwater Horizon Gulf Oil Spill case. Bertha coombs has been monitoring the proceedings thus far and has a report. Reporter Opening Statements are under way at this hour. But bp reportedly remained in settlement talks over the weekend with federal officials in the five gulf states deeply impacted by the explosion and oil spill three years ago. Reports say a 16 billion deal has been on the table whereby bp would say 6 billion in penalties under the clean water act, another 9 billion in damages and 1 billion in reserve for future spill related damages. If found grocery negligent, however, in the bench trial, bp could face a fine of nearly 18 billion under the clean water act alone. The maximum fine being 4,300 a barrel paid on 4 Million Barrels of oil. Bps calculation is closer to 3 Million Barrels. A finding of less than gross negligence could mean a fine as low as 1,100 a barrel or 4. 5 billion. Bp wont comment on reports of a deal. Oil giants shares are off more than 1 , now off more than 2 . Litigation has been an overhang on the shares the last three years as bp has sold off assets. To date theyve paid out close to 30 billion in fines, settlement payments to individuals an cleanup costs. The company says it is willing to settle in this case, but it believes at this point it just needs to proceed with the trial. The big question, david, is whether they can get all five gulf states to sign off on the deal, along with federal prosecutors. Only louisiana an alabama are actually part of this case. It is a very complex situation. It certainly is. One reason why a settlement has been something thats been difficult to come by. But always at the last minute it becomes more of a possibility. Still id love to you give me some sense here as to how likely it is or in fact is it unlikely . It is one of the things i would imagine the company would want to because it would help them sort of resolve it once and for all. It is not unheard of for them to reach a settlement once the trial begins. Once you start getting people testifying about how they are impacting and you get all that damaging testimony from the scientists about how much of the oil was spilled, it could put more pressure, perhaps maybe with a bigger deal. But they might gamble and think that they might come out at the low end. At this point with more than 30 billion sunk in to various efforts, it made their decision, it would seem, to a certain extent. Bp shares down almost 2 this morning. Now you see it, now you dont. Why the latest craze in photo text and video sharing is taking the world by storm. Well talk to the cofounder and ceo of snapchat in todays squawk breakthrough a little later on. Technology not movingd is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. Revolutionizing an industry can be a tough act to follow, but at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. Welcome back to squawk on the street. 3d printers. Investors might like the technology but no love for the stocks at least this morning. 3d systems reports a 45 pop in sales but misses animal lis estimates. Three dimensional printer down 4 right now. Analysts tell me the worry is earnings growth, living up to the expectations embedded in the stock price. Back to you guys. The civil trial today lets get over to john harwood. President obama is about to address the Governors Association in d. C. On the looming sequester. The possibility of a Government Shutdown later in the month. What do we expect to hear . We expect to hear more in what weve seen over the last couple of weeks which is the steady application of public rhetorical pressure by the president on congress trying to make them accept his framework which is to have alternative budget cuts to the sequester cuts but also have tax revenue in the mix. The question is whether he can make republicans go along. He did earlier in the year on the debt limit which was kicked until may. That appeared to be progress for the president but he hasnt gotten them to budge on sequester. It looks like it is going to take effect on friday and well see how long it lasts. The white house is betting on the accumulation of impacts, whether its in air travel or whether its in defense or domestic programs. Things relevant to governors like spending on federal spending on education and law enforcement. But we dont know that yet. All right, john. Actually the president has begun his remarks. Lets listen in. As governors, youre the ones who are on the ground, seeing firsthand every single day what wor works, what doesnt work. Thats what makes you so indispensable. Whatever your party, you ran for office to do everything that you could to make our folks lives better. One thing that i know unites all of us a and all of you, democrats and republicans, and that is the last thing you want to see is washington get in the way of progress. Unfortunately, in just four days, congress is poised to allow a series of arbitrary, automatic budget cuts to kick in that will slow our economy, eliminate good jobs, and leave a lot of folks who are already pretty thinly stretched scrambling to figure out what to do. This morning you received a report outlining exactly how these cuts will harm middle class families in your states. Thousands of teachers and educators will be laid off. Tens of thousands of parents will have to deal with finding child care for their children. Hundreds of thousands of americans will lose access to primary care and Preventative Care like flu vaccinations and cancer screenings. Tomorrow, for example, ill be in the tidewater region of virginia where workers will sit idle when they should be repairing ships and a carrier sits idle whether it should be deploying to the persian gulf. Now these impacts will not all be felt on day one. But rest assured the uncertainty is already having an effect. Companies are preparing layoff notices. Families are preparing to cut back on expenses and the longer these cuts are in place, the bigger the impact will become. So, while you are in town, i hope that you speak with your congressional delegation and remind them in no one Uncertain Terms exactly whats at stake and exactly who is at risk. Because heres the thing these cuts do not have to happen. Congress can turn them off any time with just a little bit of compromise. To do so, democrats, like me, need to acknowledge that were going to have to make modest reforms in medicare if we want the program there for future generations and if we hope to maintain our ability to invest in critical things like education, research and infrastructure. Ive made that commitment. Its reflected in proposals i made last year and the year before that, and will be reflected in my budget and i stand by those commitments to make the reforms for smart spending cuts. But we also need republicans to adopt the same approach to tax reform that Speaker Boehner championed just two months ago. Under our concept of tax reform, nobodys rates would go up, but wed be able to reduce the deficit by making some tough, smart spending cuts and getting rid of wasteful tax loopholes that benefit the bell off and the well connected. I noted sometimes folks in congress think that compromise is a bad word and they figure theyll pay a higher price at the polls for working with the other side than they will for standing pat or engaging in obstructionism. But as governors, some of which have legislatures controlled by the other party, you know compromise is essential to getting things done. So is prioritizing. Thats making smart choices. Thats how governor omalley from maryland got his state back on track and making marylands Public Schools among the best in america five years running. Thats how governor haslett balanced his budget last year in tennessee while still investing in key areas like education for tennessees kids. Like the rest of us, they know we cant just cut our way to prosperity. Cutting alone is not an economic policy. Weve got to make the tough, smart choices to cut what we dont need so we can invest in the things that we do need. Let me highlight two examples of what we do need. The first is infrastructure. This didnt used to be a partisan issue. Dont know when exactly that happened. It should be a mobrainer. Businesses are not going to set up shop in places where roads and bridges and ports and schools are falling apart. Theyre going to open their doors wherever they can connect the best transportation and Communications Networks to their businesses and to their customers. And thats why i proposed what were calling fix it first. I talked about this in my state of the Union Address to put people to work right now on urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers dont shoulder the entire burden, i also proposed a partnership to rebuild america that attracts private capital to upgrade what our businesses need most. Modern ports to move our goods, modern pipelines to withstand a storm, modern schools that are worthy of our children. I know that some people in congress reflexively oppose any idea that i put forward, even if it is an idea that they once supported, but rebuilding infrastructure is not my idea. Its everybodys idea. Its what built this country. A democratic governor in oregon has made Clean Energy Infrastructure a top priority. Governor brownback of kansas, a republican, has been fighting to upgrade Water Infrastructure there. And folks who think spending really is our biggest problem should be more concerned than anybody about improving our infrastructure right now. Were talking about deferred maintenance here. We know were going to have to spend the money, an the longer we wait, the more it is going to cost. That is a fact. I think matt meade, republican, put it pretty well in wims state of the state address in wyoming. He said failing to maintain our roads is not a plan for being fiscally conservative. Well, whats true in wyoming is true all across the United States. We could be putting folks back to work right now. We know contractors are begging for work. Theyll come in on time, under budget, which never happens, and we could make a whole lot of progress right now on things that we know were going to have to do at some point. This is like fixing the roof or replacing a boiler thats broken. It will save us money in the long term. I know that one of the biggest hurdles that you face when it comes to fixing infrastructure is red tape. And oftentimes that comes out of washington with regulations. In my first term we started to take some steps to address that. And weve shaved months, in some cases even years, off the timeline of Infrastructure Projects across america. So today im accelerating that effort. Were setting up regional teams that will focus on some of the unique needs each of you have in various parts of the country. Were going to help the Pacific Northwest move faster on Renewable Energy projects. Were going to help the northeast corridor move faster on highspeed rail service. Were going to help the midwest and other states like colorado move faster on projects that help farmers deal with worsening drought. Were going to help states like north dakota and south dakota, montana move faster on oil and gas production. All of these projects will get more americans back to work faster and we can do even more if we can get congress to act. The second priority that i want to talk about is education. In particular, education that starts at the earliest age. Youve been listening to president obama address the Governors Association in washington, d. C. As you might expect, of course, the focus on the coming sequester saying simply, hey, it wont take much to turn off, just a little bit of compromise. And a lot of time spent on infrastructure, john harwood, something of course hes said many times both sides should seemingly unite on, the need for not just new infrastructure but deferred maintenance as well. Reporter well, certainly both sides have agreed on that in the past. The president was trying to make the point that hes not solely interested in budget austerity. Hes looking for things that will create jobs. I thought that was one interesting aspect of what the president said. I thought the other was when he talked about what democrats would have to do to get republicans to go along with them on the issue of revenue. He said democrats have to agree to modest reforms in medicare. Im not sure that the descriptor modest is one that is designed to lure many republicans along, but the president s trying to use the public bully pulpit to force them to go along and well find out over the next several weeks as the sequester takes effect and the public either reacts or doesnt react, whether thats going to be an effective tactic. Hasnt worked yet, has it . It has not. What expectations do you have that things are going to change . My expectation is that even though both sides are clearly willing to let the sequester go into effect, i think theres enough for everybody not to like an for their constituents not to like that it is probable that we will get, over time, an application of pressure and well get to the march 27th deadline on funding the government and the combination of that deadline, the debt limit being hit in midmay is going to force another negotiation on either a large deal or a more modest one and the track record recently in negotiating big deals is not good, but the hope is not all together gone. One republican member of Congress Told me last week, if we can get more tax revenue through tax reform, it is still possible so long as democrats are willing to overhaul entitlement programs, that should be easier because medicare cost projections are significantly down. But thats again why i focused on the modest reforms, because republicans want something more than that. Sure. Interesting choice of words. John harwood outside the white house, thank you, john. Straight ahead dramatic protests in italy over the countrys elections, hitting the markets here in the u. S. And around the world. Well take you live to rome for those details next. [ cows moo ] [ sizzling ] more rain. [ thunder rumbles ] [ male announcer ] when the world moves. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with papermoney to testdrive the market. All on thinkorswim. From td ameritrade. All on thinkorswim. music throughout why turbo . Trust us. Its just better to be in front. The sonata turbo. From hyundai. Markets closed in europe about ten minutes or so ago. Italian shares pared their gains after italian tv showed the party led by Silvio Berlusconi was leading in the elections. Chief International Correspondent Michelle Carusocabrera will have more live from rome in a couple of minutes. Britain recovering a little bit in the uk after moodys downgraded the Credit Rating on friday. Britains treasury minister says the downgrade will not change his Austerity Program that has been blamed for the countrys weak growth outlook. Downside of us a staausterity. Volkswagen rebounding following a scaledback forecast for 2013. Voters in italy headed to the polls earlier today to elect a new parliament that could have big implications for europes economic future. Polls closed at 9 30 eastern this morning. Cnbcs Michelle Carusocabrera joins us now, she is in rome where things seem to be somewhat confusing but i know youre going to make them very clear for me. Reporter you need a ph. D to understand the italian elections, david. Look, when the polls first closed, it looked like the markets were getting exactly what they wanted which was the center left party in the lead. If you dont know what that means, dont worry. This is what the markets expected based on previous polling numbers and it looked like that was whats going to happen. If you look at the intraday of the italian index based in milan, the market shot up dramatically, 4 gain at its highs. However, as numbers kept rolling in, numbers became less clear. Looked like leader of the central right, Silvio Berlusconi, was suddenly making a big run. Italian market went negative around the italian yield started to rise as well. It doesnt mean Silvio Berlusconi will be the next italian prime minister. We are waiting to see if anybody controls 38 of the italian senate. Thats the bottom line. Thats what were going to watch for. We dont know if were going to know for hours. It could be not until tomorrow. Beryl sklusconi making an incre comebacks, nonetheless. Months ago nobody thought this was possible. He is easily the most controversial figure in modern political history in italy. Look at what happened yesterday when he voted. A group of women from Eastern Europe, the minute he arrived, whipped off their tops to reveal that they had painted on their backs and on their breasts basta silvio. And started screaming basta, berlusconi. Meaning enough of berlusconi. What did berlusconi did . He looked at them and said, you ought to relax, life isnt that tough, you should calm down and he voted and he laughed it off. Thats the situation here, david. Were going to keep you up to date as the numbers and projections keep coming in. It could be until tomorrow before we know what happens. All right. Michelle carusocabrera, a lot of investors going to following that quite closely around the world. That video, we can just keep watching that. The police were very rough there, i thought, unduly so. Lets get a little bit more on italy. Rick santelli in chicago. Thank you, david. Id like to welcome my guest, managing director at southwest securities, mark grant. Welcome, mark. Hi, rick. How are you . Good to see you. Good. I was just listening to michelles update and im sure you were as well. I guess my first question to you is, with regard to the outcome of the italian elections, is there going to be a silvio lining on this one . I tell you, the people in brus ses asels and people in be have to be close to a heart attack at this point. Michelle made some good comments about the meaning of it in italy, but italy with the Third Largest economy in the European Union has a terrific impact upon the rest of the European Union and berlusconi ran on were not going to have the austerity measures, were going to cut back on what weve done and were going to refun money back to the taxpayers. And this could be just a huge shakeup for the European Union. I dont think, honestly, rick, that the people in the United States understand the consequences of what this could mean. Okay. Tell us what they could be. Well, if berlusconi takes power and then theres some alliance perhaps with some other people, youre going to have a whole different italy. Also think it is worth mentioning that mati, the technocrat who was the hope of the European Union is getting 9 , 10 of the votes, and clearly the people in italy have rejected him and his policies. I think this is a game changer thats going to cause a lot of commotion in the European Union and have big effects on the euro, on the yields of the italian sovereign debt, and also affect the United States in terms of how the euro and the dollar interact with each other. I think theres even some easier lessons. Answer yes or no to this do you think that the austerity thats been pushed upon italy for all the reasons that central bankers are embarking on this road in the European Central bank. Do you think its been teamed with good growth policy so austerity for good growth programs for future growth . You think thats been paired up well . The answer is 100 absolutely no. They have virtually basically austerity is getting a superficial bad name because it is not being applied appropriately. I think thats actually a very big lesson. I dont think there is any way around austerity in any country. It is just a question of a timeline, reserve currencies have the longest timeline. But in the end austerity isnt the issue, really. The issue is wile you are in an austere time, what are you raising to implement growth down the road. I think the other lesson is, is that brewer cats and technocrats arent who counts. I heard our press and even on our channel saying, my god, what credibility issue if this guy berlusconi wins. Isnt it what the people want that counts . Whatever part of the world . Their choice is the only choice that matters. Right . Thats 100 correct. The italians are voting and it remind me of a famous comment by w. C. Fields i never vote for, i always vote against. I think thats exactly what the italians did. On his tombstone it says id rather be here than in philadelphia. Thats what it says. Thanks, mark grant. Were going to be following it closely. Those percentage numbers keep coming in from the tracking polls. As rick pointed out, berlusconis party in the lead. Lowes was out with earnings today but what about what home buyers really buy at those stores . Cnbcs diana olick has those details. Reporter well, thats right, david. You are looking at it. As home buyers start to not only purchase homes again but do bigger renovations, were finding that they dont want big space so much as they do higherend amenities that you see here at signature kitchens and bath in rockville, maryland. The National Association of Home Builders wanted to know exactly what these buyers want so they did a big sur mmit rvey. Energy star appliances. We also want ceiling fans according to the survey. And garage Storage Systems increasingly in demand. I say systems because we like them big. You want to look at specialty retailers in that space. Whats really new is full wireless security, along with inhome Electronics Systems that link everything together. Finally, our air. We want full house air purifying systems, and again we are willing to pay for that stuff. So honeywell and whirlpool will be big buyers in there as well. I think that now consumers would still like to be frugal but they are much, much less likely to deny themselves what they really want because theyre less squared. They really feel like they need to invest in their house to be competitive. Now heres what we dont want. We dont want a home on a golf course. My biggest surprise, we dont want wine coolers so much. One other thing do not say laminate counter tops. Thats a good thing for Companies Like caesar stone which do the stone ones. Lowes, unfortunately, does a lot of laminates. Number one on the list of things we dont want, sorry to say the inhome elevator. Because this one is incredibly cool. It operates like one of those suction think at the bank where you put the deposit in and it shoots back up to the teller, then to your car. The top of the list, people said we dont want these. But we do want greener homes. Were not willing to pay for the really highend stuff like solar yet but green amenities will make us buy. There is a lot more on the block, realtycheck. Cnbc. Inhouse elevators. I could understand that. After the break, it is the latest craze in social media. Snapchat, an app that lets you take an send pictures that disappear in ten seconds. The ceo and cofounder joins us live right here next. Coming up, whether europe will kill our rally for good. Certainly having a big impact today on the market. Gunning for apple. Live at the mobile industrys biggest event. Who is giving apple the biggest run for its money and how can you trade it. And lowes beats but is the Home Improvement trade running out of steam. Two traders, one big debate. See new about 15 minutes. After the break, it is the latest craze in social media. Snapchat. It is an app that lets you take an send pictures that disappear in ten seconds flat. Ceo and cofounder joins us live right after this. Revolutionizing an industry can be a tough act to follow, but at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. Homewood suites by hilton. How do you keep an older car running like new . You ask a ford customer. When they tell you that you need your oil changed you got to bring it in. If your tires need to be rotated, you have to get that done as well. Jackie, tell me why somebody should bring theyre car here to the ford dealership for service instead of any one of those other places out there. They are going to take care of my car because this is where it came from. Price is right no problem, they make you feel like youre a family. Get a Synthetic Blend Oil change, tire rotation and much more, 29. 95 after 10. 00 rebate. If you take care of your car your car will take care of you. Now you see it, now you dont. Thats the premise, at least, of todays sidewalk breakthrough snapchat. The appeal, when you share a photo or video itself deinstructs up to ten seconds after it is viewed. Kayla tausche and Brian Schactman tried it out friday in the newsroom. Snapchat has grown rapidly since it began in 2011 in a fra center hou fra center house. It consistently ranks in the top 20 amongst all the free apps in the apple app store. We are joined here at post nine by snapchats cofounder and ceo. First, do you really get rid of the photos . As soon as theyre viewed, they are deleted from our servers. Meaning they cant be found, they cant be crawled by google and some it doesnt prevent someone from taking a screen shot but from taking a photo with another camera but theyre gone from our servers for good. And how do you make money from all this . Thats the Million Dollar question. Theres a couple things we are really excited about right now. A lot of businesses are experimenting. A cool brand called 16 handles, it is a frozen yogurt shop in new york. We did a really awesome expiring coupon campaign. Weve also seen a lot of artists, musicians teasing previews of their albums before they are released. Like a stu