Transcripts For CNBC Squawk On The Street 20130304

I think that, you know, we live in the best country in the world, and we will solve our problems, and the people that own equities, purchased over time, not just when they get all excited about it, in a lowcost manner are going to do fine. Warren, have you noticed that that ketchup bottle was already shaped like a ukulele . Have you thought about that . Like a custommade i mean, you could have one easily made and when you play the ukulele, you could be pushing your products. Were going to see how this one sells. And if it performs like i anticipate, they probably will put me in charge of new product development. Red emade for that is my favorite i decided, when i looked at both of them. I do like the whats it say . Preferred by hot dogs, and then it has your picture. That i like. Were in business, joe. All right. Warren, and becky, great job. Warren, thanks so much for all your time. Phenomenal as usual. We appreciate it. Becky, get home safe. Well see you tomorrow. Make sure you join us tomorrow. But for now, squawk on the street is next. Good montds morning. Welcome to squawk on the street. Im carl quintanilla, with melissa lee, jim cramer and david faber at the new york stock exchange. Ism services tomorrow. Nonfarm payroll on friday. Got some selling in europe. General softness. Some of that fed by shanghai overnight down 3. 7 . The worst session in the year and a half as the Chinese Government announces new restrictions in taxes to clamp down on real estate prices over there. In asia, the hang sang, look at the nikkei, pretty nice day. Road map for this monday morning starts off with Warren Buffett. Three hours of conversation with our own becky quick. The oracle weighs in on stocks. Sequester, housing, and what apple should do with the cash. More signals of slowing growth. Two big stories in the newspapers about how companies arent adding jobs, and the rich are the only consumers spending money. Barclays saying markets underestimating the value of the stakes in alibaba and japan. The company says it will no longer support the blackberry 10. Is that product in trouble. Samsung releases a teaser video for the galaxy s4, or as cramer calls it, the galaxy. 52week lows on friday. Well start with the oracle of omaha. Warren buffett spending the morning with becky and joe, saying hes on the hunt for more elephants. Says stocks are still a good bet for investors. We like buying businesses and we like buying stocks. You get more for your money there than you will get the dumbest investment, you know, in my view, is a longterm Government Bond. The dumbest investment. Great weekend. Always great bedtime reading on a friday when you know that letter is on its way. Dont you agree, guys . Common sense is so much fun. You sit there and think, heinz is good. I think heinz is a great company. Does he want to buy more companies . Yes, versus treasuries. Geico, he praised over and over again. Obviously we see geico constantly. They make a fortune so theyve got a lot of money coming in. Its about doing something with the money versus going to buy a business. Hes a buyer. I hope the chinese werent listening when he said dont buy u. S. Treasuries. Or i should say you want chinese which we will get to. I am being somewhat facetious. Its interesting, because its a point weve made many times here which is, how can you buy a treasury, the risk that youre potentially taking on if the economy does pick up steam. And we see that increasing in Interest Rates. Always interesting reading that the letter and as much more interesting listening to mr. Buffett. Sometimes i think we forget he runs an enormous company. The largest market Cap Companies in the country. In addition to being the oracle of omaha, and wanting to listen to him for stock advice. They own burlington northern. I know. Quarter of a million you can go over and over it again. He represents American Business basically and american finance. Berkshire was pointed to as performance, and for him a great barometer of the u. S. Stock market overall. Hitting a record high last week. That is really reflective of where the u. S. Stock market is going. Because of the diversity of Warren Buffetts portfolio. In talking about treasuries being the dumbest investment around, thats a judgment call on where he sees cash. Cash he would rather go buy an elephant, as opposed to having all that cash on the Balance Sheet. That is sort of a backhanded slap on apple, sitting on 137 billion in cash. Apple only down a little bit today. Its monday. Usually apple is down four or five. Tuesday its down three, four. Im trying to remember the pattern. Look, if they dont do anything, they have become the antibuffett. Dont cross the oracle of omaha, lightly. What theyre doing philosophically is crossing the omaha. The key to so much corporate activity in so many ways, if you have cash on your Balance Sheet, youre earning almost nothing. Comcast, our parent company, for example, deciding to buy what it didnt own of nbc, they do it now. Heinz, 3g saying, were willing to buy this company at 14 years worth of earnings, depreciation, amortization. Why . Because were going to get a decent return on that money. His argument is thats extrapolated to households, too. The best thing you can do right now is buy a new home, borrow, borrow, borrow, stretch it out 30 years. If youre in Corporate America right now, and you have a lot of cash trapped overseas, you may want to borrow here against that, and go out and buy something. Believe me, every banker is calling on people to say, do it now, youll never have lower Interest Rates. Werent you shocked that he didnt look at the futures and get negative . You come in and look at the futures and say, holy cow, i want to sell everything. He did not play that game. He was using common sense. He talked about physicists. Why is he so out of whack from what we see every day . I mean, come on. Vix jumped 5 . I didnt say him say risk on, risk off. What is with this dinosaur with the railroads. It amazes me hes not willing to play the on again, off again, buy call, sell call thing. He is so stuck in this world of making big money by buying stocks. He does buy companies. Buying stuff. The buy low, sell high thing, he doesnt have to sell high, he can hold on to it because hes so big. Isnt he a breath of fresh air like you cant believe . He is a breath of fresh air. You can buy Great American companies and make money and not worry about did he talk about the italian elections at all . He said he and munger have not talked macro to any substantial degree for decades. 30, 40, 50 years. He doesnt have time to lose money. Now, theres going to be some out there today, hes invited them to talk at the meeting today, what he calls the subpar performance. Once again, lower returns in the s p. One more year and he misses for five years in a row, something hes never done before. Look, hes got a big portfolio. His portfolio is very housing related, by the way. That could be coming back. Look, i felt that, yes, maybe he is underperforming, but his portfolio is uniquely set up for an american renaissance. Its entirely possible that he is in the sweet spot right now. Even if he wasnt before. A lot of it is predicated on the companies as opposed to the stock picking. Right. We tend to think of a wells fargo no longer from wells fargo around cocacola or ibm. Those have not done that well. Coke, pepsi. Look, we own the stock. You would . Yeah. Really . Would you own it five minutes from now . That depends on the futures. Jim, you asked him a question, specifically about nat gas, burlington northern, which buffett addressed with beck. The railroads are definitely experimenting with converting to natural gas. Its not a simple matter. And i cant tell you the technicalities of it. But its real enough so were spending real money. In fact, i think we ordered a couple of units that were working with. So when you get natural gas, 3. 50, and you look at where oil is, youve got to look at converting any kind of an engine to natural gas. I think that when you start hearing big industrialists, and im calling Warren Buffett an industrialist in light of the conversation here, switching to natural gas, you have jack welch talk about it on our network, many executives saying this disparity is too great, what that tells me is we have so much natural gas lack of an Energy Policy being made in washington, its going to be the markets that dictate it. Well, keystone on friday, the state department seemed to think theres no objections. Thats not about natural gas, though. Thats about oil. And thats not chinese oil. Whats heading to china, we dont take it. I was gratified to hear it. Because what happens is the railroads use theyre diesel. And the goal of any environmentalist should be to get rid of diesel. Because it is awful. Mayor bloomberg being the greatest environmentalist, hes a practical man. He is not trying to tilt hes not don ki yoquixote. Like buffett, clean up the skies, and use natural gas. Just get up, listen, feel great. This is better than the cnbc alarm clock. Wow, this man is not troubled by the problems. No. He just spent 340 million buying newspapers. That is, by the way thats pocket change. Literally pocket change for Warren Buffett. What did he say, his perspective is always interesting. His demeanor even when it comes to newspapers. Local is still important. If he still likes stocks and likes companies, shouldnt people at home like stocks and companies . Hes a thoughtful man. I like him. Lets talk about the markets overall as we start the week. The dow starting within 75 points of its alltime closing high. The markets are facing some headwinds. You have continued wrangling in washington over the sequester. Data showing the wealthy shouldering the load in consumer spending. Futures are lower after a selloff in the shanghai market after beijing announced new property buying restrictions. You add all these things together, jim, and you think slowing growth around the world. We also, of course, got the terrible pmis on friday which showed slowing in europe, across europe. The best performing groups, augmented by the purchase of heinz, are these companies that do really well in a slow economy. Kimberly, clorox, theyre very stretched on a valuation basis. When you look at campbells soup, youre talking about Companies Selling well above their historic level. Theres this notion these are the defensive areas of the market but stretch the on valuation. Does this make other sectors the new defensive sector that you need to be in this market environment . I like the housing sector better because of the lower Interest Rates. I think that these stocks will get look, that interview with becky quick was an important interview. I think people are now going to start saying it is going to be clorox, his next buy is going to be kimberly. He also said hes not about to pounce tomorrow. I would trim those, i dont want to sell them entirely, but you still get a 3 yield in kimberly which is better than in treasuries. But i do feel this trade has become, as you say, safety into momentum. And i dont like momentum with slow growing companies. And its where people want to be so badly. Yeah. Meantime, shares of yahoo moving higher in the premarket as well. Barclays saying the stakes in alibaba and yahoo japan are undervalued. Yahoo announcing its planning to discontinue seven of its products including the blackberry app. They have a Business Alliance to share and coproduce editorial contented. I think barclays goes to a 26 target. Then this issue of apps that are customed for the 10, jim. Seems like theres another one going away every day. I continue to be impressed with what shes doing. I think many thought yahoo was a great brand. Shes making it a great brand. Monetizing different things. I have been so impressed by this idea of, listen, youve got to stay at work. You cant be someone who isnt part of the culture. We need to reinvent yahoo . I think shes doing a remarkable job. I think shes leading, which i but thats new. Well, it is. I think well ill reserve judgment. On whether or not it works. Why . Because you are a skeptic by nature . Yes. Yeah, i am. By the way, to go into the point of the research reports, what you think alibaba is worth, what you think japan is worth, all fair points. And that continues to be valued. Lets see if and when we get an ipo from alibaba, and what its really worth. That will certainly be important. As to the core business of yahoo its being turned around starting this streak in 96, it would be fabulous to deal with the same person. I always find that, oh, that person left. Now that person left. Now that persons on leave. That person that alone would change how people view yahoo . Yeah. Stability. Stability, david. Im not a skeptic about stability. You and i are rock solid on that. Stability, right here. Weve got to cue that up next. What did you buy this weekend . Maybe its over. My father we got runts. I know you like runts, right . Nerds . These are candies. Fun dip. What else are you on right now, jim . I didnt get the juji fruits, because i have a dentist appointment on wednesday. I dont have to explain myself on that. Apple share prices suffer, tough session on friday. Samsung releasing this, a new teaser video for the galaxy 4. Could this change the Playing Field for mobile phones . One of the top analysts on how to play financials. How hes sneaking his way on the Conference Calls and a lot more, later on. Taking a look at futures. We have sold off on every monday so far this year. Although weve been up every friday. Interesting pattern. Were currently in the red. A lot more squawk on the street still to come. Here we are, me and you on the road and we know that it goes on and on [ female announcer ] youre the boss of your life. In charge of making memories and keeping promises. Ask your financial professional how lincoln financial can help you take charge of your future. Oh, oh, all the way oh, oh but we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Ap million falling in premarket after ending the week by hitting new 52week lows. The stock is 38 below the sppt highs. Samsung is upping the ante for the launch of the new galaxy s4 smart phone. March 14th, a lot of people say the competition is really going to start getting tough. Well, apple is just absent, because theyve got the cash hoard, and they can do something samsung has become the new favorite. Its interesting, the press has viewed it as being the underdog. Samsung worldwide is actually the big gun. Apple does not feel compelled to do anything in reaction to this. What people think, maybe apple doesnt feel that way, but i continue to think that samsung has the momentum. And apple seems to be trapped in a world where they think theyre king. And cash isnt king. And theyre not king. Those are harsh its reality. Wow, up a couple hundred. They still sell a lot of stuff. Look, im saying the perception. I still do not youll have to pry my cold dead hands away from my apple thats an nra plug there. Understood. Mossberg looking at apples cash saying they have enough to buy facebook, twitter, linkedin, pandora, yahoo all at once. Netflix, they should buy netflix. Sorry, pop, i couldnt get the netflix to work. Its on all your clickers now. These would all be a sign of a pulse. We need a pulse. Paddles. The stock doesnt have a pulse. The price action on friday was terrible. Stocks were close to new highs, struggle higher. Apple shares closed on a low of the session, new 52week low for apple. First of all, asking if you took a look at the chart and didnt know what stock it was, you would say, whats wrong with the stock. Making acquisition of some its not going to happen. Thats desperation. Why is it desperation to own how about come u another product that Everybody Loves and wants to use. At the same time, if you want to really have itv, if you own netflix, i think netflix is an undervalued story right now. You keep reading about, say, amc. What an amazing article this morning by david carr about amc and how when they realized you need netflix to get the back stories, you can get right into your favorites and mine, walking dead. Netflix is about a weeks cash for them. By the way, amazon should run netflix, not apple. Okay. So you want apple to come up with something. Im saying that apple could do something with its cash thats not that big. Buy netflix. And suddenly, all of a sudden they would own itv. Netflix is doing everything right. Content. Social media. We need a little social media would be good for apple. Twitter would be good. None of these are elephant acquisitions, these are mice for apples. Teeny tiny. They are. They are, but then but not what the company does. At least at this point. You like it when the company said theyre considering what to do with their cash . Theyve had a lot of time. They have. I assume well hear something one day. Presumably. I like to go out on a limb on that. One day we will hear something. But dont tell them when. Thats outside the Corporate Union parcific woud be outside the core. Opportunity now for a new trading week. Cramer is fired up. The mad dash is coming up next on this monday morning. Lets look at the futures. S p looking at a lower open, about four points. Much more squawk on the street straight ahead. [ woman ] if you have the audacity to believe your Financial Advisor should focus on your longterm goals, not their shortterm agenda. [ male announcer ] join the nearly 7 million investors who think like you do. Face time and think time make a difference. At edward jones, its how we make sense of investing. [ construction sounds ] [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] im a conservative investor. But that doesnt mean i dont want to make money. I love making money. I try to be smart with my investments. I also try to keep my costs down. Whats your plan . Ishares. Low cost and tax efficient. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Five and a half minutes to the bell on a monday. Mad dach looking at what some people are not too sure of the 3d printing thing. Youre so right, carl. Lots of people feel this is a bubble. Okay . So when stratis comes out with a fantastic number, 3d printing, youve seen it, it is all the rage among a lot of our viewers, this has caught a lot of short sellers by surprise. And i have to tell you, carl, i think the industry is a bubble, too. That said, if you want to play the bubble, stratis clearly has the momentum over 3d. What lead you to they made an acquisition. It gives them mind share, market share. Youll see a lot of people trying to find a tech stock that has momentum. In an apple world where the air seems to fall out, seep out of the balloon every day, 3d is the lets say that thats the segment that is of innovation. When other people feel tech lost its innovate power. Is that psychology contained to this particular space . Vaguely. This morning tech data reports, they tell you that theres a terrible mixed shift going from server to tablet, and that that is hurting and cell phone thats hurting everybodys margin. So tablet and cell phones, people arent that crazy about, and boy, are they crazy about 3d. Be careful. It is a bubble. But if you want to play the basketball, stratis is the one to lay. Were on dow record watch. A new day of trading. [ male announcer ] ive seen incredible things. Otherworldly things. 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The s p, by the way, guys, is sitting exactly 3 below the record high. That is to the hundred death of point. Wow. What are the odds of that. I dont think you can push it today. No. I mean, thats quite a ways away. The dow is much closer to a high. Apple in the dow. Apple in the s p 500. Apple in the nasdaq. Much farther away from the alltime high. So, you know, thats how apple affects it. There is the opening bell, as we kick off, a look at the top of your screen. Louisiana pacific, manufacturer of Wood Building materials celebrating its 40th anniversary. Over at the nasdaq, United Tennis Association celebrating tennis night in america. And a great thing about summer, the u. S. Open gets a little bit closer every day. One of the great events. One of the great companies. This company has been on fire. Timber is on fire. You go back over the conference call, timber, lumber, doing so well. Its great to see these guys they have been plywood its great to see them make it. Boy, its been stuck in a range for a long time. When you talk to the home builders, when we spoke to doug yearley, he said it is the lumber costs that are rising. Thats the behind wind if headwind if there is one. Boise cascade, watching those stocks today. A lot of retailers in the coverage of roughly a dozen of them. This is what they like. Ulta, thats davids favorite stock. Coach. Limited. Tj maxx. They like the inventories there. Inventories look like theyre in solid shape at these particular companies. Growth is underappreciated. Kors initiated a neutral rating. They are worried like so many others about the valuation, even though the stock keeps going higher. Do you call it out on valuation or just go with the momentum . Because it has been performing and executing very well. You met michael kors. Yeah. Sold the 25 million shares. It has been pancaked since then. People dont want to buy his if hes a seller, people dont want to be a buyer. Hes got all his eggs in one basket. When you see Something Like a michael kors sell, you also think that a large percentage of his wealth, including his own livelihood, is tied up in one company. Which is not a smart diversification. Ive been trying to figure out coach, which lacks catalyst, and kors, a lot of momentum. What i worry about here is that coach remember, it was the takeover rumor last weekend, i mean, valuation in coach is so low. Valuation in kors is so high. Does the twain meet. Where do we meet respectively . Three times the really . Take a look at this, page two of the journal, all about wealthier consumers holding up their end of the spending bargain, so to speak, and more, as gas prices, food prices, whatever, is harder on the lower end. Jim . Yu house is going up in value. That makes people feel good. The wealthier are not lacking for jobs. Their stock market portfolios, 3 down on the s p. They feel good. The major wealth effect is really taking hold among the wealthy people. It really makes them emboldened to be able to buy newer cars, to be able to feel better about their portfolios and to spend at nordstroms, buy kors bags. I think this is the key to our economy right now is the wealth effect. Is it enough to sustain the overall economy, especially if youre talking about people hit by higher gas prices, who are still adjusting to the payroll tax that is now a part of what theyre paying again . The dollar tree was big last week. Walmart cant be kept down. Walmart guided lower. The stock is a rocket ship. Im waiting to see, other than jcpenney how about warren weighing in on jcpenney. How he used to work there. He said i was not fired from jcpenney. One more quarter, though, right . I dont know. I went with four months i think it might have been a little more there. Great blog this weekend, i was reading about a great writer who went to washington jcpenney, and they saw nothing happening there. Jcpenney, i dont want to dwell too much on it, but Warren Buffett pointed out, its hard to turn around a retailer. He knows retailers. You dont want to talk about apple, all day, every day, but its hard to ignore at 4. 27. Numbers are being cut. It cant be cheap. No stock where the numbers are being cut is cheap. A new 52week low on shares of apple. So thats certainly one to watch. I want to mention shares of lbs, las vegas norm times story. People may have seen in their own press release, they say were firing back at press reports suggesting the company violated the antibribery positions act. It said news reports stating otherwise, such as the New York Times story are both inflammatory and defamatory. Inflammatory and defamatory, yes. Look, i look at this and i say people dont get too scared about the practices act. Haliburton had the biggest amount of money ever paid for one of these. And didnt skip a beat. People at home might think its the worst thing in the world. Even if it is true, and i dont want to say its true no, its not true. Smokin joe. I was thinking of the rumble in the skrung will. I was thinking about the gorilla in the manila. It always crimerhymes. Are you serious . About 64 years old. How cool is that . Thats fabulous. Nobodys afraid to talk to him. I would give you some berth. Unlike the knicks got a little what does he wear by the way . I asked that, because he is known as a i would think his work clothes does he wear fur . He got the name clyde because he was a fancy dresser. He was named after clyde barrow from the movie in the 60s. I might call you clyde. Whatever you want. Just dont call me late for dinner, right . Lets check in with bob pisani, somewhere here on the floor. Right behind you, about 60 feet. Happy monday, everybody. A sour start to the week, dow down about 40 points. Mainland china down almost 4 . Theyre trying to tighten up the Property Market there. 20 Capital Gains tax on the sale of second homes. Higher down payments, higher Interest Rates. This is having a few ripple effects. The australian dollar, for example, has weakened. From the looks of it, it doesnt look like a sectorwide economy squeeze thats going on here. Its very limited to the property sector. Theres no indication theyre going to tighten credit everywhere else. The Property Market has been on fire. Theyre concerned about losing control of it. So i think its limited right now. Japan stocks, do you see them near a fouryear high, nikkei up, the new proposed head of the bank of japan says 2 is the inflation target and hes going to do everything. So hes basically backing shinzo abe up. That market doing well. In italy, down about 0. 6 . No progress toward making any kind of government over there. The Keystone Pipeline story on friday is a marginal positive overall. I hope you saw it. It came out after the market. The Draft Environmental Impact Statement Released by the department of state. They said it will not result in any substantive change in Greenhouse Gas emissions, nor change the development for oil sands. This is marginally positive for Pipeline Developers and for the main company there, transcanada, which is an Oil Development company. Trp is the symbol there, up fractionally this morning. Marginally positive for the Pipeline Developers as well. Theres a 45day comment period, and who knows, maybe july, august, we could get a president ial permit. Thats still very much up in the air. Thats what some of the people behind it are certainly hoping for. I looked at the notes here, you know, the earnings of revenues were below expectations, seeming to blame it all on the borgada. It closed for five days because of hurricane sandy. I looked at the numbers. I saw the midwest and south was down 20 . This is not just related to them. This is clearly related to softness in the overall casino revenues where people basically not coming in the doors. Borgado is down as well. The midwest and south numbers were very weak. Big week for Central Banks. Well find out whether with get any rate changes. Everybodys watching the European Central bank later this week. Possibly rate change, moves to the down side. Bank of england, everybodys watching whether there might be additional asset purchases. Remember, were also going to get stress test results from the bank at the end of this week, and then find out whether banks the following week can raise dividends, or even increase their buybacks. That might help them as well. Bob is right, theres a lot of chatter about ecb cutting rates. I dont think theyre going to do it, because theyve been slow to do it. That would be significant to explain also why the europe lets hit the bonds and dollars. Rick santelli in chicago. Thanks, jim. You know, overnight, we reached a 183 yield interday. Look at a twoday chart of 10s. Its not changing much, but we are at the lower end of the yield range. And even at 185, where we sit right now, were only nine basis points away from where we closed at the end of last year, 1. 76. If we look at a dozenyear chart of the jgbs, japanese Government Bonds, and look at their yields, youll notice just that much above 60 basis points. You know, they are embarking on the road of easing. And of course, as counterintuitive as that may seem, think of all the countries involved in that. Go back to 03 to show a lower yield. Lets switch gears a bit. Today i see the pound and yen are a bit higher. A bit of a reprieve. I know we have Central Banks meeting thursday. I just heard the table discussing whether the ecb will lower rates or not. There is a lot of traders selling the euro versus the dollar versus the yen a bit, as we start to maybe see not only the Printing Presses but the lowering of rates to further Economic Growth. We know what the Collateral Damage may be. All of this is good for the dollar index, not necessarily by design, maybe not to brag about, but it is what it is. Open the chart up to december, were at the best levels in the dollar for 2013 and at about another three weeks to that. Jim, back to you. Thank you so much, rick. Lets check out the latest moves in energy and metals. Bertha coombs at the nymex. Good morning, jim. Weve got oil modestly lower this morning. You would think it would be a little bit more supportive with brent, brent pipeline overseas is shut down for technical issues. Nonetheless, we have seen over the last few weeks or so, weve seen a number of funds starting to cut their long outlook when it comes to oil. Down 16 when it came to net long positions last week, according to the cftc. Were seeing a bit of asset reallocation in these days. And one of the things that funds are doing is going net long the dollar, for the First Time Since november 27th, according to regulators. Gold, however, today is getting a little bit of a breather. And looking a little bit higher. Were a little bit higher across the metals complex. It defies the speculation when it comes to real estate today. Copper still a little bit firm, but metals have really been taking it on the chin over the past few weeks, david. Very interesting, especially when you look at that piece last night on 60 minutes that saw the entire cities empty. Where people have bought up condos, but nobody lives there. Yeah. At least not yet. You never know. Things can move fast in china. Bertha coombs, thank you very much. I want to hit on hess. The stock is up, the oil company under fire, of course, as viewers know, from Hedge Fund Elliott associates, selling about 4 of its shares and nominated five directors. The meeting will be held on may 16th. Most importantly lets get to the news this morning. Hess fires back with a lot of different developments of its own. A significant restructuring of its business, and six new directors that it is nominating. As for that, here it is. They want to exit the downstream business. Those hess stations that you go to still, they have over 1,000 of them. Also the toy trucks, yes, theyre going to be getting out of that. Thailand, not a significant play for them. Monetizing the bachen midstream assets by 2015. The bakken transforms itself into a pure e p company. Something it has been doing for a while. It was 55 . As much as 90 now, going to 100 . Theyre increasing the dividend to 1 a share. Repurchase plan, 4 billion. And the six new independent directors. Theyve been under fire for both the composition of the board, saying there are few too independent voices there. Many of them subservient to longtime ceo john hess, who, of course, was the son of leon hess, who founded the company. Theres a look at the bakken shale production. We expect this battle will continue. But these are significant moves by hess at this point. But they say they have been under way long before elliott got there and showed up, which was at the very end of january. Take a look at john hess. Interestingly, theyre replacing directors, they just added sam nunn, who was added in august, is now out. That guys on more boards. Probably pretty busy. Sam nunn also out. An important vote, dont forget, relational investors. This is a Shareholder Base that has been somewhat wrested in the past. Significant no votes and vote to destagger the board. Neither of those actually occurred. But well see what happens. Elliott says go back 17 years, look at the underperformance versus peers. Lately the stock has been performing very, very well. Look, these guys want the company for sale. You would have to pay north of a hundred for this. Amarada hess, the predecessor, they discovered the bakken. Many people feel they got the best assets in the bakken. Every company around the world wants to own the bakken. I understand the heat, because the company is worth a lot more than its selling for. Youve got to obviously do a good job of getting it out of the ground and finding the most economical ways to do that. I think this company this company is going to be under pressure because its worth considerably more than it is selling for. That said, i think johns doing all the right things. If it were to remain independent, but i think these guys want to sell. Well see. This battle continues. But today, very Significant Developments when it comes to hess. Coming up next, mike jackson, hear what the head of the nations largest auto chain is saying about stronger auto sales and whether he is wor ritd the sequester will halt that momentum. As we head to break, look at this mornings early movers on wall street. Look at lexmark, up 5 today. Music plays thank you orville and wilbur. Amelia. Neil and buzz for proving theres nowhere we cant go. But, at some point. Giant leaps gave way to baby steps. And with all due respect, youre history. If you taught us anything, its that you cant cling to the past. If you want to create the future. Thats why, instead of looking behind. Delta is looking beyond. Pushing u. S. Aviation to new heights. All 80 thousand of us. Busy investing billions in the industrys boldest moves. Its biggest advances in technology. Bringing our passengers the best, the most spacious fleet in the sky. And earning more awards than any other airline. To show for it. So rather than simply saluting history. Were out there making it. 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. Always good to bump in with ashford. Becky did a great job on squawk woks with Warren Buffett, auto nation, the retail giant reporting an impressive month in sale. Mike jackson is the chairman and ceo of auto nation. Mike, good to see you. Jim, always a pleasure to see you. Thank you. Youve got some terrific things, as always, in your conference call. And i want to point out, in the mood here, goodness, that you said that we are just beginning to recover in 2013 from the used car market which is a gigantic market for you. Thats the most bullish statement in your most recent conference call. Yeah, its a really good time in the auto business, jim. For once in my life, im in the right place at the right time. I certainly paid my dues to get here. For the month of february, we announced retail sales, new vehicles, of just over 21,000. Thats a 6 increase on a same store sales basis, plus 3 as we have some acquisitions in there. Some of the bright spots are that our premium luxury business was up 16 . Our pickup truck business was up 16 also. And believe it or not, the state of california was plus 10 . For the industry, the sales were at an annual selling rate of 15,400,000. Thats the fourth month in a row above 15 million. Its really a trend and it really confirms that our forecast of mid14 million for new vehicles is solid this year. And yes, jim, youre absolutely right, a strong used car residual values are definitely facilitating trades. Were able to give a lot of value to customers. You combine that with great financing, great new products, and genuine replacement need, this recovery in autos is plowing through all the headwinds. Mike, one of the things weve been puzzling, and we did it during the break, is who keeps spending here. Thats a huge number of autos that are going to be bought. And you simply cant be bearish if you hear that kind of number. No, you cant. I think, though, the auto recovery has to be put somewhat in context. We had a depression in autos, not recession. Sales came to a standstill in 08, 09. Im a great car salesman from new jersey, jim. But i tell you, if there wasnt genuine replacement need with an average age of 11 million, our average trade, 160,000 miles on it, thats the foundation of this. And theres millions upon millions of pentup demand for january replacement need. But we also have great financing used car values. And paradoxically, for once in life, a risk factor, namely high gasoline prices, is actually supporting sales. Now, how often does that happen in life. Because the new cars we have from the manufacturers have significantly improved fuel economy without the usual tradeoffs in size or speed. But i think the biggest message is, the consumer, jim, to your point of why theyre spending, is looking at washington, d. C. , and saying, you know, youve got a soap opera going on down there and im not going to sit in front of my tv transfixed and paralyzed because of whats going on in a dysfunctional washington. I got my life in order in 08, 09, ive had my own personal Austerity Program and i need to move on. You see it in housing and you see it in autos. That bodes well for the economy. Throw in the energy factor, if washington could really get out of the way, i think theres a chance for a much stronger growth in the u. S. Economy. Well, mike, i tell you, it is always affirming to hear you. Im glad we got you this time. Thats squawk boxs loss. Thank you for being on the show. Jim, always a pleasure to see. Mike jackson, auto nation. What a company. Take a look at that chart, look at that stock. Listen to him. Hes got great common sense. Six in sixty is coming up next, carl. Yeah. Here we are, me and you on the road and we know that it goes on and on [ female announcer ] youre the boss of your life. In charge of making memories and keeping promises. Ask your financial professional how lincoln financial can help you take charge of your future. Oh, oh, all the way oh, oh well start with tsra. The deal. Com reports that starboard taking a 10 thoe say that starboards blackmailing the board into firing the ceo. This is an amazing story. Fera . I know these deals are small. Keep in mind the nice synergy and foe taking it out of its earnings. The stock going higher. Not enough for carl icahn. Braidian. This is incredible. Backing away from doing a lot of mortgage insurance. Its been on fire. Price target up on eaton. A cyclical stock that has been a place in the high. Really on fire. Finally, ksu. Oh, man, this is the trunk line, bringing cars from mexico from where my place is, guadalato right to the united states. Its on fire, if you want to visit mexico. A lot of talk about the rails after buffett today. Wasnt that great . Becky quick, the best there is. I know. I was jealous. Whats on mad tonight . Why do i focus on these companies . Because these are where americas doing well. Real Estate Investment trusts, people dont understand how strong the country is until you bring these guys on. They just finished a merger. What theyre telling you is, look, were out of space. We need more building. Commercial real estate may be the way of the future in this country. That could be the next leg of this u. S. Economy. See you tonight at 6 00 and 11 00 today. Thanks, buddy. We get more from beckys sitdown with buffett in just a moment. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. 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 . The oracle of omaha weighing in on stocks. The sequester, and apple specifically saying stocks are still a good bet for investors. Should you follow suit . Two top strategists weigh in on buffetts take. Apple shares closing on friday at a new 52week low. Hitting another 52week low in todays session. Is the bottom finally in for apple . Black rock head of the muni bonds, the inside scoop on why theyre blowing off the sequester and the fiscal emergency in detroit. President obama getting set to speak on several key personnel changes to his cabinet. Well bring you the comments live. Becky quick sitting down in the suburb of omaha, nebraska, this morning for three hours with the oracle of omaha himself, Warren Buffett. Becky joins us now with a little more on what was a threehour sitdown. How you convinced to happen, becky, i do not know. Good morning to you. This is the very First Business day since the sequester officially kicked in. Washington, we know, has been really kicking around about this whole thing. Huge reaction there. The Market Reaction has been a bit of a yawn. When we heard from mr. Buffett this morning, his reaction has been much of the same. The sequester in effect reduces the amount of stimulus to the economy. They talk about stimulus and they say, this is a stimulus bill and vote 800 billion and say this is a stimulus. Stimulus is when the government operates at a significant deficit. That is stimulus by definition. Were operating at 1 trillion deficit roughly. The sequester reduces that a little bit. Raising the taxes at the start of the year reduces that somewhat. But were still operating at a deficit that is 6 of gdp. And by canes definition, thats a pretty fair amount of stimulus. So its just it has the effect of reducing stimulus. Now, buffett said that, yes, this brings the deficit down, and that is a good thing. He pointed out this is not a pretty way of getting there. It would be better if there was a better way to get there but it ultimately brings the deficit down. After the big dropdown in the economy at this point in the return, at this point in the rebound in the economy, we should probably start to see a real bringdown in the deficit. Of course, that still leaves the fed with the massive stimulus out there, not only with qe3, also Everything Else the fed is doing to bring out more stimulus. Now, he has said in the past, buffett has said in the past that he is a fan of ben bernanke. He credits him with saving the financial world back in 2008. But he says at this point he would like to see the fed maybe doing a little more to at least have a plan to get out of this huge Balance Sheet that its got. He said what bernanke does next is what the market is really watching. All over the world, everybody that manages money is waiting to catch the signal that the fed will reverse course. And, you know, i think theyre on a hair trigger. So i think the fed will try to give little signals here, and all that. But in the end, there are an awful lot of people who want to get out of a lot of assets, if they think the fed is going to tighten a lot. Guys, i dont know if you were listening, but through the course of the interview he did say stocks relatively speaking are the best place to be putting your money. If youre looking for the dumbest investment, probably longterm Government Bonds. He thinks thats the worst place to put your money relatively speaking. Carl, we did try to get his take on herbalife. Weve seen what bill ackman and cart icahn have been doing. He said hes not read through any of the filings that they have with the s. E. C. He says, though, that both ackman and icahn are members of the giving pledge, so he would like to see both of them make a lot of money so they can give them to charity. Its a wealth of information that you got out of him, as always. I wonder, though, having been to a few of these meetings, having sat with him in a context like that, is he would are argue even marginally less enthused about stocks, because of how far weve come . He said he likes stocks better when they were cheaper than he does right now. But he said hes still buying stocks now. All things being equal, hes looking at this as being the best place. But he doesnt think theyre as much of a great value than 2008, because they were a lot cheaper then, but hes still buying. Great stuff, as always. I know youve already had a long day, beck. Thanks so much. Talk to you soon. Thanks, carl. Do you want to point out google here . New high on shares of google. And some point point to apple hitting a 52w low in todays session. They have a theory that funds from apple were going into google, as google kept chasing these new highs here. We have another one for the monday session. That long google, short apple trade. Continues to power on today. Reaction from buffetts comments. Portfolio manager at dynamic mutual funds. And manager of principal with douglas c. Lane associates. Great to have you guys. Good morning. Good morning. Is buffett telling us something we already dont know . He said people who keep putting money into the bond market arent listening. Especially the Government Bond market is the wrong place for longterm money. If you look where the market is today, were back to where we were in 2007. But if the s p earns 112, 113 this year, earnings are 40 higher, or 38 higher than they were in 2007. Bond yields, in the meantime, have gone from 4. 3 to 1. 9 . Yeah, i think hes saying something, but people arent listening. Especially if you look at the flows into bonds. Keying off of serat, if you would do what buffett is doing. He bought heinz, a valuation some would say stretched compared to itself historically. Im wondering as we enter this period where markets are chasing after new record highs on the dow act least, would you go into some of these staple names that have a lift in terms of premium valuation on the back of the heinz deal . These are staples now turned into momentum stocks. Or would you stay away from them and go into other sectors as defensive plays . Very good question, actually. If you look at some of the comps for heinz, like campbells, general mills, great companies. But their premiums now are so high, they become really Growth Companies with momentum buyers behind them weve actually cut those back. Thats not something i would want to chase in the consumer stap plle staples. Maybe Something Like colgate or mandolay. Where you get the real growth in the three to five years, you Want Companies that have great Balance Sheets, good cash flows, Global Growth, and industrials and cyclicals are two areas. Especially the auto companies, thats where youll see a lot of growth. Youre coming from depress the sales and youve got companies that are just going to keep on growing, especially cash flow. Let me pick up on the point that both of you have now made about corporate profits. Isnt the reality that the stock market is reaching to record highs precisely because americas unemployment remains so stubborn. And if we get 700,000 more jobs lost through the sequester, then that reinforce, the stock markets rise. I raise it in that way, noah, because this mornings front page article in the New York Times says were in a golden age of profitability, precisely because ceos dont have any wage pressure, they dont have to take on any extra workers because their productivity continues to rise. And in that environment, you have a Federal Reserve that is doubling down. Saying we will further stimulate monetary conditions, and the stock market, noah, for as long as we fail to bring down unemployment, which still they continue to do. Is the market rising because unemployment is so bad . Well, i mean, if the Federal Reserve is trying to stimulate the stock market, its done a fairly poor job. Weve gone nowhere for nearly 14 years. Equitylike returns have been achieved through fixed new york stock exchange. The stimulus from the Federal Reserve has basically been in the bond market. Corporate profits have gone higher, yet weve gone nowhere for nearly 15 years. I think were on the cusp of the handoff. I think the Federal Reserve will keep Interest Rates as low and stimulus going until we get that handoff from stimulus towards the economy reacceleratreaccele. Thats dependent on the u. S. Housing. As buffett said this morning, housing is turning up. That gets the u. S. Closer to the 4 gdp. I think were in that stage. Thats a positive stage for stocks. As we go from low Interest Rates to accelerating earnings. And so sarat, do you agree with that . I agree with it. And the other point, given that equities have gone nowhere in 15 years, but the multiple has been cut in half, you get Earnings Growth thats just 6 , 7 plus the dividend yield, youre looking at high double digits in the next three to five years. If rates do back up, which were all expecting, companies today are flush in cash. What does that do to them, a, theyve turned out their debt, b, theyre going to get higher yields on their cash. Nobodys talking about Interest Rates on cash at all and going down the road for companies that are financially structured well. Now, the issue is going to be companies that arent, that are very dependent on shortterm markets. So you really have to be careful not just on the bond market, but on Financial Companies that are really dependent on Financial Markets or shortterm funding. That spigot could stop. You know what, noah, actually, i want to get to google, alltime highs. My memory is not what it once was, but if i recall, you have been positive on that stock for a long time. Give your take here, 815. Yeah, you know, i think that the baton of innovation is perhaps being passed. I think when investors got excited about the stock is you saw some pretty significant declines, double digit declines in cpc for google. I think what google showed in the last quarter is the ability to monetize mobile. The reality is, they paid 1. 6 billion for youtube. Last year they sold 5 billion worth of ads on it. The question becomes, how do you monetize android and mobile. If you look at the multiple of google, i never thought id sit around my office and say, gee, if google could get the same multiple of heinz. But thats kind of the market were in today. I think the stocks got longer to go. Its one of my biggest positions and i continue to like it a lot. Apple can be fixed, too, if they make the right moves there as well. Got to start somewhere. Heinz is one place to start. Noah, sarat, thank you, guys. Good insights. Thank you. Lets take a look at this chart. Im sure this is a chart that people are saying, if apple could get the same multiples, a fresh 52week low in todays session. 425. 15 is the low. Shares down over 39 from their september highs. Meantime, samsung beginning its galaxy s4 campaign. Could there be a light at the end of the tunnel for apple. Mike mayo talks about his dustup with jamie dimon. His best ideas for 2013. Plus president obama about to make some key personnel announcements. Well take you live to the white house when it happens. Stay tuned. [ male announcer ] the lexus command performance sales event has begun. Featuring the lexus gs and is performance lines. Because control is the ultimate expression of power. Get great values on your favorite lexus models, during the command performance sales event. This is the pursuit of perfection. When i take a picture of this check, it goes straight to the bank. Oh. Oh look the lion is out no mommy no dont worry honey, it only works on checks. Deposit checks from your smartphone with chase quickdeposit. Just snap a picture, hit send and done. Take a step forward and chase what matters. President obama set to nominate Walmart Foundation head Sylvia Matthews burrwell to be his next budget director. She previously served as budget director during the clinton administration. Lets bring in chief washington correspondent john harwood. Hi, john. Reporter hi, melissa. The president s rolling out three appointments today, sylvia, and ernesto of m. I. T. Is the energy secretary. This is an attempt by the president to show diversity in his cabinet, but also a high level of competence. Sylvia burr well has a good representation for her service in the clinton administration. It was tweeted out this morning she was a strong choice for budget director. Not a change in policy. But a choice for competence. Ernesto is very interesting as energy secretary. An academic like steven chu who he replaces. Hes somebody who has a record of supporting all energy sources, nuclear power, fracking, carbon capture, things that the administration can use to make the case for its Energy Policy and negotiations with republicans, especially on issues of climate change. And gina mccarthy, head of the epa, is a comparable choice to lisa jackson, who is the outgoing head of the epa. I dont know whether its too simplistic to argue, but coming in at a time lik this when we are in the age of sequestration, is it a baptism by fire . Yes. Matthews is going to have a difficult time sylvia burrwell, she is going to have a difficult time dealing over the next few months. I assume she will be easily confirmed as head of omb. But pruning 85 billion in a short amount of time to a budget you just took over is not going to be easy for her. But sequesters already in place. And shell have to deal with that. John, does the sequester stay in place . Is it a done deal . I see that over the weekend, sources were suggesting that mr. Obama, president obama was offering to cut entitlements like medicare and Social Security. Possibly as a deal out of that. Well, hes always been offering to cut medicare and Social Security in a negotiation with republicans that includes more tax increases. If republicans say yes, well consider tax increases. I talked to house and Senate Republican sources over the weekend, they said dont rule it out down the road. But they collapsed in their corners after boxing over this for months. I do think a sequester will stay in place for at least weeks, perhaps months. And were going to have to see after that. One thing a republican source in the senate reminded me over the weekend was that its only sequester through the end of this year, in the sense of being arbitrary and across the board. Once we get to the next budget year, which the house and senate are now beginning to make plans for, then agencies can smooth out the process. It is less difficult over time. The most difficult part is going to be over the next few months. All right. John, when that event happens at the white house, well take it live. Come back to you. Thanks a lot, john harwood. The head of jcpenney, ron johnson, back on the stand again today over the legal rights to sell Martha Stewart products. Courtney . Hi, good morning to you, carl. Ron johnson finishing up his testimony today in the courthouse behind us. We did catch johnson as he walked into court this morning. No comments on earnings yet . No. Thank you, courtney. Thank you. We also asked johnson about those when we asked johnson about the disastrous Fourth Quarter earnings, you can see, still didnt have much to say about them. Johnson just actually finishing up direct questioning from the jcpenney lawyers in the courtroom behind me. Martha stewart living omnimedia did ask johnson to call home depot ceo frank blank when they were trying to ready this agreement with Martha Stewart, to discuss the idea that both retailers would be selling window related products. Johnson testified that he did indeed call blake. And when his lawyer said, while you were calling these ceos, why did you not pick up the phone and call Terry Lundgren . He said because Martha Stewarts company didnt ask me to. Now, regarding johnsons comments in emails, testified earlier in court, saying that Terry Lundgren would now have to work. Johnson said he does regret some of his word choices and that he was just boasting a little bit. He didnt mean to imply lundgren wasnt working, but when a competitor tries to step up a game, perhaps someone elses game will also have to be changed. Interesting stuff playing out here again today. Its not over yet. Courtney, before i let you go, i want to get your reaction. Everybodys talking about the company, and ron johnson, including buffett today, who talked about his own experiences as well. Once working there. Take a quick listen. When you start arguing with your customers about what they want, its not a good idea. And, you know, its theyve got a very, very tough game to play from this point forward. I mean, theyve obviously turned away a very significant percentage of their customers, and the thing about retailing is your competitors are always moving. You just dont normally hear buffett talk in explicit terms like that. Yeah. Exactly. I think, again, this is one of those cases that many people are following very closely, whether or not you have a vested interest or investment in it or not. Ron johnson is trying to do something to very much change the game of retail. But so far, it doesnt appear to be working. I think buffett is right, he has turned away many of the core customers, who are confused about what jcpenney is doing. Those who dont follow the story as closely, i thought there was no sales, now there is sales. Theres a lot of questions still on wall street about what happens from here. And a Beautiful Day in lower manhattan, courtney. Enjoy it while youre out there. Thank you. Thank you very much. The latest from that particular court case. Still ahead on the program, will one of this years best performance sectors kill the rally. The stocks that could undermine the new highs weve been making certainly, certainly at the end of last week. Plus, making sense of the sequester with a former washington insider. 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Theres a live shot of the white house here as were awaiting the president s remarks on key personnel changes to his cabinet. Nominating two omb, Sylvia Mathews burwell. Shes worked for the Gates Foundation, Walmart Foundation, then secretary treasure ruben, under clinton. Im not sure anything, though, prepares you for running omb itself. No, and certainly not at this extraordinary time of standoffs that have been persisting for two years. The sequester process that nobody wanted to happen. Its now happening, and on your watch and youre responsible for it. As i mentioned before, she had a reputation as a very steady and competent hand in the clinton administration. So i think president obama is likely to be well served by his choice. I wouldnt expect to see any significant republican resistance to her appointment. Anybody else that you expect him to address specifically today . Well, hes going to announce the Ernesto Muniz for energy secretary. Gina mccarthy for head of epa. I dont expect an announcement on commerce secretary, which is one weve been focused on. Penny pritsger, the hotel executive, is one who has been talked about for that job. White house officials have been indicating it will be a while before they complete the process for that selection. One of the things to keep in mind, as the president appoints two women, and one hispanic to his cabinet today, is the idea that he got a lot of flack for having appointed a bunch of white men and having not enough women in the inner circle. And the president always said, wait until i appoint my entire cabinet, and this is what he was talking about, his appointments like the one today. As reuters says, burwell in particular brings an outsider status to the white house inner circle. Here is the president. Everybody have a seat. Have a seat. Well, good morning, everybody. This afternoon, ill hold my first Cabinet Meeting of my second term. And there will be some new faces, and there will be some familiar faces in new jobs. But there will also be some seats waiting to be filled on a permanent basis. Today im announcing my plan to nominate three outstanding individuals to help us tackle some of our most important challenges. One of those challenges is building on the work that weve done to control our own energy future, while reducing pollution that contributes to climate change. And a few people have played more of a role in addressing these issues than current secretary of energy, steven chu. Stevens helped us to speed the transition to more sustainable sources of energy. Hes given more of our brightest young scientists the opportunity to pursue the ideas that will shape our future. So i could not be more grateful to steve for the incredible contribution that hes made to this country. And now that hes decided to leave washington for sunny california, im proud to nominate another brilliant scientist to take his place, mr. Ernie moniz. Theres ernie right there. [ applause ] now, the good news is that ernie already knows his way around the department of energy. He is a physicist by training, but he also served as undersecretary of energy under president clinton. Since then, hes directed m. I. T. s energy initiative, which brings together prominent thinkers and Energy Companies to develop the technologies that can lead us to more energy independence, and also to new jobs. Most importantly, ernie knows that we can produce more energy and grow our economy while still taking care of our air, our water and our climate. And so i could not be more pleased to have ernie join us. And he will be joined in that effort by my nominee to lead the Environmental Protection agency. Over the past four years lisa jackson and her team at the epa have helped reduce emissions of the dangerous Carbon Pollution that causes climate change. Putting together the toughest standards in two decades. Lisa is ready for a welldeserved break and i want to very much thank bob, whos not only been a great deputy administrator, but has also been acting as the acting administrator. So please, bob, everybody give bob a big round of applause. [ applause ] as we move forward, i think theres nobody who can do a better job in filling lisas shoes permanently than my nominee who is standing beside me here, gina mccarthy. [ applause ] you wouldnt know from talking to her, but ginas from boston. One of her proudest moments was yelling play ball at fenway before a red sox game. But ginas got plenty more to be proud of. As top environmental official in massachusetts, and connecticut, she helped design programs to expand Energy Efficiency and promote renewable energy. As assistant epa administrator, ginas focused on practical, costeffective ways to keep our air clean and our economy growing. Shes earned a reputation as a straight shooter. She welcomes different points of views. Im confident that shes going to do an outstanding job leading the epa. So these two over here, theyre going to be making sure that were investing in american energy, that were doing everything that we can to combat the threat of climate change, that were going to be creating jobs and Economic Opportunity in the first place. They are going to be a great team. And these are some of my Top Priorities Going Forward. But as president , one of the things you learn very quickly is its not enough just to talk a big game, the real test is whether your priorities are reflected in a budget. And thats where the rubber hits the road. Thats where my third nominee comes in. Since i took office, jeff sits has served as americas first chief performance officer, and the Deputy Director of the management of director for management of the office of management and budget. Hes made our government more efficient. Hes saved taxpayers a lot of money. He stepped in as acting director of omb, not once, but twice, including leading up to the fiscal cliff. And so theres no question that jeffs skill and versatility has served the American People very well. I expect it will continue to serve us well in the future. In the meantime, i am confident that my nominee for omb director, Sylvia Mathews burwell, is the right person to continue jeffs great work. [ applause ] in the 1990s, when she was, what, 19, sylvia served under jack liu as Deputy Director of omb, part of a team that presided over three budget surpluses in a row. Later she helped the Gates Foundation grow into a global force for good. And then she helped the Walmart Foundation expand its charitable work. So sylvia knows her way around a budget. But as the granddaughter of greek immigrants, she also understands that our goal, when we put together a budget, is not just to make the numbers add up, our goal is also to reignite the true engine of Economic Growth in this country, and that is a strong and growing middle class. To offer ladders of opportunity for anybody willing to climb them. Sylvias mom is here. And i sylvia loves to talk about her parents, growing up in west virginia, and the values that they instilled in her as educators. And i think that reflects everything that sylvia now does. And so im absolutely confident that shes going to do a great job at omb. And those values are especially important to remember now, as we continue to listening to the president , president obama nominating three new cabinet positions. Lets go back to john harwood for a quick wrapup here. Epa, omb has new secretaries. Some of the notes we expected. Gina mccarthy, who has been at epa, represents steady as she goes. Somebody who will reassure democrats that the president isnt giving up his environmental values in climate change, but in ernie moniz from m. I. T. , he also has somebody with a record of looking at other sources of energy, including fracturing, hydraulic fracturing, including nuclear power, things that are designed to enhance credibility in association with republicans. And with Sylvia Mathews burwell, he gets somebody with a reputation for competence and that is going to serve him well over the next few months, assuming all three of these nominees are approved by the senate, which i think will happen. If youre talking to a ceo today who has had runins with lisa jackson or steven chu, does their life get any easier as of this moment . No, i wouldnt think so. You know, i think the biggest thing you trade when you go from steven chu to ernie moniz is somebody who has a little bit of a reputation as an environmentalist, perhaps more in the political center. Steven chu also was a was an academic who didnt necessarily take to the political aspects of the job. Moniz has served in the Energy Department before, although hes a fellow academic, but maybe that experience will make him somebody who is better able to deal with people outside the department. Great insight, john harwood, outside the white house today with the cabinet nominations. Steve liesman at National Association of business economists conference in washington, where the hot topics are Central Banks, and their money policies. How to jumpstart Global Growth. He joins us this morning with a special guest. Hey, steve. Yeah, carl, thanks very much. Im here with the chairman of Jpmorgan Chase international, former governor of the bank of israel, chairman of board of trustees in europe. Thanks for joining us. Nice being here. Vice chairman of the fed saying this morning to this group right here that she doesnt see any costs right now that would stop her from quantitative easing. Ben bernanke making similar dovish comments over the weekend. You have a chart in your presentation, Interest Rates around the world are negative right now. Central banks are wide open. Is this the right policy, in your opinion . Well, given the circumstances, it seems to be the right policy. But we need to realize that this is not sustainable for the very long run. The presentation of janet yellen was well reasoned, an excellent presentation, basically justifying the policy stance of the fed. But the way in which you read now the situation, the fed is going to continue with its accommodative policy for years. One of the reasons to continue with it, jacob, is to bring down the Unemployment Rate. You talked about the Unemployment Rate. Will this policy be successful in bringing down the Unemployment Rate. Unemployment rate today is about 7. 9 . All forecasters are basically saying that it will take about two years for the Unemployment Rate to reach 7 . So if you aim at 6. 5 , its a very long period. But we need to remember that Unemployment Rate is an average number for a very complex economy. In the u. S. , if you are a college graduate, your Unemployment Rate is less than half the national level. If you are less than high school degree, your Unemployment Rate is much above what about the policies . What it means is, first of all, that a lot of elements in the unemployment are structured. And it is, therefore, not just the business cycle. If you look at the duration of unemployment today, almost 40 of the individuals who are unemployed have been unemployed for more than 27 weeks. Thats a long period, which means that it is not so easy with the recovery for these individuals to enter the employment pool. So i am concerned that the reason not of structure and element in the Unemployment Rate, which means that we may see a period with negative real Interest Rates for a long time. Structural unemployment is not something typically that Central Banks should be adressing. A structural problem, the government should address it. It sounds like if youre saying if the problem of the unemployment is structural, then what ought to happen is the fiscal side ought to address it, if youre right about the education numbers, which im sure you are, they need to educate people to reduce their chance to being unemployed. We have had a situation not only in the u. S. , but also in europe, of overburdening monetary policy. Excessive burden was put and is being put on the fed here, on the European Central bank in europe, thats not healthy. It is a good strategy to give time to the governments to do their jobs. But you cannot give too much time. Its not healthy. You talked about mega trends today. One of the biggest mega trends is whats happening with the global population. It is aging here in the united states, but not as badly as it is in japan and europe. While other parts of the world are getting younger. What does that mean from an investment standpoint . Well, the central gravity of the world is changing very rapidly. And it is related to those countries whose population is growing, and getting younger. It will be the destination for the future. It is in this regard that if they get their acts together as far as health is concerned, they may become the most productive future continent, because in terms of size, their population is very, very young and growing. But by the same token, if you look today at japan, you know, in japan, if you want to see more friends in 20 years, you need to be 80 years and more. Because the fact is, theyre shrinking. Thats a serious matter. It will also have significant budgetary consequences. Look in the u. S. , within a few years, the proportion of the population above 65 will be rising and growing, leaving very little room for the government to do the right things, given that a good proposal goes on Social Security, medical. What is left. We have to leave it there. Thank you. Thank you for joining us. Carl, back to you. Jacob frenchel here at the conference. Talk to you soon, steve. When we come back, dwindling cash flow, and potential for de flauts. The threat of sequestration could send the munis into a frenzy. Thats after the break. [ male announcer ] when it comes to the financial obstacles military families face, we understand. Our Financial Advice is geared specifically to current and former military members and their families. Life brings obstacles. Usaa brings retirement advice. 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. 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The Senior Research analyst at jnp securities. Alex, great to speak with you. Thank you. The stock in todays session, for instance, severely underperforming its peers as well as the broader indices. Whats your take on why the stock can get out of its own way at this point and wlorchether ot you think theres a spiral, where its underperforming the Technology Peers . And theres more pressure perhaps for managers to get out of this name and reallocate toward growth earnings like a google . I think some of the near term pressure has been how apple uses its cash and returns it to shareholders. A little bit of a disappointment last week. I dont think thats the central issue for apple, though. Its competition, being in the way of getting earnings back on a track to growth. So history has a funny way of repeating itself. We go back in time, like you just did, with Warren Buffett, we know that microsoft and ibm together with a lower open licensing model, and way of going about business, put Macintosh Computers in trouble. Were seeing the same thing happen with android. Android is more pervasive than ios globally on smartphones. Apple doesnt have an answer for that right now. Samsung coming soon with the galaxy s4, a processor from qualcomm. Apple is not executing as crisply as some of the competition. What happens if they emerge with a new category, that reinvents something that gets everybody excited . Does it not push them back to being a growth stock, because the iphone is such a high proportion of profits . Simon, great point here. They do need to come out with some new products. I think they need to be able to address the new markets. Apple needs to find a strategy for that. In terms of new product categories, like the iwatch or itv people talk about, we have to see. Tim cook recently said they are a company that is focused. And if they focus in the wrong areas, they lose. If they focus and innovate in the right areas, they can get on track. Right now, whats central to them is the iphone expanding that product category, and getting that product category back to earnings appreciation. So profitable growth. In your sector, alex, which stocks have better upside potential than apple at this point . We like playing the components right now, because theyre a diversified play on whatever wins. Were recommending qualcomm because theyre so dominant in the apps processing and lte world. Were also recommending skyworks, the category leader in connectivity. Were playing the smartphone and tablet trend through the vendors. With apple were saying, lets see what theyve got. Lets see what the competition has in store coming up march 14th when the s4 comes out. Alex, thank you for joining us. Appreciate it. Thank you so much. Now that the sequester notices have been sent out, when will we see the true impact on the broader markets, and indeed, on the Municipal Bond market. Good morning, peter. Good morning, simon. I guess in terms of from your standpoint in terms of munis, the rubber meets the road in those states that have the greatest exposure to the federal government. Its obvious, what are you looking for here . Will there be downgrades, do you think . I think across the united states, states in general receive an awful lot of aid in the form of federal outlay. There will be an impact. But the impacts are going to be felt differently in different areas. For instance, hawaii, alaska, y d. C. , high dependency on federal spending and federal employment. So youll see impact there. But i dont think its necessarily going to translate to downgrades which were more likely to see is the agencies put some of those states where the dependency is heavily on negative watches, perhaps review, maybe in some cases where the dependency is particularly high, youll see some onenotch downgrades. Typically that doesnt result in a big change in the value of a bond. So you dont think it will be hugely responsive . In other words, people dont have to rotate away from those areas where there might be trouble in your view . I would agree with that. I think the effects are going to be first of all longer term. It takes a while. Notices are just going out. It takes a while for decisions to be made and cuts to be implemented. And they have throughout the entire year to make those cuts which takes us until september. Theyre disbursed in different areas like education, environmental conservation, wildlife, defense obviously being one of the heavier ones with about half of the 85 billion being made up there. So i think that diversity, that d disbursion probably has a minimal effect. Let me ask you specifically about detroit which may get an emergency manager over the heads of elected officials over the next few weeks. Im assuming since detroit has been sputtering for so long, that, too, is an outlier. I hate to say that, but i think its been well telegraphed and well handled. Its a good point because it brings into question this idea of bankruptcy defaults. Theres only a subset of municipalities in the country that can use chapter 9 for bankruptcy. But you have to look at some of the steps that states are taking to avoid that and why they do so and detroits a great example. This has been coming for quite some time. It has been well telegraphed and well publicized. I think people understand it. But an emergency manager to make the cuts instead of a bankruptcy think is very, very important. And an Important Message to the market and investors. You know, peter, i imagine that the bigger issue at the end of the day is whether or not munis are going to lose their taxexempt status, particularly under an Obama Administration for those that oearn a lot of money. There is an intense lobbying i understand from the cities and counties to prevent change in that. Do you think they will be successful . Bbying effort. Retty substantial and its important because if the Tax Exemption is lost and by the way, thats not our view, we think its a low probability that happens but nonetheless, if it is, that means higher borrowing costs not just for some constituents but everybody in a taxpayers jurisdiction. I think thats what you have to think about Going Forward. I think its a low likelihood. They have talked about the possibility of a cap. But the u. S. Tax code is extremely complicated. I look how far apart the two sides are on some issues like the tax reform and the fiscal cliff at the end of the year, the debt ceiling coming up, the sequestration cuts, how they could possibly get through tax reform this year just seems like it would be a very difficult proposition. Particularly with a notable allies that they have. Peter, weve got to leave it there. Have a great week. You, too. Thank you. Straight ahead, santelli and the sequester. Well get ricks take on what the budgets could mean for your cash. Thats next. [ male announcer ] staples has always made Getting Office supplies easy. Another laptop . Dont ask. Disappear abracadabra alakazam [ male announcer ] and now were making it easier to get everything for your business. And for my greatest trick enough [ male announcer ] because whatever you need, well have it or find it, and get it to you fast. Staples. That was easy. Tdd 18003452550 markets on the rise. Tdd 18003452550 Companies Breaking through. 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Tdd 18003452550 now get our best global offer tdd 18003452550 trade commissionfree online through september 2013 tdd 18003452550 when you open a schwab global account. Tdd 18003452550 call 18003081280. Welcome back to squawk on the street and mondays edition of the santelli exchange. Well, friday at midnight, well, its come and gone. Whats the market doing today . Interest rates are pretty much at the same place. Low end of a range over the last several weeks. 1. 86. We see that the japanese are really continuing the strategy of not only quantitative easing but trying to do anything they can to try to get their economy going, currency be damned, thats going to continue. But what we dont see in the market is any of the aftershocks of the strident protests that weve had from many officials regarding where we would be. And im not happy today. Because i look at whats going on as just absolute feckless fiscal policy. Theres just no plan for anything. Today we have some new cabinet appointments going on. Look at the last energy czar that we had in the form of mr. Shue. Many times he said 10 gag would be a good thing. It would force people into other alternative nonfossiltype energies and also force them into the poor house. I tell you what, i think people out there want jobs. Keystone, i dont hear much about keystone. You know, we had a pete yore a we meteor that passed within 17,500 miles of this planet. There in my opinion is a more significant danger to the world ending by a meteor or i have a better chance to win the lotto, take care of our planet, but oh, my gosh, we need some Energy Policy and, by the way, how can we look to the markets to try to divine a signal postsequester and i know this is old news, but unfortunately weve become anesthetized to it. The house cant pass it. But truly, if this administration really cares about the unemployed, really doesnt want them to starve because were not putting out energy that runs the economy, the absolute least they could do for the markets and for everybody is to pass a budget, for crying out loud even if the house doesnt pass it, wouldnt it be nice harry reid, are you listening . Doubtful. Hey, were going to a commercial break. But im going to have mr. Jim bianco at the bottom of the next hour to talk about the economy and where he thinks its going. Make sure you tune in. 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. 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Change your number. Turn it up. Androgel 1. 62 . Welcome to hour three of squawk on the street. Heres whats happening so far. We would expect to beat the s p in a soso year or a down year. We expect them to beat us in an up year, but our job is to beat them over time. The idea that a year and a half ago you create some monster and then you say this monster is going to be so scary that were bound to be able to Work Together with that hovering over us. And then you let the monster it kind of moves. It is crazy. He is so stuck in this big world of making money of buying stocks. That buy low sell high anything, he doesnt have to sell high because hes so big. Is he not a breath of fresh air like you cant believe . I have been so impressed by in idea of listen, youve got to stay at work. You cant be someone who doesnt isnt part of the culture. We need to reinvent yahoo . I think shes doing a remarkable job. And there is the opening bell. Were able to give a lot of value to customers. You can buy now with great financing, great new products and a genuine replacement need. This recovery in autos is plowing through all the headwinds. Housing has turned, and its turning up, and that gets the u. S. Closer to 3. 5 , 4 gdp. So i think were in that stage. Good monday morning. Were live here at post 9 at the new york stock exchange. Get a check on the markets. As usual, we are down on a monday. The dows been negative every single money this year. Todays no different, down 42. S ps down 2. 5. Nasdaq down 6. Yahoo hitting a multiyear high after overweight from equal weight in barclays, firm citing the holdings in ali baba and yahoo japan, stock reaching its highest level since july of 08. Mining stocks some of the biggest losers as the gold index plunges to a new year. Index hitting its lowest level since may of 09. Buffett says he is bullish on stocks. Should he be, too . Well talk to a market manager about his Market Strategy and if he thinks the oracle is right. Then one of the most respected bank analysts, mike mayo, says citi is in need of big Shareholder Activism and also tells us about his big dustup with jamie dimon. Steven rattner weighs in on the whole economy will be affected by sequestration. And malibu is making it official. The city getting license to its own brand for use on everything from tshirts to volley balls. But whats in it for malibu . Jane wells will tell us later in the hour. First lets get to some points buffett made on squawk with becky. The oracle of omaha saying he still thinks stocks are a good bet for investors. We like buying businesses and stocks. You get more for your money there than you will get. The dumbest investment, you know, in my view is a longterm Government Bond. Lets bring in david kelly, chief global strategist. Good morning to you. Always good to see you. Good morning. Buffetts point appears to be the same one hes made for i dont know how long. Buy american. Buy equities. Dont go long bonds. If you have money, buy a house. Mortgage it to the hilt. Any reflections on the stuff he brought us this morning . I completely agree with all that. I think the one thing that people arent talking about is, you know, the Federal Reserve is not really fixing the economy. But in another sense, they are fixing the markets. They are fixing it so that investors in cash and investors in long ofterm Government Bonds really cant make money Going Forward in any significant way. And because those are being taken off the table as good longterm investment alternatives, thats whats pushing money towards stocks. Its not that stocks are so cheap. Its that treasuries and cash are so expensive. And thats why i think you should still be in equities. If stocks arent cheap, where is the point at which even the decent macro data weve been getting doesnt push us that much higher . I think provided the macro provided we dont have another recession in the united states, provided the economy can sort of survive the sequester, and i think it can, then i think overall during the year, earnings will gradually move upwards. And again, so long as its support the by the very low Interest Rate environment, that will push money into equities. Its still moving into the equity market in a way we havent seen for years. I think that will probably continue even in a sort of mundane economic environment. Yeah. You know, the Buffett Buffett always gets a lot of play, and he deserves it. We had drunkenmiller on the show not long ago who said something very different and that is the bond market will run out of patience. That can happen quickly and has big consequences not only for the low Interest Rates youre talking about that are supporting all of this but for Government Debt payments and so forth. Thats an ugly scenario that he paints. Where is he wrong . Well, i think you have to distinguish the level of Interest Rates which are too low in real terms and credit issue. Though its approaching this issue of spending the wrong way, and they really are, we need to do longterm spending reform rather than the sequester. The reality is the budget deficit is coming down. Its going to be 5. 3 of gdp this year. Once we get it down to 4 and that will happen the debttogdp rate stops rising. The idea that well end up greece, i think that is just at an extreme, and its not true. Where i dont really disagree with him is, i think actually the economy will survive the bad decisions being made in washington, pick up a little bit of steam. And when that happens, real rates will begin to rise. Im concerned about so many investors are waiting for the day that rates rooif because of an improving economy. Theyre all with their hands in their coats. When they move for the exit at the same time, then you could see a significant rise in rates. I do think the rates will rise but not because people lose faith in the full credit of the u. S. Government, but rather because the economys Getting Better and rates are just in the wrong place. Good point. And a lot of people believe that day is ahead of us. Thanks so much. Talk to you soon. Anytime. Speaking of buffett, a quick programming note. If you missed beckys exclusive this morning, you can catch it on power lunch today, 1 00 p. M. Eastern time. Meantime, crude oil dipping below 90 a barrel. Bertha coombs at the nymex for us. We are near the lows of the session right now. And when you speak of investors moving towards the exit, weve been seeing that when it comes to net long positions in crude, according to the , the week ended february 26th, we saw funds drop their net long positions by about 16 . Overall weve also seen a drop when it comes to open interest. It seems a lot of investors have been moving out of commodities taking some profits there and moving it elsewhere. Where have they been moving . The cftc says netlong positions in the dollar went netlong last week for the First Time Since the end of november 27th. Were below 90 bucks for the First Time Since december 26th on nymex crude, carl. Back to you. Thank you so much for that, bertha. A lot going on around the airlines sector. The Airline Index hitting a 5. 5year high. Buffett weighed in on that during his sitdown with becky and ruffled feathers on twitter. Phil lebeau here at post 9 to talk about that. A lot of people have said the Airline Industry is changing, and its a new way of doing business. This morning somebody tweeted in a question that becky quick then read to Warren Buffett essentially saying would you buy an airline . Would you invest in an airline . Listen to what he had to say. The Airline Business has been a terrible business over time. If they ever got down to where there was one airline, it would be a very good business. Maybe if they get down to where its two. Its got all the ingredients of a bad business. I saw that while i was flying here. I tweeted it out. And Henry Harteveld who is an analyst, and he wrote back, listen. The old way the Airline Business maybe buffetts right, yes. But the new model, new, smarter pricing, maybe not. And a lot of people retweeted what henry had to say to me. Saying you know, hes right. The interesting thing to keep in mind is theres no doubt that the Airline Index and Airline Stocks have become a darling for investors over the last three to six months. Look at the xal. It is up to its highest point since 2007. Then when you look at specific spots, i want to point out delta. This morning at the jpmorgan conference here in new york, they made a couple interesting points. First, the First Quarter this year, carl, will be the companys most first profitable one in more than ten years, in fact, the first profitable one since 2007. And remember the trainer refinery they bought outside of philadelphia at the time . They said listen, were going to be doing our own refining. Thats basically their way of hedging the fuel market. They were break even in the First Quarter and they expect to be profitable in the second quarter. Thats part of what some people are looking at saying its a new way of doing business in the Airline Industry. You wonder at some point if consolidation were to continue, if oil remained tame, if he would have changed his tune. Having made a run at usair a long time ago and having learned from that and he still talks about it. Still says it was a terrible idea. But things have changed in the industry. The question is, is it truly different this time . Thats a great argument. Fascinating that it caused a stir. Thanks a lot, phil. Good to have you here today. Good to be here. Financials might be the best performing sector of this year, but the sectors still down about 50 from the 07 peak. One of the streets top analysts, mike mayo, joins us after the break. Plus, why he thinks Shareholder Activism is still needed in that sector. First Rick Santelli talking to james bianco. Wednesday and friday are big days because we get information on the employment situation. Theres a lot of things we could do to create jobs. Theres a lot of things we should have done a long time ago to create jobs. I want to see what jim thinks of the report, the economy and what we learned last week on Fourth Quarter gdp all coming up, bottom of the hour. You can taky all your important legal matters in just minutes. Protect your family. And launch your dreams. At legalzoom. Com we put the law on your side. And launch your dreams. announcer scottrade knows our 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. Voters in switzerland backing a plan giving shareholders authority over executive pay. Our carolyn roth is live in zurich with details on that. Morning, carolyn. Reporter good morning to you, carl. Yes, if enacted, these will be some of the toughest curbs on executive pay in the world. But let me just walk you through the details. Some 68 of the voters voted in favor of the proposal, which basically forces Swiss Companies to give shareholders a say in executive pay. Now, it also means an outright ban on golden handshakes and some of these massive signing bonuses. And carl, get this. If the managers dont comply with these rules, they could be facing up to three years in prison. Yeah, you heard me right. The outcome of the vote, thats interesting, was surprisingly clear, and it certainly reflects the growing anger over the fact that here in switzerland, ceos get some of the highest salaries in the world, and they also get these massive bonuses. Just remember the recent public outcry over that 78 million golden handshake for novartiss outgoing chairman which was later con selled. Probusiness lobbies are concerned about the impact this will have on swiss competitiveness and whether it will drive away talent. But for now i think we have to wait and see whether these laws will actually be implemented in full or whether theyll be watered down. Back over to you. We keep looking at the differences between pay policies in europe and here in the states. Fascinating. Thank you so much. One analyst wants to give more voice to shareholders. Mike mayo says we need more Shareholder Activism and hes here to tell us why. Mike, welcome back. Always good to have you. Before we get to that element of this, the sector overall, a leader for so long, so far this year not so much. Why not . Financials in general . Oh. Well, i think theres certain names that are star performers such as citigroup and morgan stanley. Stocks that have been down for a number of years, that are feeling some pressure from shareholders to change the way they do things, and the stocks are reacting. Yeah. And so youre beginning to lead this effort by taking on a de minimis stake yourself, right . Well, look, ive analyzed the banks for 5 years. Ive gotten beaten up at times. Ive been on cnbc. I testified to congress. I wrote a book. And im still not seeing the degree of change i think we need. Now ive bought very small stakes in companies, just 100 shares. Id buy one share solely so i could have a ticket to the movie, a ticket to the annual meeting, and ask these boards of directors, how is the way they oversee the company, how is that creating shareholder value . Because you sure havent seen that the last 10 to 15 years with the big banks. Which companies, and what is your top priority right now . Is it citi . Citigroup right now front and center. As you know, very negative on them for five years. With the change in ceo, i group graded my rating. I think the change could wind up being epic. It could be an epic change because now you have a ceo whos not a deal maker, whos not a lawyer, whos not a hedge fund manager, but a banker. But having said that, if they havent gotten the memo at citigroup, you also have Shareholder Activism there. Tr tril lium would report back on results. I think its in citis best interest to take control of their destiny, take action before being forced to do so by shareholders. Where is the line i assume youre getting asked this a lot, between being an analyst, right, where your job is analysis and essentially becoming an activist yourself . Well, im reflecting what many shareholders already say. Look at citigroup and the big banks the last 10 to 15 years. They are less efficient. Theyve had less revenue growth, greater earnings volatility, more risk, a lower arwe, worst stock Price Performance and lower valuations. So i dont really think of myself as being too far out there. Having said that, i never have a chance, in my 25 years, to ask the directors, the chairman of the board, questions such as, how does this pay encourage shareholder Value Creation . Basic questions like that. So thats why id like to go to some annual meetings for the first time and ask some basic questions. Speaking of q a, every time there is one, youre involved, mike, you tend to make some news. Heres you with jamie dimon the other day. Take a listen. I think what i hear ubs saying in their presentations, if im an affluent customer, ill feel a on the lot better going to ubs if they have a 13 capital ratio than another big bank if they have a 10 ratio. Do you agree . You would go to ubs instead of swrchlt p morgan . I didnt say that. Thats why im richer than you. Thats why im richer than you. I mean, those words echoed around the street for days. Does that make you better, having exchanges like that . Does it make you a better analyst . I think its the job of an analyst to hold managements feet to the fire, ask questions such as, you know, should you have more capital or less . How are you going to return that capital . How are you going to create more value for shareholders . By all means, thats every analysts job to do that. In fact, i dont think its been done enough of with regard to wall street. Look, when you look at the financial crisis, investors werent doing their job, regulators werent doing their job. Nobody was minding the store. So we have a choice right now. Either we, investors, can step up to the plate, or youre going to have more regulation. I prefer the former. That shareholders may other analysts like myself, the investors, speak up such as that annual meeting. For any other analyst in any other analyst who is stiffarmed, so to speak, by a company, would you say the solution is buy 100 shares . The head of cfa, john rogers, said zero tolerance for bad behavior. If any analyst is getting stiffarmed or treated unfairly, its up to that analyst to talk about whats happening, bring it up to the public view, go on cnbc, give you a call. Hey, for that matter, give me a call. If youre being untreated fairly by a corporation, give me a call and lets find a solution here because thats not the way the system is supposed to work. Mike, always good talking to you. Thanks for having me. When we come back, google hitting another alltime high today. Stocks up nearly 15 this year. Versus that 20 drop for apple, that long google short apple trade continues to work. Do you buy in at that and at these levels . Were back after a quick break. 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Its just common sense. From td ameritrade. Its just common sense. Investor. Yeah, ibut im a busy guy. Or it used to be easier but now there are more choices than ever. I want to know exactly what i am investing in. I want to know exactly how much im paying. I want to use the same stuff the big guys use. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Welcome back to squawk on the street. I have a market flash on raidian group. After an upgrade from kbw. The firm taking the stock from a market perform to an outperform. The new price target, 12 bucks, a 6 price target increase. Rdn, a company that provides mortgage insurance, another example of a stock moving on the perceived housing recovery. Carl . Thank you very much, jackie de deang deangelis back at hq. Google hits an alltime high. Does slow and steady win the race . James dix joins us. James, good morning. Good morning. Rotation going on here unless something is fundamentally changing at google as we speak. Yeah. I mean, obviously, in the largecap tech world, you know, theres a relatively limited universe of stocks which Portfolio Managers can focus on. Youve mentioned apple. Youve mentioned google. Theres a couple others that they can look at. But i think clearly since they reported their First Quarter their Fourth Quarter results, the sentiment has turned to be more favorable on google in the near term. You wrote, last note i have is from the end of january where your target was 7. 70. Have you moved up since, and if not, to where do you go . No, i mean, i think right now the stock is trading at probably around 13 times earnings if you exclude cash, and thats on a 2014 estimate that i have of around 53. A little over 53 a share. You know, thats a reasonable valuation. Again, the market itself is up. So generally with a higher beta, google should perform better than the market. Especially since its largely advertising driven, right . And advertising is a cyclical business. So if people get a little more encouraged about the overall Advertising Market and the global macro market, google should benefit. The discussion that we seem to be having for so long about the cpc declines, about the losses at motorola people are still having those conversations, arent they . Oh, absolutely. I mean, you know, fundamental trends in the business dont change, you know, every quarter. Motorola mobility, that was an acquisition made for, you know, over a horizon of years, not quarters. So that concern will continue to be there. I think the mobile cpc, you know, the impact of mobile on cpc was somewhat of a red herring. You know, the bottom line is i think marketers are going to spend more to reach you if they can reach you by mobile phones as well as desktop, and search is still a good way of reaching you especially for a product or service. Fascinating to watch. James, appreciate the time very much on some short notice. Thank you. Anytime. James dix joining us from wedbush on google. Bells about to sound across europe. Lets get that close and the details on the impact. Thats coming up after the break. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. 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. Barrow island has got rare kangaroos. Chevron has been developing energy here for decades. We need to protect their environment. We have a strict quarantine system to protect the integrity of the environment. Forty years on, its still a classa nature reserve. Its our job to look after them. Its my job to look after it. The european markets are closing now. A tough day overnight in asia at least for the shanghai. Got a little more green in europe today, simon. Yeah, a nice bounceback coming through on some of the utilities and telecomes, particularly in france, particularly a squeeze on the largest Water Treatment plant in the world. Two major factors that i want to emphasize coming out of this european session for you. The first is china. And that downdraft you had with them tightening mortgage restrictions over the weekend and also some disappointing data. And that rippled through asia and into europe. And you see those global minors listed really bearing the brunt of that selloff and falls as a result. The second thing i want to draw your attention to coming out of europe is how much worse european earnings are doing than american earnings. The latest today was hsbc. At the rally on that bank, though its been very good, has stalled. Today they missed on their profits. This is the important thing. Half of Companies Reporting in europe this earnings season have missed expectations. And year on year, their earnings are down almost 10 according to thompson reuters. Here in the united states, twothirds of companies have beaten earnings expectations. And their earnings, their profits, are up over 5 year on year. And thats a very big difference between the two blocks. I just want to bring that to your attention. Meanwhile, keep an eye on whats happening in italy. Will we go back to elections there as a result of the standoff that there is between the parties . Actually, the bond market is being held kind of in check by that promise of the ecb, that it would ultimately intervene further down the line. And we have the finance ministers meeting today in brussels. Whats important there . Ill send it back to you, carl. Thank you very much, simon. Want to go to scott wapner, has breaking news. Scott. Thanks, carl. As it relates to carl icahn, 20. 1 million shares. Today transocean, Ticker Symbol rig, lets look at the chart. Announced it would be restarting its dividend with a payment of 225 a share for the year. Icahn has been calling for about 4 a share. I called him today. He told me that this announcement from transocean, in his words, is too little, too late. Shareholders deserve the capital. And that this Company Needs new blood on the board. And we plan on putting up a slate on the board. So the stock, carl, is down 60 over the past five years. Its down year to date. Its underperformed the market as well. So it appears that carl icahn is gearing up for another fight. This one with transocean over what the company should do with its cash. They announced again today, a dividend, a restarting it of 2. 25. Icahn wants more than that. For what its worth, herbalive is up, too, about 1. 5 and up about 9 since carl took his public position. Hes got a number of plates spinning. He does. Were trying to keep up with them all, carl. Thanks a lot. A check on energy and commodities with Bertha Coombs at the nymex. We still have nymex crude trading below 90 a barrel. Thats a twomonth low. We have seen this move out of oil, a lot of the netlongs, Fund Managers that may have gotten in late in the runup now taking some profits, with the expectation that we may not see much more demand. Certainly the picture out of china with the data being somewhat soft and now the sequester hitting here. No one really knows exactly how thats going to work out. It doesnt seem like thats going to boost demand. Gasoline is really the biggest loser on the day on a percentage basis. Its one of the areas where netlongs had been in part because of refinery issues. But i was talking with a couple traders who think that maybe that runup had been over and done. Thats where were seeing a lot of the profit taking. Nat gas holding up. Coal forecast this week, big snowstorm thats been hitting the midwest. Were expected to see some of that weather here on the east coast. Thats positive at least for today. And take a look at gold and the metals. Seeing a little bit of relief after some relentless selling there over the last couple of weeks, carl. Back to you. Bertha, thank you for that. Bob pisani is here at post 9 keeping the conversation about commodities going. Yeah, were in a little bit of what i call a growth scare today. Remember, the markets had been moving rather aggressively on the idea that china improving would be helping the commodity markets, commodity stock market. Now we see china putting its brakes on the Property Market. Theres no evidence theyre trying to put the brakes on credit everywhere. Its really limited to the Property Market. But its kind of spooked people a little bit. Chinas down about 3 today. If you look at commodityrich countries here, this is china, new zealand, south africa, brazil, australia, all down about 2 with the exception of australia. Australia is looking top heavy. Thats had a fantastic run. Ewa had a fantastic last year but looking very toppy right now. Commodities in general have been having a tough time since the middle of february when things started getting concerned about china. Put up some of the commodities stocks, material names. We see, for example, the Aluminum Companies here. Cliffs natural, these are iron ore companies. Maybe the idea is chinas not going to be allowed to grow as fast, theyd have a problem, down 3 or 4 today. Sterlite industries, a big copper company. Ill show you some of the energy stocks. Bertha was talking about the weakness in oil. And while nat gas is up today, dont kid yourself, the trend is to the downside. If you look at all the big names, mcdermott, for example, this is one of the big offshore equipment companies. Thats down. They had a very weak revenue forecast on friday. Diamond offshore, also weak. Big offshore driller. Baker hughes and slumberger, all down 1 to 4 . The key point here about where were going right now, though, is the earnings are Still Holding up relatively well. Simon mentioned this earlier. Weve had a spectacular year. 2012 is essentially over, folks, except for a few retailers. We had a record year, 103, thats up 4. 5 on earnings. Theyre still figuring out a way to squeeze money all the way through the bottom line. 2013 estimates up 7 or 8 . Probably that will come down. It usually does. So the big question is how much more earnings will we be able to squeeze out if we get a relatively flat top line . Again, if you take a look at these multiindustry companies, these are the ones, carl, that i look at to see where the concerns are in Global Growth because they move every day on Global Growth concerns. You can see them down about 1. 5 . These are the companies that wouldnt matter if china slowed down, for example. So lets just call it a little bit of a growth scare today. Thats whats weighing on the markets. Yeah. Its all over the Mainstream Media and mondays havent been that good for us anyway. Thanks, bob. Lets get to Rick Santelli in chicago with a look at markets in the economy with james bianco, rick. Absolutely. Were going to play a little game of miythbusters. Ive given him four double espressos. Were going to go fast. Number one, the economys doing great. And you say . I dont know what measures theyre looking at. Economist measures, theyre expecting 1. 8 growth in the First Quarter and the same for 2013. And thats with an expectation of good housing numbers that are going to surprise to the upside. 1. 8 is not a good number. Anything over 2. 5 is a good number. Thats not good. Earnings are doing very well. That should be the backbone of the stock market. Theyre not doing very well if you look at a consensus estimate. First quarters expected to decline from a year ago. So were looking at earnings contraction. Now, you go out to the end of 2013, were expecting 6 or 6. 5 Earnings Growth but thats down from six months ago, and that number falls almost every week. These are not good numbers if youre expecting the stork markets going up because earnings are Getting Better. Most Government Intervention is to help the working poor, young people, lower class. Intervention is working to do that. I wish it was the case. Lets take cash for clunkers, for example. Two years ago, we had the program. What did it do . It pulled forward sales in the car market. It also took a lot of used cars off the market. Today what were seeing is the highest prices ever for used cars. Who buys a used car . Somebody whos of lesser income. But these were the people they were trying to help, students, young people, people that dont have below the median income. Theyre not being helped . Theyre not being helped because of high used car prices. The average new car is 31,000. If you cant afford that kind of car and you want to pay 15,000 to 20,000, thats the car. They dont exist. Cash for clunkers has created a shortage. Austerity, we have to avoid it at all costs. Thats what people say all the time. We look at europe and we hear about the arguments for italy, lets look at ireland. Ireland, when they went through their financial crisis two years ago, did everything the eu asked them, did all the austerity. They took the pain. And whats happening with the e Irish Economy . They have lower Interest Rates than spain and italy. They went through all the pain that spain and italy refused to go through, and theyre coming out the other side with stable unemployment high but stable not getting worse. And an economy thats doing better. I have two words for your assessment of ireland. Eaton corp. Do you remember where they announced they were going to move to . Ireland. Unrealized profits by the shareholders will have to pay taxes. Now, what happens if Many Companies do this . Now, i know that its very shameful to do things for tax purposes. Although it seems though everybody that was opposed to it jumped on the bandwagon as we approached the fiscal cliff. We even have a treasury secretary that was involved in many of those same issues. Why do we have anybody in washington whos pushing corporations like eaton corp away to avoid what they look at as a rats nest of tax policy . You know, its a mystery to me as well, too, because a lot of the companies that are moving to europe and especially to ireland for taxes, it makes a lot of sense why theyre doing it. And unfortunately we keep pushing them away, and then we keep screaming with they leave. Is our economy ready for a nonfossil fuel energy base . No, its not. Wait, were out of time. No, its not. So then why would politicians push us in an area when we need jobs, knowing full well its not ready to carry the load . Does that make any sense . No. Back to you, carl. All right. Thanks, guys. Rick, ill see you later. When we come back, former auto adviser for the u. S. Treasury, steven rattner, weighs in on the effects of the sequestration and what it means for the economy. Plus why he thinks the world of startups and Venture Capital have been dangerously deregulated. Back after a quick break. Music plays thank you orville and wilbur. Amelia. Neil and buzz for proving theres nowhere we cant go. But, at some point. Giant leaps gave way to baby steps. And with all due respect, youre history. If you taught us anything, its that you cant cling to the past. If you want to create the future. Thats why, instead of looking behind. Delta is looking beyond. Pushing u. S. Aviation to new heights. All 80 thousand of us. Busy investing billions in the industrys boldest moves. Its biggest advances in technology. Bringing our passengers the best, the most spacious fleet in the sky. And earning more awards than any other airline. To show for it. So rather than simply saluting history. Were out there making it. 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. Welcome back to squawk on the street. Im jackie deangelis. Ticker panw. The stock is down more than 4 today on heavy woman. It looks like there were some sellers out there taking advantage of an ipo lockup expiration today. The Company Started trading on july 20th last year at 42 a share. Now its trading at 56 and change. Might not be a bad time as were seeing selling. Carl, back to you. It was one of the big winners last year, no question. If youre confused how sequestration will affect the economy, youre not alone. John boehner said he wasnt too sure how those automatic spending cuts would work. I dont know whether its going to hurt the economy or not. I dont think anyone quite understands how the sequester is really going to work. Here to help us make sense of it all, steven rattner, chairman of willit advisers. Steve, good to have you back. Good morning. Good morning, carl. Certainly cbo thinks its going to hurt to a significant degree. Whos right in i dont think theres any question its going to work. 4. 5 off gdp this year. Then on a microeconomic level, Unemployed People will immediately see benefits go down by 11 , furloughs of federal workers, et cetera. Im totalny in favor of fixing our debt problem, as you know, but this is not the right way to go about it. You write in the New York Times about it. I know critics say theres two types, stephen. Theres the kind who actually want a meat cleaver to be put onto this economy. And then theres the others, the jack welchs of the world who say any ceo worth their salt could easily cut 2 to 3 of their costs without hurting everybody. Where are they wrong . Well, which one . I think the meat cleaver guys are wrong because i think as jack welch said, the way you want to do this is to find the right places where you have excess costs and cut those. So then you come to jack welchs notion that anybody should be able to cut 2 or 3 . I think that is generally true over time, but not when youre running the national economy. And so these are now, as you know, 85 billion of cuts, although less will happen this year, but crammed into the end of this fiscal year, and then more next year with no real thought, no chance to prepare people. No chance to phase them in so the economic effect is less. When General Electric cuts 2 or 3 , it doesnt affect the national economy. When the federal government cuts 2 or 3 , it does affect the national economy. You need to do it in a more measured way than the way were going about it. The president , of course, spoke last week and said a couple of things. Among them was this notion that there is a silent group in the gop caucus that agrees with him, that is not speaking up. Im wondering whats it going to take to bring them out . Wouldnt some large symbolic move on entitlements, even though it would upset a large part of the president s party, wouldnt that speak volumes . First, im sure there are some republicans who agree with the president , but this is the one it the Republican Party seems to have latched on to thats popular in the country, that theyre essentially united on and that they can use as their mantra for the moment. I dont think its going to be easy for the president to peel off some republicans. And while i do believe the president is prepared to do business on entitlements, i dont think just throwing a bid out there in the midst of no negotiations, no discussion between the sides, is what i as somebody whos negotiated for a living for 30 years would recommend to the president. Yeah. Its certainly not the way you would do it in a business negotiation or in president ial poker. That said, if we are going to start to feel the slow burn of these effects, even on a local level, steven, is there something perverse about the president trying to wield Public Opinion over the republicans even as he knows its going to hurt certain americans slowly over time . I think the president s been very clear that its going to hurt people, carl. So im not quite sure what you think he should do differently. Look, what im most worried about in this situation at the moment, slowing the national economy, not good. Effects on individuals like the unemployed, not good. But in a way, one of the worst things we have at the moment is that both sides have agreed not to have a fight over the socalled continuing resolution, over a possible government shutdown. I dont believe the republicans are going to have another fight over the debt ceiling when that comes up because that is a losing battle politically. So my problem at the moment is i dont see any triggering event. I dont see anything thats going to force these two sides together into some kind of grand bargain which is what we really need to fix this debt problem. You make it sound like the equivalent of a lowgrade fever. Can you walk around, can you go to work, but you are mildly sick and will be for a fairly long period of time. I think thats a great analogy. And just to torture it a little bit, we could take a couple aspirin, if it turns out that we have an air Traffic Control problem, they could patch that up. If you have a problem with the national parks, they could patch that up. I dont see anything thats going to create what some of us had hoped that would be that fiscal cliff moment for a big deal, deal with entitlements, add some revenues, cut spending, and really make a meaningful difference in the budget deficit in a measured way over a longer period of time. And not to mention the heightened vulnerability to any external shock should we get them later on in the year. Well, its a crazy way to run a railroad. I think its embarrassing internationally for us. I dont know how the president or our leaders can go to a world meeting and start to lecture other countries on how to conduct their affairs when we cant conduct our own. Thanks so much. See you soon. Listen up, everybody. Malibu, california, wants to make it official. Im not sure what that means. Our jane wells is live in malibu to explain. Jane. Reporter carl, it is home to some of the wealthiest people in the world, but even malibu needs a little extra revenue. So to help out malibu, would you be willing to buy an officially licensed pair of sunglasses . Well explain after the break. If you think running a restaurant is hard, try running four. Fortunately weve got ink. It gives us 5x the rewards on our internet, phone charges and cable, plus at Office Supply stores. Rewards we put right back into our business. This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. [ construction sounds ] [ watch ticking ] [ engine revs ] come in. Got the coffee. That was fast. Were outta here. [ engine revs ] coming up at the top of the hour on the half, a warning of another financial crash and a respected market watcher is here to defend his call in just a few minutes. Whether the rally can keep going even as china rattles the global markets. And should you buy one of this years best performing stocks . Two traders debate safeways next stop at the top of the hour. Carl, see you in about six minutes or so. All right, scott, thanks for that. Today at 1 00 p. M. Eastern time, Warren Buffett, if you missed becky quicks exclusive interview with him on squawk box, catch it on power lunch. Once again, 1 00 p. M. Eastern time here on cnbc. Heres something Warren Buffett e top three of nce 2000, placed Forbes Annual list of the richest people in the world. The list includes 1,426 billionaires with a total net worth of 5. 4 trillion. Clocking in at number one, carlos slim, number two, bill united states, number three, ammancio ortega and at number four, there is mr. Buffett himself. Meantime, malibu wants to make it official with their brand, that is. The city is hiring a branding company to help it begin negotiations to license apparel, Beauty Products and other goods as officially malibu. But why . Jane wells. Man, what a gorgeous vista. Has more on that. Morning, jane. Reporter hey, carl. You know, even here in paradise, they could use some extra cash. So reclusive, private, richie rich malibu is officially going to license apparel, swimsuits, watches, maybe even volleyball. Does malibu need money . Every city needs money. You know how it is now with the economy the way it is, it goes up and down every day. So having more Revenue Sources gives us the opportunity to do more for the environment and for public safety, which is always a problem. Weve got 15 million visitors that come here a year. And we want the water to be clean for them. We want the streets to be safe for them. We want the pch to be safe. Those are the kinds of things that we would use as revenue for. Reporter malibu is contracted with xl branding, did 100 million in sales at its peak. Its had other similar accounts. Its least successful may have been attempts to sell the brooklyn bridge, at least the tshirts. But malibu is very evocative. We did some research, and malibu is one of the few names that actually probably will have a stronger presence in the licensing business that we do internationally than it will in the united states. Its not bayonne, new jersey, as some might think. Reporter he thinks malibu could really more easily translate to apparel than, say, new york. What is new York Clothing . All black . The city is working on its official logo, hopes to have its first apparel line in stores by 2014. A style described as hollister meets abercrombie meets the gab sold at urban outfitters. Youve got chevy, malibu barbie. He says customers will buy the official stuff, especially if they know a portion of the proceeds are going to things like clean water. Back to you. Seems like a bit of a stretch, jane, but time will tell. Great story. Thanks so much. Jane wells in malibu. Google historying an historic high. 814 earlier in the session. China showing signs of weakness. What happens to shares of the company known as the google of china . Thats coming up next. music throughout why turbo . Trust us. Its just better to be in front. The sonata turbo. From hyundai. announcer at scottrade, our clto make their money do more. Re ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. 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