Transcripts For CNBC Squawk On The Street 20150120

Yield . What are you guessing . Around 2 . Lets take a look and see if youre right. Yep, we manage no were at 1. 8. Pardon me for that for forgetting how low we had gotten over the last week or so in terms of what it does cost the u. S. Government to borrow for ten years. Still well better if you compare to france bore rogue. 635 or italy at 1. 6 . Road map this morning starts with Morgan Stanley suffering the same fate as breaththren. Well break down results for you. Johnson johnson posts mixed quarter. Hurt by what else strong dollar. And around the rest of the world, imf cutting its outlook. China posting its slowest growth since 1990. And qe that is certainly on the docket, isnt it for europe this week. Lets start with Morgan Stanley. Its the latest Financial Firm to miss on quarterly results, at least according to what the analyst whose follow the company had expected. In this case hurt by what appears to have been weaker trading revenue out of its fixed income unit excludeing items profit at 39 cents a share. Revenue excludeing accounting adjustments fell more than 8 . Bank of america is added to Goldman Sachs conviction buy list Firm Sees Upside after the stocks recent underperformance. Becky quick, by the way, will have an interview with brian moynihan, live with becky from davos, switzerland later on the program. Lets talk Morgan Stanley, jim. Welcome back from the long weekend, by the way. Yeah. We focus on this firm in part, it is different than its breath rent because of the continued focus on Wealth Management and on all of those Financial Advisers it has out there. But they trade bonds then may have a smaller capital base to do it certainly mr. Gorman taking it down. 599 million revenue number not what people anticipated. So perhaps below estimates. You can argue every single one of the brokerage banks should preannounce, should preannounce. Misses are gigantic. Or you can say, listen we told you misses will be gigantic, look at rest of the businesses . Goldman, people did not choose to look good, goldman 1 the95 goes down to 177. Citi didnt know about legal, okay. Jpmorgan didnt know about legal, including a couple of comments by jamie dimon about five, six regulators. Which may have obscured what he would argue are record earnings. Bank of america was not good. We didnt see a lot of records. Goldman, stock went down a lot. Yes. Suntrust and wells if you circle back suntrust and wells dont have fixed they dont do it. Right. So therefore, people are saying, i want a bank that is a bank, all right. Morgan stanley i mean its absurd here but if this stock will be up big if they close fixed income currency but thats silly. Gorman will tell a story, this is my main point, gorman will tell a story, the cfo will tell a story, youre going to like it. Youre going to like it because the models being transferred. Supplements to Earnings Report include this looking forward deck that you can see it here look at the pie chart, what the key is there, management in 06 was this much now its this much. Where does it come from as a p e of overall . Fexs fexs fixed income dramatically shrunk. They have a big tailwind from lower funding costs because they dont have to worry about that. These things are influx. People are trading instantly when things coming out. These are complex analysts, this is not ppg which is a terrific quarter these are not retailers, they are not based on gasoline. Youll see delta up because delta was down 10 , gasoline was big. I caution people who want to bang Morgan Stanley down that the stock was at 39 okay bought stock on this hit, betting that the stock went down to 34 and with the worst that would happen go to 33 the book values real. Gormans real. Nobody cares before he speaks. After he speaks big fallout. This is not a football game. Its not like seattle wins but then we have this press conference with Aaron Rodgers and it looks like that they look you know, it was green bay lost. No, didnt work like that. Gorman might tell you a good story, and you might have to reevaluate. Wait to hear what he says. Your point is transformation taking place over a longer period of time certainly than a quarter. Right. I would add, though still trading bonds. Like everybody else they dont seem to have done a good job of it. Yeah, i think maybe what perhaps wasnt enough liquidity volume, Everything Else to get it done in terms of numbers. Go back over the goldman quarter that was integral. It was, fixed income currency commodities the weak spot it would seem particular to that. Why didnt an analyst say, i think that fic will be bad, fixed income and everybody who has that discount it. But it wasnt said. So we came into the quarter thinking about net interest margin. Weve seen a number of quarters weve realized trading was bad. Lloyd blankfein can call it did you see underwriting numbers . Did you see by the way, Investment Banking and equity and sales and trading an important component of Morgan Stanleys earnings as well its no just Wealth Management. A lot of the companies gave applause i lot of revenue. A huge amount of revenue gaven up since 2012 by goldman. You dont feel good about goldman. But that is kind of short term fixes income is better next quarter what do we do . We want to get away from the swing, why i bring up suntrust and wells. Right. Why suntrust and wells three weeks from now will be up. When you read the quarter, suntrust has one charge, anoubsed theanoubs ed announced in in january. Go through bank of america, everybody is thrilled it has slightly more than 3 million in charges goldman had a big charge. The upgrade today on bank of america . The stock fell from 17 to 15. You know if they can do the 1. 60, argue maybe the bank deserves to be at 16. 5. I would i would prefer buying stocks that go up meaningfully okay, go up meaningfully. J j, my Charitable Trust owns it looks like a disaster. Read 2015, just horrendous numbers are terrible. Id like to hear what gore ski says. Sales of new drugs helped johnson johnson, posted better numbers 1. 27 a share. Revenues shy. Of course, weve talked a lot about the impact that the stronger dollar will have on these multinationals. We may hear him tell a good story. Schlumberger last week the quintessential one. Everybody hated schlumberger. On the Conference Call schlumberger said seven great things that i counted. Stock ended up up huge. I mean this is a quarter its not lending itself to look j j you say, you know what alex gorski is going backwards. Hear what he has to say. Its dangerous to act, because theres too many moving parts. Im not punting but i remember that alcoa was good it was at 17 and then went to 15 a lot of moving parts. This quarter not lent itself to snap judgments, stocks hit the hardest like schlumberger, it was a good quarter. I wonder what will happen with halliburton where the quarter looked great. Lets hear what they have to say on the book. Well, we do know that baker hughes has a large investor in it now in the form of valueact right . Jim, you saw that didnt you . Yeah. I also tell you saying, again, here im searching for all of my paper here but taking very large stake, believing in the power of that combination. It does seem right. Between halliburton and baker hughs. After reading this its very right. Whats so interesting, north america is not that bad. For halliburton, middle east is terrific. Latin america was terrific. Heres an odd thing, oil is will when you read these reports from halliburton, maker hughes, schlumberger, its almost inconceivable to see oil bounce because these guys are going full out. No one seems to be cutting back other than north americas not cutting back theyre going after the sweeter spots in the they seem to be rig counts coming down. Productions not coming down. Rig count, certainly. We lag but we are going to see production decline down the road. Absolutely. Youll see selfcorrecting mechanism what happen was most interesting is is that production is probably going to be up very big in the First Quarter because theres just so much drilling that has to go on because of these hbpps clauses which make people drill and then the amount of production is coming from the already open wells. And then the gulf of mexicos going to have a gigantic First Quarter. So theres really only 1 million balance in excess now. Iraq is pumping a lot. And that was because of isis we didnt think. But iraq had is doing 4 million a day. People think iraq would have wanted 2 million. Theres a lot of production and its not stopping. Its surprising the First Quarter will be so much spent so make the First Quarter big. And remember the these are oil comes after maximized cash flow. To pump like just to pump your eyes out. Yeah. It has to happen. Yeah. Thats why you dont get a First Quarter bounce in oil. I dont know how oil goes but its not going to bounce. But 45 47 . I mean come on. Can they really continue to make money at that level, jim . And actual sunk cost well not a new well. Paid for. Right. People forget than you have sun cost well paid for when drilling like mad, up until october, and those are coming those come on. Whatever you get out of there, money good so to speak. Yes. Once its drills. Wells depleted 15 . Quick to deplete, not gulf of mexico but shale wells. Next year higher oil not lower. Next year not next quarter and not the quarter after that. Too much being pumped. As we begin a shortened trading week futures as you saw are on the rise on hope Central Banks take aggressive actions to boost economic improvement. The imf, by the way, lowered 2015 Global Forecast for Economic Growth from 3. 8 to 3. 5 . As you also may have heard, chinas fourth yarder gdp, steady at 7. 3 and in europe theres expectations ecb will ramp up stimulus at its policy meeting. The big macro pictures, china 7. 3 number theyre i didnt see shrenk toink to grow but felt that way. Its a better rate of growth in a sense at this level. I think, first of all, hoping for 7. 1. You may think its horrible. I thought 6 this year. Theyre changing this economy on the fly. They are making this an internal consumption economy. Trying to but its only 36 . Right. You turned it on its head in terms of us where we are. The iron Work Companies pumping like mad because they think they can drive out of business the staterun chinese iron companies. I think that the i think that the Chinese Communist party is trying to cut back on excesses everywhere, whether it be excesses in building excesses in lending, excesses in marginal lending. Excesses in consumption by Party Members and gift giving lets not for get crackdown on corruption has taken toll at the higher end. Yes. You see that in the diageo numbers, johnie walker. I think theres a transformation in china, this regime will not tolerate willynilly growth which produces a lot of pollution and corruption. A i think a year from now well be talking about china as kind of back. But they have to get rid of excesses. You know housing prices the stock market down enormously because of a change in margin requirements. Margins were ridiculous. Unlike us where you know where greenspan, who could have controlled the rate of growth in margin they chose to raise fed funds rate. Here, theyre controlling margin. Rational. I think the chinese are doing a lot thats right. Thats why i dont think you peck to see many of our companies kratsercrater on a chinese slowdown. The Domestic Companies that we sell into that are domestic might do better. Right. Overall, as we begin this week given last week and the turmoil in currency markets as a result of what the swiss dit withd with the franc and continued focus on oil and ecb coming very importantly in terms of whether it will or wont really meet expectations in terms of quantitative easing how do you approach things. One of the things we have to get away from the idea that futures are up. Because breakdown of the future of whats in the s p, oil is 8 finance is 8. 17 . Youve got 25 s p going the wrong way. Futures seem to indicate the wrong thing because futures are some Hedge Fund Guy saying wow this i good ecb. Theyre not about the individual stocks. Many of the companies are not doing well. I look at ecb and say, its disappointing. It hasnt happened yet, i say its disappointing. We have a big perception overhang from hedge funds. Ecb not going to be good sell the futures. All i can tell you, unless theres structural reform in europe it doesnt matter. Just keep they keep crushing the euro to make so bmw does better. Structural reform. Its literally mercedesbenz, volkswagen audi in charge. Nice cars. The president going to suggest hiking taxes on the wealthy and on banks, as well certainly levy new fees on them in tonights state of the Union Address. To davos, becky quicks live interview with the ceo of bank of america, brian moynihan. A look at futures. More squawk on the street after this. The lightest or nothing. The smartest or nothing. The quietest or nothing. The sleekest. Sexiest. Baddest. Safest,. Tightest,. Quickest,. Harshest. Or nothing. At mercedesbenz, we do things one way or we dont do them at all. Introducing the allnew cclass. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. President obama delivers his state of the Union Address to joint session of congress. Slated to push a plan to increase taxes on the wealthy by hiking cal hiking Capital Gains rate, exposing a fee on large Financial Firms to pay for tax cuts and benefits for the middle clasp republicans who control both the house and senate say the president s plan is a nonstarter. Some argue this will go towards at least trying to address the ever increasing gap in our Larger Society between the haves have havenots, so to speak, what we know is the wealth the 1 everybody else. He doesnt like the Capital Gains thing, it was a matter of time. Cap gains are up i think under its 28 still under ordinary income. Dividends as well. Right, always a sense turn ordinary income into Capital Gains, something rich people can do. I think its dead on arrival. I dont think he has the votes. I think step up in basis for when you inherit property thats been in the tax code forever. I just cant imagine that even going away. It has been the bedrock of individual income that you get that step up and there a lot of people middle class used to benefit from parents pay dids 16,000 for a house and house is 250,000. Its noted agood idea for the middle class. Right. You can tax the stepup in basis of for the wealthy but great break of the middle class, parents bought homes after world war ii and values gone up even went down the last 2006 its almost not thought through. I was listening to larry kudlow today help wants to believe the legacy the middle class didnt do well and he did his best. These are the things when you have a republican congress, we can talk about it or we can say, its not going to happen and were just not going to dignify it by to say its going to happen. Yeah yeah. Its id rather talk about the price of earnings ratio bristolmyers. Well see what areas they can conceivably where do you think they can . Who knows . Maybe cyber security. Kibcybersecurity. Wishful thinking. The republicans have always told me they want Corporate Tax reform without individual tax reforms and the democrats have always told me Corporate Tax reform is dead on arrival. The previous treasury and there is treasury. A great article what president obama proposed versus what happened. He tried tax on the banks. Wheres the tax on the Oil Companies . Where is the condition the average person got an increase off of oil . Good luck. We need to ventant up next cramers mad dash. One more look at futures. Set for a higher open on this first day of trading of the week. More squawk on the street from the nyca this. A look at times square. Six minute before the opening bell. Why stand when you can sit . A mad dash over to the tell straight, didnt work now a mad dash back. This is the super mad dash because we barely made it. What do you want to start with. Two pieces of good news that could reflect what futures saying. Delta announced december quarter. Weve had a couple of companies say, listen maybe revenues wasnt that good. Delta reported a very good quarter and talked about a number of saving for oil 2 billion. The stocks and down 10 going into the quarter. People going to like it. That simple . Yeah. Because it got killed turned out to be good traffic. Right. These stocks have been down theyre popular favorites. As we know its almost an ol la gop ollie. Way these guys dont compete. Delta has overseas stuff. Well see. A pure domestic play could be better. Right. Tiffany heres a piece, like these kind of pieces this is a rating change. They didnt like tiffany at wells. Now they feel its been overdone and its time to buy. If you remember tiffany was the beginning of this earnings season. This and sandisic a negative note today. But its interesting that people are already starting to circle back to the real losers of the quarter, whether tiffany or bank of america saying, wait a second these have been thrown out. Maybe they were thrown out too aggressively. Im trying to rationalize why futures are going up and whats going up with them because i think the market could be down 10, 15. Why do you think that . The financials are a big part of the economy. And i think also the drug stocks are going to take cue from j j until alex gorski says were doing things. Im curious to see where ive got that stock. Ive gone it down two, three bucks. Yeah. Look, if you read the release, it basically says we screwed up and were horrible and the commentary, dont worry, were good. Halliburton, baker hughes. Weve got so many stocks to talk about when we get that opening bell including halliburton and baker hughes. I want to talk at t. Downgrade from Morgan Stanley of the media names. All of it coming up after this. Welcome back to showdown im jerry rice here discussing the upcoming big race between the tortoise and the hare. Jerry, the hare always brags about his speed. Fine, but he crossed the line when he told. Hey, turtle neck. Want a head start, how about a week. Yeah, my performance does the talking, ok. Jerry, thanks for having me, i have film to study. Hey, how about you rice cake wanna race . You dont want none of this. Vote on twitter for your chance to win a mercedesbenz big race viewing party. Do y ou like to travel . Im all about free travel babe. Thats what i do. [ female announcer ] fortunately, theres an easier way, with creditcards. Com. Compare hundreds of cards from every major bank and find the one thats right for you. Creditcards. Com. Its simple. Ive been called a control freak. I like to think of myself as more of a control. Enthusiast. Mmm, a perfect 177degrees. And thats why this road warrior rents from national. I can bypass the counter and go straight to my car. And i dont have to talk to any humans, unless i want to. And i dont. And national lets me choose any car in the aisle. Control. Its so, whats the word . Sexy. Go national. Go like a pro. Youre watching cnbc squawk on the street. We are live from the Financial Capital of the world. Opening bell. Its been that kind of morning. A lot of things to keep track of this morning, jim. Yes. Yes. It seems to be getting best of me perhaps, in terms of paper i keep searching for and cant find. Okay holiday, come in, you surprise, were in the thick of earnings season holiday yesterday, and so Many Companies reported this morning, and theyre hard. We know Halliburton Baker hughes merger could be fabulous. I didnt think it would be this fabulous. Ive got to hear what the company says because someone made a really smart move buying a lot of stock of baker hughes. Value act files 13d, 5. 1 position, average price paid 55 68. Call it 22 million shares. All right. Not insignificant sum of money theyre spending here. Their belief of course by the way hadnt been in oil and gas valueact sense i think 70. Really. Yeah they dont typically invest in the industry. If halliburton can aintmaintain the numbers, and that may be hard, because the rig counts going down very fast the companys making a lot of money all over the place because people arent stopping drilling like other the u. S. Speaking of drilling when we get to the opening bell well mention it again, there it is that opening bell. Here at the big board, Transocean Partners Transocean Partners own and operate, of course ultradeep water drilling rigs. Its not rig, its rigp. As the nasdaq. Very tough companies. Yeah. We open up nicely because the futures, and then back and say, what a great opportunity to sell x. Terrific opportunity to sell y. Earnings frankly, earnings earnings include financials have been horrendous. X out financials, hard to do theyve just been okay. You know look im a bull on earnings and what does it mean . Were not having a particularly good earnings season, what does it say about expectations the multiple, start to see contraction . Can we expect any expansion . It wouldnt seem so. If you think the u. S. Would benefit from lower gas, gasoline, than the rest of the world, you have to take advantage and think its a trough. Its entirely possible its a trough court. Take a look at suntrust the bank that ive been following closely, they saw a lot of activity. A lot of loan activity. A lot of business. A lot of nonresidential construct. I think a lot because people are feeling optimistic confidence is back. Its this quarter im saying if you listen to the Conference Calls, listen to ppg, which is a Great American industrial basically, this is pretty good. A lot of nonresidential construction, mexico great, u. S. Great. Its case by case but theres a sense that maybe chinas bottomed. Theres a sense that maybe draghi is going to do something. Lets get long stuff thats not just domestic. Every day i see netflix go up. Lets hope about the quarter. Theres hope about quarters. And its been kind of disappointing once they report but right now if you havent reported yet you going up. If you have reported and got cracked, youre going up. If you you know theres a lot of joy about how were going to get through this period and be in the promise land of gasoline at 1. 89 which does make you feel great. It should. It should. More broadly speaking. Broadly speaking right now, the s p up lets call it a third of 1 . Wanted to get to a couple of names i follow closely, your reaction. The auctions aws 3 auctions weve talked about, theyve been incredibly successful by the way, 44 plus billion coming in to treasury. Right. Thats going to help. Sure. I tell you, all of those Little Things between that and the feds, interest that the fed takes in on all of that bond. Ring the register on long days. Fannie and freddie, nice Little Things coming in. Great point. No, no. I did not mention for that reason. Read the paper, you feel like the worlds coming to an end. All of that is terrific. 538 release helps with deficit reduction. I wanted to get to at t. On mad money its 5 38. On friday. A release that says huge loss. I look through it its pension. Its like it was not people are living longer you have to adjust assumptions. The question on at t specific to these auctions which are going to conclude any day now. Okay. Any day now, theyre going to en is how much spectrum did they buy . How much did verizon . Maybe at t upping its revolver. Once these close, youve got to put up some money quickly, not all of it but a nice down payment. There are throws who believe we may see at t having bought more than verizon perhaps the most the highest priced spectrum i think j band what will that imply for what verizon bought and the possibility that verizon then actually going to pursue a different strategy perhaps dish and some commercial agreement. Are you serious . This is all spectrum. Do you think the number will be announced before i bet verizon would like to speak publicly about this. You recall a couple weeks ago at ces, it was at the same time the same place, but media the Telecom Conference we are anxious to tell you about our strategy but we cant. Wow. So i do think they want to talk at verizon. What do you make keep an eye on both stocks. What about the goldmantmobile upgrade, buy the conviction buy ahead of verizon earnings. They like operating leverage and more importantly, opx. That seems out 0 sync with what everyone is doing. Tmo is up. When i come back to that you think of consolidation and whether theyre going to run out of room despite what everybody seems to agree the incredible leadership of the ceo in terms of taking fight to so many people. Hes worked maybe they can tweet with his feet. Do you know that near the end matisse painting with his feet going for a lot of money. Youre kidding. Best matisses by his feet. I did not not. Thats why i come to work ever day. I did not know. Downgrade of media stocks. Explain that to me. Geez viacom you read that people stopped watching viacom. We talk about it a lot here its a lot of bigger themes that, if youre not a sports fan, youre going to start coming off that tier and are there going to be fewer subscribers . What is dish going to do in its deals with viacom and other, can it live without, and many guys live without the programming out there, can you expect ongoing double digit affiliate feed growth . Whats the advertising landscape look like at this point . Kind of all of these things coming together in addition to what are, in some cases, fairly high multiples. Yes. And multiple years. And the analyst the Morgan Stanley say im out of here. Were going to downgrade a lot of names. Cautious, as margins and multiples correct. I read that piece, like another piece about cable, how can cable keep doing so good . How can entertaining companies be doing so good . Everybody feels like this is the big down story for 2015. And then it doesnt happen. Then it doesnt happen. True. You have a lot of obviously companies generate enormous amount of cash buy back a great deal of stock, which always helps. But its an interesting piece. Its having an impact viacom down again, over 3 at 65. 88. Still buying is viacom still buying back huge amount . They are, they are. People looking at sales stock. Exercises options, had three years to go. I understand portfolio rearrangement for him necessary, at least his financial advises are tell him thats the case. But that stock hit the worst of all of them although the complex is down other than disney, your favorite. Disney bob iger that model is the idea that they put that College Bowl Series on espn made you rethink the idea that you could possibly cut espn because that was one of greatest performing set of numbers, and it basically was not he didnt put it on abc. Would have been natural to put it on abc but he didnt. Did you see the number this within . Not as strong for the seattle game. The most exciting game i can recall. Certainly last four minutes of the fourth quarter. Not to mention overtime. Maybe because you dont have prebasis market. Tv is not doing as well as it did. Everything tells me when amazon does this programming, netflix reports tonight, you know whats the lead story over the weekend . The Better Call Saul series how great it sounds bringing back mike. The fact that i know who mike is is a testament that the golden age, as Michael Wolff calls, golden age of tv a lot less to go around. When netflix and amazon developing product, you are to say, you cant watch two shows at once. Right. Weve got to get to bob pisani. Good morning, guys. Industrials, techs, staples leading the market. Energy, though lagging a bit. I want to point out something. Im not in my normal spot. Im next door to what used to be old garage. This was an annex to the floor and its completely been remodeled and reopened here. Just take a look at this and how big it is. You sue hoy wide the space is . Over 7,000 square foot. Its a a great, beautiful new space that they just opened here. Put up the full screen. It opened in 1922. Its an annex, youre next door. This is completely remodelled and renovated, housing additional part of the u. S. Equities and Housing Options business, what we used to call American Stock Exchange ice futures also in here as well as operations part of the new york stock exchange, just on the other side of the wall. Its a brandnew space and literally just opened about a half hour ago. Ill give now more on it as the day progresses. In terms of the markets here a bit of a problem. Energy earnings below expectations. Last week big banks below expectations. Today disappointments with more companies that are in the financial space. Morgan stanley and regions financials regions a notable dis disappointment today, some of it was on the expenses side some on the legal side. Regardless, their guidance for 2015 not particularly great. Loan growth is 4 to 6 despos desposde deposit growth, anemic. Talking about net interest margins lower if rates continue to stay low somewhere thats an issue. Any issue with margins, you saw last week, number of companies talking about margins, a real concern. Airlines, positive comments on what lower oils going to do. Jim you mentioned this delta talked about 2 billion in fuel savings in 2015 thats a remarkable number because very very big hedger. And they specifically came out and said had we not hedged savings would have been 70 more than that without the hedges. Heres a company thats clearly got tailwinds with the lower oil costs overall. Bottom line is we can get a company thats making positive company commented around oil. The Dow Jones Industrial average, as i stand in the brandnew room down 3 points. Back to you. Thanks very much, bob pisani. Now from stocks to bonds. We go to Rick Santelli at the cme group in chicago. Good morning, rick. Good morning, david. Of course being closed on monday, much of the world continued to trade. Were catching up a bit. Yields slipping as we slip under on 8 on down just a handful of basis points. If you look to year to date down 38 basis points for the year, 217, basically where we ended up last year. If we look at bund yields yeartodate not the amount of distance traveled but obviously, the same direction as we still hoover in the lower to mid40 basis point range going into the big meeting on thursday. If we want to resurrect what happened in the Foreign Exchange markets last week we know that europe euro versus swiss, huge move not in favor of euros. Look at twoday chart of the euro versus swiss, its getting its gps back hooving around 1. 1. The dollar open up the chart, back end of 03, last time we were in the zone, not right to the tick but virtually at the lowest level. And over a decade, the last chart, i like this chart, yeartodate of the shanghai composite, chinese stock market it was down 7. 7 when we were all sleeping in. One of its biggest drops in almost six years. But indeed it did right itself with the recent data righted itself a bit. Back to you. All right. Thanks very much Rick Santelli. Now lets go to oil prices. Jackie deangelis from the nymex. Pressure on oil again. Watching wti, february off the board. I have the march price at 46. 88 down 2. 25. Brent crude 48. 10, down 2 as well. Imf cutting Global Growth forecast and also the weakest growth weve seen out of china since 1990s. Thats pressuring crude today. Iran making some comments that we could see potentially 25 oil and that the pressure it and venezuela putting on opec does not seem to be having any impact. Earnings out this morning from baker hughes and halliburton. We did see a beat on the top and bottom line. But at same Time Companies are cautious about 2015. A lot to watch in the oil patch today. Back to you. Coming up bank of america Ceo Brian Moynihan becky quick will be interviewing him live from davos. But first, Interactive Broker ceo Thomas Peterffy with his take on the swiss Central Banks surprise currency move and the impact on forx brokers and his clients as well. Do y ou like to travel . Im all about free travel babe. Thats what i do. [ female announcer ] fortunately, theres an easier way, with creditcards. Com. Compare hundreds of cards from every major bank and find the one thats right for you. Creditcards. Com. Its simple. Take a closer look at your fidelity green line and youll see just how much it has to offer, especially if youre thinking of moving an old 401 k to a fidelity ira. It gives you a wide range of investment options. And the free help you need to make sure your investments fit your goals and what youre really investing for. Tap into the full power of your fidelity green line. Call today and well make it easy to move that old 401 k to a fidelity rollover ira. While some currency brokers like fxcm were hit hard by last weeks surprise swiss move boy, were they ever others weathered the storm better. Talking first on cnbc inactive brokers chairman and ceo Thomas Peterffy. Got to tell you, tom, this was jarring to people and i want to know whether you think in your judgment individuals should even be in these markets. Well you know to the extent that individuals are running internationally diversified portfolio like our customers do you cannot have but have to be in the market because of the extent that you buy or sell assets denominated in currencies other than euro and home currency youre inevitably taking a Foreign Exchange risk. So most of our customers are welltodo individuals and financially sophisticated professionals and organizational accounts that they manage internationally diversified portfolios so they do not have a choice. Do you allow the level of 501 liveeverage as some others do. 401. Well, you know there were some up to 51501. If the majority of your clients levered up and got it wrong, would your company be able to survive . Well you see, first of all, misunderstanding about Interactive Brokers. We are a much Larger Company than its commonly known because less than 15 of our stock is publicly floating. So we appear to have a market of 1. 5 billion, our market volume really is 11 billion. So this kind of wow. Seems weve lost mr. Mr. Peterffy. Looks like that feed has gone down. Talking about how large difference is its very large. Yeah you find fxcm which by the way i note is open and down 85 , also has a large amount had a large amount of its stock as well held by its founders and insiders i think as much as 40 . Didnt realize the case of Interactive Brokers it was that large a company in terms of overall capitalization. I didnt know either. It does seem like theres a level of geez i hate to use the word sophistication i dont know the client base, seems like there was a, lets say there were people who maybe didnt understand how quick, quickly, fxcm currencies can go against them. And i think that mr. Peterffy was basically saying we didnt have that base of players, so to speak. Yeah. Our apologies to mr. Peterffy for losing that feed. By the way i mentioned fxcm because it is open for trade. You may want to take a look down 86. 7 there it is, may come up earlier. Did the deal on friday to save the firm 300 million offer, debt deal with lucadia that will give other rights if the companys sold which theyre going to try to do. I think its threeyear period. Also 10 coupon that creeps up by i think 150 basis points a quarter, if im right. Really . Home run. Yeah. Thats big give up. But they got to stay in business. Didnt take long, as i said rally to go away. Futures dont remember the common stocks. S p up a third of a percent to down a third of a percent. Up next of course stop trading with jim. Former jpmorgan cfo, Doug Braunstein. Jim woolery, ill have that for you 10 15. Thats yours. Thats me baby. I want to hear that. Time for cramer and stop trading. Last week there was just a flurry of activity about jpmorgans biotech conference. Health care conference, sure. They all went up. A big hangover effect. Immunotherapies names down. A caution people a couple days of churning. Never a history where the stocks have gotten crushes after the conference. Wait a couple of days pick among the ones. Im going to focus on mad money three, four days from now. Buys created instantly by the hangover effect. We talked last week kiddingly, of course about the law passed that even with the down market would not allow the likes of celgene or gilead to go down both of which are down this morning. Is that over with . I think youll fine those will catch a bid after they dough go down. This was one of the most hyped events. You cant have a pair abolic move and think youre not going to give it up. Celgene, visit 115, 114, not bad. Very cheap. By the way lens lifer. Talked about the notion of choice. Regeneron. Regeneron a great winner. He did hes all yours, baby. I dont like the idea youre being told by your pharmacy benefit manager what drug to take. I like being told by my doctor. I thought that was a great interview by meg. I dont like the cost to be cut by having a drug that maybe i think is inferior or the doctor thinks inferior. But thats whats happening. Mad tonight . Weve got theres a deal coming im not going to reveal its name a big deal coming in ipo i think a chance to get in on it comes this week. Im going to encourage people to get. I dont think it looks hot but it will make people a lot of money. I like that. All right. Mad money. Thank you. See you tomorrow morning, same time, same place. Breaking news on home Builder Sentiment and becky quicks interview with bank of america Ceo Brian Moynihan live from davos. Keep it right here. You just got a big bump in miles. So this is a great opportunity for an upgrade. Sound good . Great. Because youre not you youre a whole airline. 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For a free quote today,call Liberty Mutual insurance at see Car Insurance in a whole new light. Liberty mutual insurance. Good morning welcome back to squawk on the street. Im david faber with sara eisen and simon hob. Live at post 9. Carl quintanilla has the day off a look at markets. Turned around after an up open you can see now down by a like amount. Whats oil doing . You see it down there, wti, well below 47 a barrel, down over 4. 5 on the session. Lets get to diana olick, breaking news on Home Builders sentiment. Home builder confidence, down one point in december. It didnt move for the month. The monthly Sentiment Index stands at 57. Anything above 50 positive and it has been in positive territory for seven straight months. Last january, it was at 56. But then it dropped into the 40s for the first half of 2014. A mid higher Interest Rates and higher sales. David crow said steady Economic Growth Rising Consumer confidence and growing labor market will help Housing Market to continue to move forward in 2015. Of the indexs three components, current Sales Conditions unchanges at 62 expectations for future sales dropped four points to 6 on traffic of prospect evg buyers fell two points to 44. Buyer traffic the only component unable to break into positive territory. Builder confidence highest in the west lowest in the northeast. Housing starts tomorrow morning at 8 30. Thanks very much for breaking news on housing, diana. It has been a volatile start to the year and the morning. Stocks opening higher. Now dow down 9 points. Stronger dollar oil slump, falling commodities an investors best friend . Who better to ask the bull on the stock markets, as hes known, wall street tom lee. Good to see you. Is your confidence shaken from what weve seen over the last 2 1 2 weeks a bumpy start to 2015. Its been disappointing obviously, you think the u. S. Economys doing better stocks should track. But its disappointing. We know theres headwind, right . How is oil going to affect strong dollar, whats going on in europe . I understand the confusion and hesitation. Of all worries out there, yes, oil at top of the list perhaps that it would hurt more than just Energy Companies earnings, do you buy that . Is that a negative for stocks if you look at services companies, Railroad Stocks other type of companies which could get hit. Yes. There are going to be the second order effects from lower oil, which is activity levels are going to drop. I think investors have done a pretty good job of saying cap x cuts Energy Earnings this is what its going to do to s p. And thats why its weighing on sentiment. We put out eight report last week if you weigh in effect u. S. Corporates are huge users of energy, both for commercial and industrial use, transportation running factories, the s ps a net beneficiary of lower oil by almost 5 per share. Headwind and tailwind, even more of a tailwind. Earnings season its still early, but it doesnt feel so good. You know its its not been great on the top line right . Only 58 of Companies Beating on revenue. But 88 beating on the bottom line. Its early but it shows you that theres a better margin story than a top line story. You know, maybe you can say part is Energy Savings helping margins. But its a good margin story. Its early. There may be some but its early in terms of of savings and talking about last quarter. Sure. But you have to remember even on the strong dollar theres positives to consider, right . When you have a strong Dollar Companies have a good currency youre going to see u. S. Companies say, look ive got a great Balance Sheet what can i buy thats in distress overseas. The lags . You think oil will lead to higher Consumer Sentiment six months out. Correct. About now, then . Yes. I think were going to start to see 15 20year highs in Consumer Confidence by the summer will that translate into spending. Correlated not only with consumer spending, its correlated highly with s p p e ratio. Theres a quep i wantstion. We saw weak retail sales in december that should have been strong. You say theres a lag effect to oil. Is there a deeper concern about the u. S. Consumer . Unilever was out and developed markets were flat. You know we dont know. December retail sales disappointing and december wages as well. I wonder if its an anomaly. Is it going to be something when we see january data are we stacked November December . Turns out those two months were good. Questions over the how they compile the Wage Statistics in the first two weeks of the year, for december in particular whether its an 11 or 12 working week period. Its kind of like a lot of people scratching theyre heads about it. You sound unusually down beat. Have we got you on a bad morning . Maybe its 178 on the ten year treasury. Yes. Thats decidedly pessimistic, no matter what other factors are at work. Yeah. Simon, i hope im not coming across bearish. Were bullish for the year. Slightly deflated i think is the way. Yes disappointed with the Market Action. Again, id say it doesnt rule out even us being up for the month. I wouldnt the earnings numbers, you said maybe its the guidance im not getting the same feel from investors certainly who are responsing to it when it comes to consideration what multiple to pay for earnings. I think there is not a lot of visibility at the moment right . We have to think, strong dollar how than going to affect incoming guidance, weak oil, the energy cap x, what happens going on in europe. But remember visibility doesnt always have a negative conclusion. So i think right now its understandable for people to say, look, lets attacktake a step back. Underlying story should be u. S. Consumers getting stronger. U. S. Companies have great Balance Sheets. Ton of pentup demand. The story by the summer look at age of capital stock. Other brokers are starting to write how theres aged equipment and thats a demand story. Sticking to bullish guns, thanks for joining us at post 9. Tom lee. The president will use tonights state of at Union Address to push for tax increases on the wealthy and wall street fund higher benefits for the middle clasp this as a new poll shows 49 of americans approve of the president s handling of the economy. Cnbcs chief washington correspondent john harwood has more details. Talk about the poll john. Admittedly from a low bar, this is a very optimistic poll for once. Thats right, simon. What weve seen is that the American Public has turned a corner from the pessimism that accompanied the Great Recession and financial crisis now theyre looking ahead. Take a look at these numbers reflecting that rising optimism. You see just since august when we were in the middle of the Midterm Election campaigns president obama at his low point in popularity. Weve seen a tenpoint gain in the proportion of americans who say theyre satisfied with the economy. Ninepoint game in number of people who say that the nations headed in right direction. Sixpoint game in president obamas approval. Heres how he wants to use that rising optimism. He wants to tax people at the top, 320 billion by raising Capital Gains rate to 28 . By taxing the appreciation in inherited assets which hasnt been tax sod far, he wants to use that to benefit the middle class, 235 billion over 1 years new tax benefits for children 60 billion to make Community College free for all, as long as they keep up the work. Now, is the president going to get these things from congress . No, hes not. But weve turned a corner in the economic debate as well as attitudes. Middle class incomes and what to do about them democrats and republicans alike, thats what politic is about and president is trying to set the terms of the debate. There is a problem with wage growth there at the heart of. John, thank you very much. Busy day for you, john harwood, in d. C. Lets bring in Larry Kudlow Cnbc senior contributor. Good morning. How are you . The question is whether obamas kicking off a meaningful debate now about tax reform or whether hes just irked the gop to a point that its back to the bipartisanship. I think this is an irk. Right. All right. Im going to score it as an irk. Look, there is growing consensus on Corporate Tax reform which i think should be the first order of business and the studies show that lower Corporate Tax rate benefit the wage earning middle class the most. These are studies from left of center think tanks, right of center think tanks. Thats the selling point. Paul ryan is getting close, theyre talking to the treasury theyre talking, what as far as this other rigmarole is concerns, you know class warfares not going to work. Raising Capital Gains tax would push money offshore or deter investments. The estate tax, i was talking to my pal jim cramer you know raising the basis was a good thing for the middle class, helped them a lot. Its silly to fiddle with that kind of thing. You need fullfledged tax reform for the personal code. You need to lower the rates, broaden the base get rid of the deductions. Im all for that. But would that be realistic . Picking out winners and losers and trying to pit one class another, it wont fly, its lousy economics and its lousy politics. Do you think this president has the clout to lay out in the state of at union seeds for Corporate Tax reform when he has a message and that is that he wants to help work families and higher income. Everybody wants to help working families. Everybody wants to help working families. How do you do that . One, grow the economy faster. Were seeing improvement in the economy. Lets not be raising tax rates. The problem we have we all have for these people wages arent growing. And thats what hes it hasnt worked has it so far . We are generating employment but see time and time again, that the wages particularly at the bottom of the workforce are not shifting. Hes coming through with in essence entitlement reform of some description. That may be where your objection is. No. The heart of it surely we have a problem. No no. Two quick points. Wages is doing better than you think. Can i make this point . People look at monthly job numbers and see average Hourly Earnings, 0. 7 year on year whatever the number is. They were down. Down 0. 2. You can use that number. You have to multiply average Hourly Earnings times hours worked. When you do that yeartoyear its 1. 7 plus 3. 3, youre at 5 less inflation rate of 1. Its better than you think. Now, i agree, over the course of mr. Obamas presidency as the wall street journal reported today, middle income wages have slipped. I agree with that, okay. Heres my solution. All right. Lower tax rates for all those people. Give them more aftertax income. Can i just tell you something . If youre married filly jointly make 70,000 a year you dont pay the 15 rate. Knock it down to 10. If you married filing joinly make 100,000 a year the husband and wife dont pay 25 . Push that down to 10 a year or 12 a year. Flatten the rates and get rid of all the deductions and loopholes. Thats the way to do. Dont penalize investors. Investment leads to business formation, which leads to jobs which leads to consumer spending. We need the investment. We cant just joggle the investment. But my point is this obamas plan will go nowhere. His he will have a paragraph tonight on Corporate Tax reform okay. Honestly, from what i gather talking to people like paul ryan okay talking to orrin hatch in the senate finance, theyre not that far apart, believe it or not. There are issues, revenue raising issues theres territorial offshore issues but in terms of dropping the rate from 35 to 25 theyre not that far apart. Hes at 28 the republicans are at 25. The big battles on the repatriation of profits and socalled territorial. But, im going to play this from the optimistic side because the gop wants to help all workers, they agree with obama on that and they are moving towards Corporate Tax reform. This could really help america get us i want 350,000 jobs a month. I want to get wage up to 5 6 . I want the country to grow at 4, 4. 5 , 5 for the next 5 to 10 years to get back to longterm trend line im want america to be competitive. Dont be raising taxes. Keep them down. Flatten them. Make it simple. Dont be complex. Make it simple. I want tax credits i dont want all of this other regular ga ma roll. Put the irs out of business. Give incentives. Incentives grow the economy. Take home more after tax, incentive. One and only larry kudlow. The larry kudlow state of the Union Address. Youre great. Thanks for having me. Two wall street deal makers starting a new activist hedge fund with major ceo backing there they are. Former jpmorgan cfo Doug Brownstein and doug woolerly will be here at post 9 with david. Over the last 10 years weve helped over one million Business Owners get started. Visit us today for legal help you can count on to start and run your business. Legalzoom. Legal help is here. Do y ou like to travel . Im all about free travel babe. Thats what i do. [ female announcer ] fortunately, theres an easier way, with creditcards. Com. Compare hundreds of cards from every major bank and find the one thats right for you. Creditcards. Com. Its simple. Push your enterprise and you can move the world. But to get from the old way to the new youll need the right it infrastructure. From a partner who knows how to make your enterprise more agile, borderless and secure. Hp helps business move on all the possibilities of today. And stay ready for everything that is still to come. Two of biggest deal makers of that their day ditch, arranging corporate marriages for an opportunity to invest in them. Doug braunstein and jim woolery, forming a fun to create value through corporate financial solutions. Nice to see you both. Good to see you. David, very glad to be here at start of the new firm. I bet you are. Just quoted from a press release, of course, and i would like to know doug what is that . Its funny, people have been describing you guys as forming activist fund, the word activist doesnt exit here. No it doesnt. What does it mean to create value through Corporate Finance solutions. Great question. Thank you. What were about, were going to find companies we think undervalued in the market and we believe we can bring some transaction or execution expertise to the company to enhance value. Were going to do that through constructive engagement. That is working with the boards and the management and the shareholder of those companies to create value for our firm and to create value for all of the investors in those securities. Jim, something that you guys are not going to do at least, is mount proxy fights. Again, differentiating you from what has been an extraordinarily popular strategy as we know act everybodyists, talk about them every day, but i wonder does that prevent you from using effective weapon to get attention of managements. No, it plays to our skill set. We can create value as we always have done by collaborating. This is a new old idea merchant banks of old collaborating with shareholders and boards and Management Teams to get deals done and get things positively done for shaersreholder. We have secret sauce in terms of being able to collaborate and make things happen that are positive. And you know you dont always need a contest to do that. That just isnt our skill set. We have another core skill set, friendly collaboration. We see tremendous opportunity in the marketplace. What do you mean by secret sauce. I can talk about that, right . One of the great things this firm brings together is weve enlisted the help and partnership of 14 ceos and those folks bring with them a wealth of executive and management experience, strategic insight. Theyve got deep Industry Knowledge and theyve been through almost every type of issue in their companies. Jim and i have spent 50 years on the corporate side of the ball right . We understand how boards think. We understand how they make decisions. And, quite frankly, weve worked with them on hundreds of friendly negotiated transactions. So that insight, that network, that real capability and expertise we think is going to make a difference in companies in which we invest. Some say you have done all of those things. Youve been in boardrooms but never picked a stock. And that done mean youre going to be any good at it. What do you say to that . Weve created a lot of value through our careers. Our record stand for itself. I think we are going to be able to create a lot of value by making positive deals and Corporate Finance solutions happen. Were really really comfortable moving into the space. I think doug and i have been sort of moving in this direction for years and years, and this is sort of culmination of careers and experience. Were going to put all of that to work for investors. Doug, what do you say to somebody who says, braunstein, has done deals, cfo, getting into the activism game its got to be the top. This hat gots got to be it maybe this is tipping. Let me give you perspective, david, which is there are 2,000 Public Companies in the United States which market values more than 500 million, a mere fraction of those have seen activists investors but the entire world of long only investors is becoming increasingly active. Weve spent much of our career in that space. So we think being able to bring that strategic advice and the capital behind that advice and the Industry Knowledge of the group that weve assessabled, i think, is going to create enormous value for the companies, 500 million to 10 billion and its a space we think we can really do a lot to help improve the value. Thats where you think youre going to focus up to 10 billion a month. Absolutely. Thats the places where we think, weve worked with those companies over our entire careers, theres a lot we can bring to the table. When you have a list of group of experts that we brought to bear we think were going to be able to do a lot to help companies. A lot of companies in that space, david that are looking for the kind of financial and Strategic Support that Hudson Executive Capital will bring to the table. That said 250 million, which you guys are putting in along with partners, cfo partners, youve got to work with more than that it would seem, from my perspective to take meaningful positions to get to the table. Is that a starting point . Its extraordinary that youve got 14 Public Companies ceos putting this amount of capital into a venture like this. But our fundraising process is private under the law, so i cant get into detail around that. All i can say is that this is a pretty Extraordinary Group of people to come together to pool their capital i dont think you can find something that substantial n. History. Doug a procedural question, but a real one, do you find yourself restricted potentially from opportunities because you kind of got to wait some period of time before you can actually invest in them . The good news for us we think there are an enormous number of opportunities out there where we are free to act and more importantly, we believe weve got insight that will help those Companies Improve the value for all of their shareholders. Were obviously going to be very mindful, david of making sure that we do things in a firstclass way and for jim and i, this is really about the long game for us right . Were starting a firm today that we think hopefully will have a real meaningful impact over time. What do you do when that ceo, you come and sit down and say we think you should do x, y and z and they say im not interested see you later . Thats happened to us before. You know what we do . We sit down we have a conversation right . We its a collaboration. Its a back and forth. Were i think Doug Braunstein and jim woolery and ceos we have together have a lot of experience in playing tennis with ceos around ideas. We love doing that. So just because they dont agree with us in the very first second doesnt mean that we immediately have to go in a different direction. Well stay in there, work with them, get something done. Can i just add . I think whats interesting here is theres always this presumption today that things just have to be unfriendly. The reality is there are lot Office Companies out there that are looking for capital to support their Strategic Direction and we have a real good sense of the opportunity set given our network where that first call in is going to be a welcome call. Looking forward to those opportunities as well. Doug, no longer an employee of jpmorgan. Technically i am still. You are. I cant ask you this the first time youve appeared public any in an interview since you were cfo. Yes. A lot of ups and downs, youve admitted that as well. But im curious, before i let you go are these big banks too big to manage . You know i im not going to speak generally, but what i will say, ive spent 19 years at jpmorgan. I feel privileged to have been there and been a senior manager to serve heading the Investment Banking businesses to be the companys cfo and recently vice chairman i think its an extraordinary Management Team extraordinary set of businesses that jamie and the team have built, and im delighted to be a shareholder and intent on being a shareholder for a long period of time. All right. Im not going to let you get away with it youre leaving, you havent been there very long, they cant be happy. Theyve collaborate the with us. They helped birth this company. This is a dynamic moving area of market. Cat walters right in the middle of it and well do business for a long time. Thanks to you both. Mr. Faber, thank you very much. Good luck in this new nonactivism but activism world. Thank you, david. All right. Doug braunstein jim wool ier are. Live to the slopes of davos. Bank of america Ceo Brian Moynihan live from the World Economic forum. Well, a mortgage shouldnt be a problem your credit is in pretty good shape. Pretty good . I know i have a 798 fico score thanks to the tools and help on experian. Com. Kaboom. Well, i just have a few other questions. Chuck, the only other question you need to ask is, what else can you do for me . Ill just take a water. Get your credit swagger on. Become a member of experian credit tracker and find out your fico score powered by experian. Fico scores are used in 90 of credit decisions. Welcome back to squawk on the street. Teva the stock is sprooi spiking after the Supreme Court ruled in its favor over patent protect for a top selling multiple sclerosis drug. By 72 vote the Supreme Court said the court of appeals had not used correct approach in analyzing when the patent in question was valid or not. The court sent it back for more lower court proceedings. Shares off session highs, still up by 1. 5 today. Back over to you. Thanks very much. A down market wit the dow down 50. Live interview with bank of america Ceo Brian Moynihan. Get his response to that surprise shocking move out of the Swiss National bank. Plus, does he think the Federal Reserve can raise rates this year. And on the economy and more, well be right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Its that time of year the World Economic forum kicking off in davos, switzerland. Becky quick in position at ski resort and joins us with a special guest of over to you. Thank you, simon. Right now we are joined by bank of america Ceo Brian Moynihan. And brian, its great to see you here. You just arrived. We really appreciate you making time to come over. A spectacular spot on a sunny day like today. It is. Lucky to be here. When you look around the globe, there are chaotic things happening now, markets in flux things we havent been anticipating i wonder what your perspective is from where you sit on so many things, currency markets in flux, Interest Rates, oil markets. Which surprise you the most . Well, its been an interesting, late winter here in the sense that you had oil structure move rate structure move dramatically. Its moving around based on economics. As we look at world, we see the world growing next year not as fast as people like. The United States picking up growth in everything we see supports that. The markets reflect the view of the economics, peoples view of Worldwide Growth slow down people pulling back and example of new things what happened here in the country a few days ago. That moved the markets around and now settling back into the new reality. Talk about what happened here a few days ago. Swiss National Bank actually deciding it was going to depeg from the euro caught a lot of people flatfooted. A lot people didnt know about it. You didnt know about it. Theres a lot of things we wont know about, how do you keep risk down . We made money last few days and helped our customers but it hasnt had a big impact on us but caught everybody by surprise. How did you find out about it. Read it about it over the wire like you did. It reflects a decision by the country to move forward and i think thats good. The worlds got to keep moving forward off of artificial elements to help push growth artificial elements get back to core growth rate. Theres a good side it just dislocation as it goes through the system. People think they had to move ahead of what is expected to be some move by the ecb this week that they will go ahead, start their on quantitative easing. You think thats the case. Experts say thats the case. Its been so talked about, if it werent the case somebody would be saying something different. But well know i guess on thursday. And well all react to that. Let pleat ask youme ask you, youve made money over the past few days referring to the currency markets. Currency marks and trading. Volatility helps activity. If you keep exposures low. Any activity helps generate revenue at the time. So we are fine. And we look forward to getting to the other side and letting the economy adjust and markets adjust. But its been dislocating for some firms, well written up and for us it was fine. Obviously a lot of volatile markets, oil one of the ones people watching closely, too. What is bank of americas expose exposure loans made to the Oil Companies that could be in trouble at this point. We have 900 billion Loan Portfolio and our exposure in oil is around 40 billion that we disclose. A big part is very Large Companies that have a lot of different Revenue Sources which oil and related products is one. But as you look at it and we look in the u. S. Especially you have a plus and minus. From a macro sense and company sense we stress oil to 30 hole for months and its part of what the regime keep stress testing yourself all the time. We have been running them consistently. Doesnt have a huge impact on us. But the question is why is it falling and what that broader effect and the economy. Consumer side its remarkable. Just looking at data from last week, oil spending, you know, effectively down over a dollar a gallon. Consumers spending that money, plus more, and that means consumers are benefitting and spending money which is good for the broad company. A company like ours that has more consumer expose sure oil exposure, it will be a benefit long term. Your view of the consumer is a very good one. Bank of america you have half of all households in one form other another through banking, loans. We looked at the retail sales and it was a shocker to see retail sales were down in december. I know thats because of lower gas prices but whats the consumer feel like to you . How healthy are they. We didnt see any break from the headline number in November December and into january so far about of about 3 fairly stated combined spending and debit credit cards. You didnt have the oil downdraft compared to a year ago and the oil cost down draft it would be 4, 4. 5 . We see the consumer has spent more money. Data, it gets done in a way sometimes which it gets restated and thought through again. What we see in our consumers last friday theyre spending more money by 3 . Does that make sense to you to look at tenyear and a yield of below 2 maybe 1. 8 1. 7 . I think theres a lot of market activity based on the view when the fed and the rate structure will rise that has to do with unemployment. Is it improving fast enough as wage pressures and people earn more money to spend in the u. S. Context obviously. That debate will go on until the fed does do something. So each time if you watch we come into the year with a lot of optimism and it deflates and it picks back up. I think this year will be no different. You expect the economy our experts at 3. 5 in the u. S. Versus 2015 versus 2014 last year. Last year was flat and raises increased. Next year we look to increase again. Everything we see is constructive and for growth. And that ultimately means the fed raises rates, the question depends on the factors they talk. It means fed will raise rates, probably the middle of the year. Look whats happening around the globe, if they would raise rates right now . They tell us what they watch, they put it out in great detail. I think predominantly what theyve been focused on is u. S. Employment. They want to see, you know, the wages pressure. Underemployment rate is down. A couple years ago we would be talking about underemployment rate. You see it our workforce, job openings turn over quickly. I think thats what theyre going to look at. I think the key one is u. S. Labor economy in the shape that theyd like to see so theyll have the sustained spending and sus sustains consumption. Lloyd blankfein joined us and he brought up an interesting perspective, look at it as a risk manager. For the fed if they hes fine with them keeping rates lower for longer because its about making sure that you dont get yourself in a bad position. Would you agree with that logic or would you like to see them raise rates sooner. Selfishly, wed make more money if they raised rates but the good of the american economy, long term is better for the company. Think about. They ought to raise rates, and they will, when the economys Strong Enough to absorb to slow it down. If you go back to chairman bernanke and his discussion the unknown of going backwards and having deflation and other issues, which figuring a way out of that is tricky i think as lloyd would say, err to the risk of worry about the upside getting overheated versus the downside because its a big economy. The worlds become dependent on the u. S. That creates a fact to make a mistake. All of that factors in. I assume they look at it as a risk manager, thats what they all do. Thank you so much more your time. Appreciate you joining us. Sara, back over to you in new york. Thanks for bringing us the conversation, becky. Well have more big interviews from you and the squawk box team all this week. Coming up one and only art cashin joins us at post 9 to weigh on the Market Action and big move weve seen. The dow is down 119. Looking at session lows. Squawk on the street will be right back. If youre running a business legalzoom has your back. Over the last 10 years weve helped over one million Business Owners get started. Visit us today for legal help you can count on to start and run your business. Legalzoom. Legal help is here. Ugh. Heartburn. Did someone say burn . Try alka seltzer reliefchews. They work just as fast and taste better than tums smoothies assorted fruit. Mmm. Amazing. Yeah, i get that a lot. Alka seltzer heartburn reliefchews. Enjoy the relief. Its quite a broad based retreat today. Dow down over triple digits. Energy one of the sectors in negative territory. Dom chu has more at hq. Energy weighing on stocks as Oil Prices Continue their fall. West texas intermediate down 4 in todays trade. Usual suspect leading the way. Danbury resources, range resources, neighbors industries and chesapeake. Energy is down trying to make its way off of session lows. Wti 47. 05. With that move were seeing stocks taking a leg lower during the session. Art cashin director of floor operations for ubs financial services. Looked like were going to start on a high note, now dow down 113. It is primarily energy. Looking for signs of stability or range and theyre not quite getting that comfortable feeling. I also think that there is further concern about the operation of the Swiss National bank. I dont think the victims will be limited to just a few currency traders. I think it may spread past that. This idea that Central Bank Credibility is a question central bank mistakes can be made, and we are in an unprecedented era. How do you take big ideas like that work it into the trading environment . If you look at it the Swiss National bank is was in a position whereby making this decision, they may be putting their own nation into a recession, and possibly into a deflationary spiral. I dont want to overdramatize it, but the last time you saw things like this happening were in the 30s. Again, you have the imf coming out overnight, downgrading Global Growth forecasts for almost everywhere except the United States. The question remains into 2015 can the u. S. Remain not only island of economic stability but attractive place for the markets or would you rather be in europe on the expectation of qe. Shortterm traders go long in front of thursday. The assumption is that the Swiss National bank to make that dramatic effort that they did, might, in fact have had a minutehint this is a large qe if so it would move the euro substantial substantially. If they had kept the peg on, they would have gotten run over. So they painted themselves into a corner of their own making . Absolutely. Before 2011 there was no peg. They decided it seeped like a good idea and it never went with them. What about this market . Can we continue to make gains through the year. I think you can, but youll need cooperation. You need oil to begin to look like its stabilizing. There are some people beginning to think that the ceiling for oil will be the nominal cost of fracking. In essence, if they can drive the price lower, they can limit some of the fraccers from going. What price . 50ish. 50ish. You hear iran and others talking about 25 and 30 oil. If they can take it below 50 and it shows a sign that theyre limiting production then theyll be happy. However, if china or somebody else begins to firm if it gets back above 50 fraccers go back to work. Instead of open peck being the swing player its the fracking group. You think the china worries are making theyre way into the trading session . Yes, gdp came out better but still the slowest growth rate for the year since the 90s, and that massive drop on monday for the chinese stock market. Well that was margin related from what we could see. You did get a bit of a bounceback today. But i think obviously that bears watching. Well begin to know a little bit better when we see what the chinese do with the cheap oil. Do they should help them. I know it will help them but my point is you have got to see how aggressive they are in building Strategic Petroleum reserve. Do they go and rent the big tankers and bring cheap oil in figuring things are going to get better or if theyre difficult dent about it thats going to tell you theyre concerned about their own economy, too. For now a lot of pressure on the commodities at large, except for gold which is getting a nice tick. Golds getting a nice tick. It broke above a long standing downtrend line. Moving better. Youve got surprises in the currency markets. So, it was kind of a flight to safety with an excuse for breaking a trend line. I degree. Well see impacts of the swiss move for a while. Art cashin director of floor operations at ubs. Walt mossberg why you do not need to give in to pressure to upgrade devices. Were back after a quick break. The lightest or nothing. The smartest or nothing. The quietest or nothing. The sleekest. Sexiest. Baddest. Safest,. Tightest,. Quickest,. Harshest. Or nothing. At mercedesbenz, we do things one way or we dont do them at all. Introducing the allnew cclass. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. Have you heard of the new dialing procedure for for the 415 and 628 area codes . No what is it . Starting february 21, 2015 if you have a 415 or 628 number youll need to dial. 1 plus the area code plus the phone number for all calls. Okay, but what if i have a 415 number, and im calling a 415 number . Youll still need to dial. 1 plus the area code plus the phone number. So when in doubt, dial it out welcome back to squawk on the street. The parent of red box, the stock is falling after announcing its ceo is stepping down and resigning from the board. No explanation was given. Board member nora denzle will serve as the interim ceo. The shares down 13 . The stock up nearly 25 over the past three months. They also provided some revenue guidance they expect 2015 revenues to be up about low Single Digits and operating profits to be in line with 2014 results. Back over to you. Thanks very much, dominic chu. Lets get to the cme group where Rick Santelli will join us with the santelli exchange. Thanks, david. My guess this morning is trey i think the best way to introduce you, is youve probably forget more about japan than many people will know. Its his passion, japan. All right. I hate what i call burping comments, when the dollar is stronger, what does everybody say. Burp it all together. Weak commodities. Whats gold doing. Going up. Why doesnt anybody talk about that one. Its up about 15 today. The conclusion is the crude oil break is not because of dollar strength. Crude oil is breaking on its own right. The proof of that is in gold. Gold acts very good this month and it will continue to do that. Lets bring all this back to japan. Whats a great trade that would include japan . Hint hint might have gold in it . It certainly might. Not a great trade, rick this is my single best idea and my single largest holding. Long gold in yen. The bank of japan we have the chart up is my guess, coming close to historic highs. Long gold short yen in my mind has the perfect Macro Economic landscape. The bank of japan is buying twice the amount theyre issuing twice the amount of yen as the government japan is borrowing in a year. How could the yen do anything but go down. Remember when you short a currency short it versus what . I like being short it against hard assets. Real estate is a little harder trade to execute. Black swan factory in japan is like the zoon factory. Might have made a lot but nobody has one. Do you think there is a catalyst that will make this kind of fray in japan . This sounds counterintuitive but as the bank of japan buys bonds they are creating an enormous amount of pressure on bonds, and bonds will eventually break. Why . Because a bond is an iou. Ill give you yen, you give me an iou. The bond holders as they see the yen which is mostly old japanese and the bank of jaen. Lifecos and things like that. The largest pension fund, the government pngs fund announced theyre changing their asset aloe kay away from the government bonds. Shocked on the peg of the euro vers sus the swiss franc, the bank did it before the 22nd meeting. Im not shocked on the timing. You think another peg may be unpegged at some point and its funny because its my kind of wild card for 2015. Why dont you break it. Look to china. Number one, as the yen weakens, who do you think is ruffling their feathers right now . Who do you think is a little upset about Euro Weakness and yen weakness. I dont know a big export market like china. So a strong dollar hurts the chinese. Theyre going to change that. The chinese are going to unpeg to the juan to the dollar and devalue it and its going to happen in 2015 2016 at the latest. Right now, 6. 2 to the dollar. I think 12 13 14. Wow. Thats a big call for 2015 and trey is moving to texas. He cant handle taxes in illinois. Happy feat. Good luck in texas and thanks for taking the time to be our guest this tuesday. Simon hobbs, back to you. He will be missed. Thank you very much. Lets see whats coming up on the squawk alley which takes to the air in just over three minutes time. Jon fortt has our look ahead to that. Good morning. Yeah, well google might have its eyes in the stars, possible investment in spacex. Elon musks other venture. We will look into that. Netflix reports after the bell were they sandbagging last quarter with the reduced guidance or is International Growth kind of uncertain. Is that going to hit them . Well look at that. Finally Walt Mossberg on why you shouldnt necessarily feel the need to upgrade every time a shiny new gadget comes out. All that and more on squawk alley up next. Good tuesday morning. Its 8 00 a. M. At space x headquarters in california 11 00 a. M. On wall street and squawk alley is live