Transcripts For CNBC Squawk On The Street 20150130

1. 7. Markets, disappointing print on gdp. Ruble slipping overnight after yesterdays rally. Futures are in the red. Amazon stock is up sharply, results beat as profits returned to seattle. Google misses stock fell 3 . Then the Conference Call. Google shares higher in the premarket. Well tell you why. And visa posts strong results, the stock split, that stock also up. But first up, futures moving lower on the final trading day of january. Gdp below expectations up 2. 6. Weaker Business Investment wider trade deficit offsetting a nice pop in Consumer Spending. Chevron, mastercard among companies posting better than expected earnings but the major indices on track to post declines for a second consecutive month. We havent do that in a couple of years. Oil shooting for serve months down gold for three months up. Crazy times. Were the opposite of europe. Europe is fantastic for this month. A great stock market. Great stock markets there. Im struggling to find what stocks are fitting the futures profile. In other words, almost every stock that i follow today is has something good because of earnings. I know that, look you can shave something off of boeing, whatever. The these this of individual stocks really good in the last 48 hours with the exception of alibaba and qualcomm but you know what the futures overpower. When i saw 1. 67 on the tenyear i said okay bad day. You cant coexist with Interest Rates going down because the machines algorithms dont let us. And the dollar gathering strength as well or is that less a part. No dollars big. Last time visa comps lent Conference Call. Charlie sharp amazing. Travelers arent coming here europeans arent coming here. Brazils not coming here. Big decline in tourism. Tiffany could have told you that, right . Yes. I visa charlie sharp puts on a clinic. The numbers he shared in terms of what theyre seeing amongst consumers and what they expect to see interesting. Dont you love that . Gives you granularity in terms of expectations for Consumer Spending. 50 save. Particularly savings and spending that will come as a result of fall in gasoline prices. Saying after the 60 per month, hes low but hes got the receipts, so obviously i dont theyre saying that the second half of the year will be strong. The granularity, lets put the drop in context, u. S. Oil fuel prices down 30 . According to surveys, 50 of the savings being saved, 25 used to pay down debt. This is america. Pay down debt in our country. 25 spent discretionary. Wow. I thought that was eye opening. No one has figures better than char. I mastercard out with the beat twosent beat revenue up 14 purchase volume up 12 in local currencies. But were not seeing much effect from low gas prices as we expect. These guys get hurt the size of the low gasp. A. J. , cross border. Few industries where you have two titans. I mean look theres a lot of ceos i hit some ceos but certain people you say, wow. Those companies are run by smart guys. Yeah. Theres another smart guy out in seattle, bezos, nobody can argue. Amazon shares up after the company Beat Estimates with Holiday Quarter rps rev. Revenues up. Amazon says its prime membership rose 53 in 2014. Still not telling us how many prime member theres are. No. Im estimating 40. 40 million. Move up to 99 a year did not hurt prime. Margin number was better. How do you like that . It was better. Therefore, profits significantly above what people anticipated it does seem when youre about at the point to say, were done with its never going to happen the way the bulls believe it will they always throw a quarter in there to make you a believer again. Google did the same. People thought that google quarter my Charitable Trust owns it down immediately and used the call used the word discipline four times. Amazon absolutely saying listen, were going for profitability growth. Google mentioned profitable growth over and over again. Chase and buy the stock market. These guys dont like what happened with the stocks. Wellcontrolled companies. You think theyve gotten religion in terms of posting operating profits . I thought google my Charitable Trust owns it i was initially dreading it. I read the release. They had a million onetime items, like millions of dollars. They said were putting google glass on hoemd. Ld. Were not doing it any more. What are you talking about . Their margins would be twice if they werent doing this stuff. Operating margin went to 24 from 28. Its a spigot. It doesnt turn off. Theyve been spending so much. This was the quarter i felt they said were going to start monetizing youtube. Look at rates of monetization on youtube are not for pure search. The greatest business created. Its dominated but its moving facebook, at lass snapchat so many different names that going to be challenged on for their core business. And the question is is all of the spending going to relate to something that equiv lates to that. Talking about a buyback because they realized maybe more mature. I want them to spend on youtube. How about salespeople to sell you the commercials from the super bowl watched millions of time on youtube. Youtube undervalued asset. Theyve spent too much time doing google feet and google socks and whatever, and nef done a theyve done a lot of stuff i dont like. This was the quarter i thought they said, look you know what maybe weve been doing the wrong thing and maybe we have to return cash even. They were sensitive. The analysts are in revolt here david. Do they care though . I thought they cared. I thought they cared. 64 billion in cash now. People arguing starting to burn a hole in their pocket. I thought that they cared. I dont know. Because they were defensive. So defensive. One guy, hire 3,000. Wait were more disciplined. Disciplined. Noisiest quarter but business on track. 18 growth in revenue, 17 types earnings. Why am i supposed to sweat the program . Im not sweating the program. Something to be said for companies willing to spend, spend, spend, and in order to try to stay on top. We can sit here and say those guys could have gone in so many Different Directions and end up like yahoo when on top they didnt do what they needed to do. Amazon, and his willingness to just you know stiff arm shareholders to a certain extend and say, im following my own path. Im saying this as a brandnew google that cares . No youre not. Im saying there were a couple of instances, 44 million views watched for the commercials on super bowl i mean theres a moment in this Conference Call where theyre kind of challenged and they said guys i mean do you even care . They mentioned big clients. And you know one point said the issue of margins, look if you think the business were looking for growth, were looking for growth. Here it was. Defining sentence for google. Were looking for growth in operating profits. Hard to believe that you have to make that circle back to amazon quick here. Breaking out web services results start in first quarter, 40 of inventories, now third party. Where were you on amazon before . Has that changed . I was shocked. I mean im in the world that says that the last quarter was, they mentioned spend. I counted the numbers the times were spending in china. Here, only time they talked about investing in india. A Conference Call that was about trying to make some money. I was impressed, i think the stock up 40, probably going up more than that. A lot of times we see stocks first day 40. This is ridiculous. You did your special. Amazon web services is a gigantic business. Oh, it is. Its a monster. And its been extremely successful. Now the margins on it not believed to be particularly high. They are very price competitive in terms of offering that service. But it will be very interesting to see when they do break that out for us. By the way, on that other line you also have something at amazon advertising. You can buy search on amazon and why wouldnt you . Right . You know people on the platform are looking to buy. Why wouldnt you be buying search if you could . Theyre selling. Its also showing up there, i believe in that other other line which is also going up. A lot of people think its only aws. It may be advertising, back to google and the competition that they will increasingly face from different platforms in search. I agree. Two companies that offer tremendous value prosper, costco, i hope youre a executive member and google amazon with prime, where they raised the price and they got 50 increase in the United States. Listen, now i want to join because its more expensive. I know. The membership thats a club i want to belong to. A club im a member of both clubs. Theyre huge parties. Content, costs up 42 whatever percent, bother you at all, talking in billions now . No. Starting studio from scratch, not a concern . I dont know. Netflix, netflix its well thats the thing. That makes it a Value Proposition thats interesting, the 9 bucks a year for 99 bucks a year for shipping. Video service that were using. Im going away next weekend to be with my daughter. No dvd player in the hotel. I said doesnt matter. Weve got amazon. Watch whatever we want. Amazon. Netflix, by the way, starting to put things on i was talking to my research assistant, nicole research colleague, talking about seinfeld on netflix. Right. Netflix and amazon. You know mastercard you listen to conferences, now i know where the smart people went. They became ceos in major companies. Good. Were you wondering where they went . I was thinking theyre somewhere in the facebook basement. I throughout they were running hedge funds or something. No. Thatsiester year. And theyre flipping burgers. Just kidding. Didnt mean the term flipping. People got in trouble using that term. But we are having shake shack. Danny, 155 million man. Probably the 300 million man. This is probably going to open at 40. I want my vanilla milking shake the new york shack exchange. Well over at post 8 in a little while, as the shake shack opens for trade. Fascinating story. Mores earnings to talk about on the final trading day of january. Well break down winners and losers. Danny meyer and Randy Garutti on the big day for shake shack debuting at big board. One more look at premarket as january look to be the second month down first time in a while. More squawk on the street from post 9 in a moment. 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 shake it up shake it up shake shack making its wall street debut at the big board. The burger chains ipo pricing at 21 a share, above the already increases range of 17 to 19. Gives it a valuation of 746 million. Trade under the symbol shak. Well talk with founder danny meyer and ceo danny garutti after shake shack opens for trade later on. Not only changed the names of the new york shack exchange. The buzzer they give you when the orders ready. Apparently go off when the bell rings and first trade happens. I love. Dannys an old friend actually from the 80s. Hes his book setting the table i felt one of the greatest Business Books ever written. Been on the show more than any other guest. Created an index of stocks felt a prepare number p. E. Treat the guests well, tripled the index. This guy knows stocks. People dont know or think that. This company, 63 stores understand each one made 5 million revenue, theyve got great stores. You warned in mad dash the other day that to be careful here. Talking a multiple of sales quite extraordinary and unlike any, i think in fast casual. When i said 11 12 i said you can pay 18 20. A 21 means its going to be at 40. I expect it to double at the open im uncomfortable with that, because as much as i think dannys great, thats a lot of pressure. Remember chipotle is still king. Think they can open ten stores a year for the foreseeable future. Margins and growth non manhattan stores not what they are in new york. A question for danny down the road. Does his comp store, for two year stack, theres a lot of things that danny does different. But i think that one of the reasons why this stock is going to open up so high its not mcdonalds. I mean literally is look i go to shake shack a lot. A go to any city where there is one, theres one down the block from me i went to one in philadelphia. People that go love it. Theyll buy the stock like its netflix, like its facebook. I in that in the end its still a company. I mean its not its not a goodtasting burger in and out burger, maybe that opens at 60. You cant just say it tastes good. They have to run a business that has some metric. Chipotle, does have real metrics. Chipotle, go back three years ago, remarkably cheap on a p e multiple. These guys are fantastic business people. Danny is a business person but wow at 40, expensive. Yeah. 79 million in revenue for the first 9 months of last year. Mcdonalds does that in one day. In one day. No no i know. The easterbrook, thats an interesting thing. Whats going to happen there. But you have average cash return of 65 , payback period remarkable for the opening. Dwarfs 40 from the habit. Everybody loves the habit. Danny dannys got an overseas road map. Versus 16. 8 for chipotle which is why im worried but at the same time, this is a great brand. Its a worldwide brand out of nowhere. Its got to grow into the multiple, always difficult. Right. Grow into the multiple. Look at chipotle 22plus billion market value, what thats been able to do. Do you believe if its owned by mcdonalds it would have been able to have the same success . Absolutely not. A good interview what mcdonalds has to do. They never slide mcdonalds, even off the record they dont do that. One thing that chipotle chipotles a its its like whole foods. I dont want to call it a religion. Its a secular religion. They truly want Natural Organic first and so did the people. People regard chipotle as a place where you are eating healthy and its worth that. I think were if we can get danny on the floor, and garutti, making their way to the bell now. Your point about the food supply, jim, highly sought after, as a result as we saw chipotle, a couple weeks ago. Chipotle is about the food chain. They think the food chains corrupt in this country, therefore theyre begging theyre begging to be healthy and go eat at chipotle. Shake shack, not, i think look shake shack does the same thing. Its that chipotle has done it on a scale unprecedented. As the s1 points out, occasionally its going to mean supply interruptions because the average restaurant as three days inventory worth of beef. When chipotle ran out of the regular beef they liked they put up signs we dont have it Comp Stores Sales increased. Some places have a lot of momentum. Chipotles really incredibly well run. Putting more money behind pizza. When you interview jack my favorite cfo, brilliant. Amazing story for a business that only started as a literally a cart trying to help a park i did a lot of charity work for the man in square garden. I dont eat burgers. Try it out. What was i thinking . Wow. I mean Madison Square done a lot in our neighborhood. A great moment. One across the street the Natural History museum. Mine in brooklyn. Been there many times im have not been to mcdonalds, to your larger point. Well get cramers mad dash. Count down to the opening bell. One more look at premarket. As jim said seeing more movement in dow futures. When you run a business, you cant settle for slow. Thats why i always choose the fastest intern. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast business and get the fastest wifi with the most coverage. Comcast business. Built for business. The time of my life oh, baby give me the time of my life all right. Its friday time for a mad dash. Start off with biogen good. City, piper, raised numbers why not . Franchise is good its strong. Thats a great main tense situation. Keep teasing you on alzheimers. People say theyve got isnt remarkable. The stock has been a horse. It is not done going higher. Alzheimers thing, that would be amazing. Even just m. S. Franchise, un un unassailable, you have to take that for life. Its a wellrun company. When they come on mad money im like, wow. As good as biogen decker is bad. They say things are good and they were not. This was a very big disappointment. I say ug to this quarter. Traffic was down not that great execution. Many of their different kinds of shoes didnt deliver. People are saying longer term dont worry about deckers. A good this is sound despite bad execution. Everybodies lowering numbers. This is a surprise to me. I have been with them twice this year. What does that mean. People not coming by the stores. China, they did not like what deckers gave them in china. And this is kind of a dazzling a very good executive. Do you stick with it . I think its a good brand but they miss tpded it. Wasnt going to be seasonal. Seems seasonal. A lot of warm weather in places. A head scratcher. I dont want to write this company off. I want to hear from him. The retail was very weak. I visited one of the retail stores, i was under the impression things were going far better. Ill leave it with that. Visa mastercard Amazon Google, dollar the tenyear and the shake shack ipo coming up right here on squawk on the street. Female announcer dont wait for president s day to save on a new mattress. Sleep trains president s day sale is on now save up to 300 on beautyrest and posturepedic. Even get three years interestfree financing on tempurpedic. Plus, free delivery, set up, and removal of your old set. And sleep trains 100 day money back guarantee. Keep more president s in your wallet. Sleep trains president s day sale is on now . Guaranteed sleep train your ticket to a better nights sleep youre watching cnbc squawk on the street. Live from the Financial Capital of the world. Opening bell set to ring in a minutes time. Big chants here from enthusiastic crowd of shake shack employees as that stock set to go public later on today, after pricing at 21. Jim, you may think its expensive but they clearly do not. Well look no just want to warn people again look danny, dont take it personally were very good friends if the stock doubles at open youve got a situation where youll say, three days from now, are they going to reopen it again . No. I know caution is wrong. They still make burgers. Still make burgers. Although as i just said on twitter, the ninth anniversary week of chipotles ipo. Public at 22. Danny can do that too. Chipotle is the gold standard. Its not easily no, more competition. [ bell ringing ] there is a look at opening bell and s p at the top of the screen. At the big board, shake shack, hamburger chain, celebrating its ipo today. Talking with founder danny meyer and ceo garutti. This did light up over at the nasdaq a clinical stage biopharmaceutical company. They know their audience. They went to a noncrinkle cut. A huge revolt. Now back to cringele cut. Love the crinkle cut fries. Its the guiltiest pleasure that i have in my life. But thats a statement about how hollow my life is. Burgers are the biggest dineout segment in the country, 72 billion a year nearly double what pizza does in the country. Pizzas next biggest category. New mcdonalds ceo talking about how people like to treat themselves. You treat yourself. Thats what i do at shake shack. When im down in the dumps i go to shake shack. Steve easterbrook tweeted a moment ago, wow, what a 48 hours, thank for messages of support, big thanks to don respect. Lets stay tuned. When Howard Schultz came back, everybody goodt too excited, stock jumped 9 and stock proceeds 200 8, 2009 went from 19 to 7. Like chipotle never looked back. One stock that had a big ipo here not that long ago, alibaba. 240 billion market value on day one. As opposed to what shake shack may be i dont know 8 million, maybe more than that. Stock coming for sale. Stock yesterday, alibaba down sharply after the Company Reported what were disappointing, i guess the best way to put it earnings hard to use that word when talking about 40 top line growth but they were. Yahoo of course taking it on the chin with alibaba. Today, upgrade over the evercore others coming out positively on yahoo doing the math and saying if we apply 10 , 15 discount to spinco, where theyre putting the 384 million shares of alibaba and we take what the worth is of their stake in yahoo japan and discount that the core business is valued at nothing or negative. True. And so true. Youve got a couple of analysts coming out and doing the math. Yahoo shares up a half a percent. Im with them. The problem your interview with jerry tsai. Joe tsai. Talk about the government i mean the government, the government, what a poorlytimed the governments savy what a poorly timed release of the investigation. They knew it in july . They came back very combative, alibaba and the paper has been withdrawn now from that. Look, alibaba is not as bad as the stock. But there is a big expiration. I also a lot of people felt that you would see much better mobile. Mobiles everything. If you go Google Google is mobile king. Facebook loves mobile. Make more money on mobile. Mobile is everything. Programmatic for google i mean these companies, honestly, you have to be 23 to understand the power. Transition to mobile is an important one, as you point out. Facebook has made it magnificently. Yeah. Given that number from bob yesterday, got some amazon people worried. Irrationally perhaps. Watch the stock go down 10 , they are at least in the same area certainly, ecommerce. I know some guys who may have owned amazon going into the print last night and said no im going to sell it. Im afraid and theyre hitting themselves now with amazon up over 12 this morning on those better than expected earnings. Look amazon quarter was a love fest. The google quarter, let me make it very clear, was very hard to understand. How could a stock swing 35 points . It goes down if the release because there were so many onetime factors that i really i tried to add up i gave up. You couldnt add them back. In the end 18 Revenue Growth and you came back with a company that has pseudoreligion in other words, episodic but we dont know. I felt i felt underthe gun when you questioned me about the notion of discipline because its true. They still do some wacky things. They do. But they may return capital. That was big. Got plenty of it. Amazons the biggest gainer on the s p. Second biggest gainer biogen. M. S. Drug doing its wonders 409 beats 377. Four stocks i recommend, biogen regeneron, gilead celgene. Celgene, did you see the numbers that bob released yesterday . He is saying theyre going to earn 17 bucks in 2020. How do you put a multiple on that son of a gun . Geez. 1250 you give it a 30 multiple . When regeneron reports thats going to be the best. The best. Chevron, 1. 85 beats 1. 64 but looking to cut costs across the board, jim as a result of what oil as done. Chevron, 100 december 15th. The low for all of these except the drilling stocks. Listen, core labs the scientist, guy who does Reservoir Management came on mad money and said were going to bottom this year. Well be higher maybe double next year at this time. I dont know about that. Using statistics that show some of the wells go down so much and the drilling, oh i think were going to see a bottom in the oil in Second Quarter. Really . Yeah. Not first quarter. Still production coming on. We talked about mattel earlier in the week when they axed their ceo, brian stockton. 52 cents, a big miss of the 92 cent estimate. Barbie down 16. Third Consecutive Year barbies fell. Fisherprice down 11. American girl down 4. Whats going on with toys in general . Hasbro i think these guys got the wrong lineup. Yesteryear names. Kids e. A. Electronic arts look at their numbers. Its the opposite. Take 2, the opposite. Wait until evolve comes out. We both have girls. My still play with her American Girl dolls. Yeah. And barbies. Throw back. Wear a throwback uniform. Were throwbacks, we are. No devices. Dolls. And we havent done tyson, 77 cents, beat business 4 cents. Hillshire integrations going okay. These Companies Take a look at one of the things that i loved about the dow chemical call was the crop business. Its strong but remember the raw costs for chicken is corn corn was glutting. Starting to plant more soy around the world because corns so glutted. I do think that the dividend this is a hormels very good. I like i like the stocks that have the raw costs coming down. Look at visa. Look at these things. This markets out of sync with the companies. I reiterate, futures shouldnt be as powerful as they are because the individual Companies Reported unbelievable numbers. Great piece jim stewart on apple. And apples up again, not a great deal but it is up 119. 38 a share will get you a share of apple. Taking out that high which is what people were concerned about. About that said Broader Market reflecting continued concerns weve talked about so often. Youve discussed at the open of the show 1. 7 or less yield, dollar 15year high against consumers, up 15 , i think 11year high. But then visa, Charlie Scharf lays it out how bad the currency is. He knows currencies better than anybody, too. You say, look yeah currency horrible, currency horrible. Up 13. Okay . If you have got a really good business, youre overriding currency. Proctor gamble not as good down again today. Really quickly, visa the waiting, because of the 4 for 1 split, waiting on the dow going from 9 to about 2 or 3 . I know. Goldman the biggest. Hedge funds wont be shortening. This was a smart idea split 4 for 1. Hedge funds jam it down. Scharfs better than that. Mary thompson on the floor, with the dow down 33. Like a pep rally all morning here with all of these people from shake shack waiting for the first price. What we saw at open triple digit decline for the Dow Jones Industrial average, dropping 121 points. Weight on the markets early on disciplining data on Fourth Quarter gdp here in the u. S. We saw a decline in business equipment spending in the Fourth Quarter. Also slowing exports which shouldnt be a surprise given the bump up that weve seen in the dollar or dollar strength. Also, of course we have disciplining data from europe on consumer prices. Both of those things a factor here. Its actually a mixed market because the nasdaq is showing strength in large part because of gains in the big cap tick. Along with the response to the earnings, were also keeping watch on oil. The markets have been correlated closely to the movements in oil. Right now we are seeing a pick up in oil prices as the dollar has pulled back a bit. A couple of dow components. Talking about visa earlier, splitting its stock, 4 for 1. Last night the company said Foreign Exchange or currencies impact Second Quarter revenue but maintaining full year outlook, raising fees and that should have a positive impact on revenue in the second half of the year. Chevron with a better than expected number. Mastercard reporting coming in with earnings two cents ahead of expectations. Like visa, the Company Reported 11 increase in total processed transactions in the Fourth Quarter. Quick check of the big tech names. Google and amazon of course google missing but positive comments on the growth. Investors like than shake shack, waiting for that to price. Priced last night at 21. Right now early indications 34 to 36. Ill be standing right here and have the price when it happens, guys. Back to you. Collect in with Rick Santelli and get the at the cme. Good morning, carl. Theres some out there that will say some countries would kill for 2. 6 gdp. I get that. But it was a disappointment and reflected quickly in rates. The ten, 24hour chart, down 7 on the day, down 12 on the week and down 50 on the year and its not february yet. Twoday chart the minute the weakness took us under from the data yesterdays low yields which were virtually real close to the 19. 5 20month low yields established on the 15th of january, everything changed. So as we moved down open the chart up you can see that midjanuary number. Open the chart up all the way for the full 20 months from may of 2013 and thats where we sit. We have to look at a 20year chart for 30s. Sorry, folks its the longest one i have youre not going to fine a lower yield on. Yield curve flattening. A big top ex talking about it a long time 10s minus 2s, reached 120. Thats the distance of basis points between those two maturities thats the flattest since firing fireworks off in 2012. Year to date a dollar yen. Most volatilitys in the euro versus the yen. You can see this is flatlined. Pay attention to than and follow me shortly, chicago pmi. David, back to you. Thanks very much, Rick Santelli. If youve been pollfollowing my coverage at least of the successful auctions by the fcc you know as well it did end yesterday. Thats right. The bidding in the socalled auctions spectrum by the fcc has officially concluded the government raising 44. 9 billion. Billion dollars. Far more than anybody anticipated. Wow. First responders supposed to get money from this theyll be doing just fine. Maybe the rest used for deficit reduction, as i said with dividend coming in from fannie mae, freddie mac who knows where else. The larger question is who won . How much did they spend . We may very well get that today from the fcc. If we dont get it today, well certainly get it monday. That is, we will be told by the fcc, the winning bidders for different spectrum that was up for auction. So we will be able to determine how much was spent by at t how much by verizon, how much by tmobile, how much if anything by dish and any other unexpected participants in this highly successful auction. But what we are not going to get is a great deal of information from the companies in question. While they may welcome out and confirm that the fccs numbers are correct, and they did pay this, they are not going to be allowed, under the fcc rules to actually offer us any more information about their strategy, about what they were thinking, why they spent what they spent, for another, lets call it at least ten days. Thats due to the anticollusion rules instituted for the auction by the fcc. The fcc says we still dont want you talking until we get the money. Until we get i think its a 20 deposit from you, within two weeks, then you can talk all you want. But until then we dont really want to hear from you. So well put out the numbers. Well put out the winners. And then youve got to shut up until you finally can talk once the collect clears. We still may not know as much as we want to because this is a defining auction. In some ways it could be. It may give us a better sense as to what were going to see from Charlie Ergen at dish whether verizon spent as much as people think or perhaps that up ins come down how much at t spent. We may see some of these companies have to enter the Capital Markets or set up new lending facilities. At t recently did last week to help finance the deals. What do you think it does for Capital Expenditures for the companies . We heard from at t coming down and verizon going up. I just think this is remarkable. When those thing started i was looking for maybe a quarter of that. Yeah. Numbers are huge. The government makes some money. They done chicago pmi. The number looks better than expected. 59. 4 on january Chicago Purchasing Managers survey. Last month, 58. 3 revised to 58. 8. But is it a spectacular as it looks . Its solid. But keep in mind for november at 60. 7. For october last year 64. 5. So we hit the skids under 6 on still good over 50s expansion expansionachlts r expansionary. 10 50 eastern, have alice from the group discuss the intricacies of the data set. Back to you. Thank you. We are, of course on ipo watch. Waiting for shake shack to open for trading. You see the indication 37 to 39 now. Well talk with the founder, danny meyer and the ceo Randy Garutti. Dows about flat. Apple about to crack through an alltime high. Back in a minute. When the moments spontaneous, why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. Recently, a 1954 mercedesbenz grand prix race car made history when it sold for a record price of just under 30 million. And now, another mercedesbenz makes history selling at just over 30,000. And to think this one actually has a surroundsound stereo. The 2015 cla. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. Enthusiasm on the floor among employees of shake shack, which has indicated 39 to 41. Might explain some of the emotion that were seeing here jim. Yeah. 40 is too high. It doesnt matter. Its an emotional situation. Emotional situations do not lend themselves to great investing but people want to own a share, theyre going to own a share. Who can stop them . Im a friend of dannys, im not trying to knock anything. Youre seeing reasonable. I have to. Its our job. No free passes. No free passes. Yeah. Meantime, apple, as we mentioned, getting awfully close to alltime high. Alltime intraday high. 119. 84 the highest its ever been. Compare apple to shake shack. What does apple sell at for next year . 14. Why does apple go higher . Is it worst than the average company . By contrast what will shake shacks multiple be at 40 a share. Infinite. Approaching 700 billion market value is apple. Apple is you know Money Managers are stymied because they know the law of large number but was also know that its an inexpensive stock. Youve got the watch. Listen to visa gigantic. Its the future. What a year apples going to have, its the year of i pad. Google said its the year of youtube. Amazon says its the year of profit ability. Everybodys got the year up. Whats the year for you. Trying to figure that out. A jim memo. Stop trading with jim in a moment. Dows down 42. But visa adding 100 points to the dow by itself. Well be back in a moment. [woman] can it make a dentist appointment when my teeth are ready . [girl] can it tell the doctor how long i have to wear this thing . [man] can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Why do i take metamucil everyday . Because it helps me skip the bad stuff. Im good. Thats what i like to call the meta effect. 4in1 multihealth metamucil now clinically proven to help you feel less hungry between meals. Experience the meta effect with our new multihealth wellness line. I love my Meta Health Bars. Because when nutritious tastes this delicious i dont miss the other stuff. New Meta Health Bars help promote heart health. Experience the meta effect with our new multihealth wellness line. Time for kram somewhere stop trading. Lost in this costco. Costco paying a special dividend, theyve got that much cash, want to return to shareholders ala google a year from now, my prediction. Look at costco and look at amazon and recognize some of companies, consumer spent Companies Like apple. Consumers stronger than you think when you look at costco stronger than amazon stronger than netflix. Friends on netflix, not on Seinfeld Seinfeld seinfeld. People are spending on things not captured by aggregate numbers. There you said it. On shake shack, you say 41. Ill see you 41 and raise you, i dont know 50. It doesnt matter anymore. 42 to 44 100 pop at these levels . Well, you know if you want it id rather get the burger. Lets go get the burger. Get theburger. Wheres my shake . Mad tonight . Why its so stupid to trade when a Company Reports and puts out a release. Talking about google. I cannot believe how wrong people are and how stupid people are. I am taking some people to task. The people who pulled the trigger, down 20 on google l. Theyre in my sights. Most important question Seahawks Seahawks patriots. Its 3517, patriots. What . Does your boy sherman know this. Talking about not playing. My advice to r. Sherman, i traded the day that my one of my kids was born and i regret that and will all my life. I just think that patriots have the best second best defense in the league after the seahawks. If you only have 17 yards running and win a game its the kraft year. Hello gronk. I love the seahawks. See you for shake shack. Well get Consumer Sentiment and shake shack in a moment. Good friday morning. Welcome back to squawk on the street. As we await for the first trade from shake shack observe at post 8. Prices at 21 indicated 44 to 46. At these levels going up more than 100 . Well talk to danny meyer and Randy Garutti in a little bit. Im Carl Quintanilla with sara eisen, simon hobbs, david faber. Dow is flat down 25. Visa adding a bit. But will add less down the road once that 4 for 1 split becomes official. Oil doing well above 45. Breaking news here. Consumer sentiment after chicago pmi out not too long ago. Rick . Well keep in mine that the midjanuary read off the Richter Scale for michigan. So here we go. 98. 1. Last last month mid month, 98. 2 stands. 98. 2 is the best since january of 04. So the notion that we dipped by a tick isnt going to make much difference. So, very very solid number. And i think that we need to go no farther than one more to explain it along with the big consumer confident number that we had last look. And that is of course gasoline. 1. 68 on tenyear note yields. Its 50 basis points down on the year and still in january speaks for itself. Back to you. Thank you for that. One more check here of shake shack, indicating 44 to 46 if youre not familiar with the burger chain, founded 11 years ago. 63 shacks around the world, 9 countries a concept they call fine casual. On a week where mcdonalds with all of its troubles switched horses in ceos. Well have first on cnbc shake shack founder danny meyer and Randy Garutti, the ceo joining us, once we get the first trade from ticker shak. Lets egg checkcheck on the markets. Dow and s p struggling to hit positive territory. Dow down 50 points. Nasdaq a lift from surge in amazon shares after better than expected earnings. Joining us Morgan Stanleys chief u. S. Strategist adam parker. You know how the january barometer goes down month for january, down year. Didnt happen last year but i think it happens 88 of the time. Is this an omen . No, i think, to me, thats astrology. You need 10,000 year before you can get any statistical significance out of than i wouldnt marry myself to that stuff. You need to believe earnings are growing and thats what the key variable will be as we head through the rest of earnings season. You say earnings are growing. Have you been disappointed with what youve seen so far . Everyone from google to microsoft to caterpillar affected by the strong dollar. By weaker oil prices. Its been somewhat negative. Do you have you to revise down based on the fact that earnings has been sluggish so far . Actually no numbers are coming in about what we expected. Above the bottom of consensus expectation setting in. The good news is you had nine weeks ago a bottom number that looked like 14 earnings growth. All the way down to 6 growth. I think 6 is right. All ten sectors of the market have seen downward revisions. To me it will be certainly places in the consumer and other areas with lower input costs that will see upside later in the year. I leakike 6 . Numbers are coming in where i expected. What youre saying what people are saying for the Fourth Quarter what were reporting now from whats happened is above expectations. The issue is looking forward for the rest of the year. Ive got work here from lindsey bell at s p capital iq. I think its one of the most important things that happened this week. Shes showing current estimates for 2015 a rise of 3. 7. Thats significantly below the 7. 5 growth expected last year and its well below the 12. 2 growth that was expected for 2015 at the start of people writing those estimates some theres a huge pulldown on what the ceos are saying and what we can expect the rest of the year and thats a fundamental deterrent for a rally, isnt it . Lets me give you points on that simon. Theres been 39 full years of forward earnings from the sell side. 33 of those years, the january estimates were too high. The six years they were too low, all recession recoveries or the year after. Everybody knows sellside estimates can be too optimistic. On average during 39 years january expectations for 14 growth and the actual growth was 6. Numbers come down all year. What matters this years earnings above last years earnings . What probability do you assign to bears. Were not recommending areas hardest hit, we dont like staples, machinery, chemicals, health care were not recommending those areas because you want to play that relative revisions game. The consumersurrencys going to hurt. 125 for 2015 i think they theyre about right. Three, four bucks downside currency and industrials too high. Three, four bucks upside as the year transpires because theres a lot of places that benefit from lower rates from lower oil. Energy shares are leading. But this has been a painful one. Upgrading energy in december and its hurting you like a packers loss to the seahawks. When will Energy Companies rebound . You have to wait for the bottom in oil prices . Its been okay. A slight net negative. But three prongs to the thesis. Energy stocks are cyclical. All seven times in past theyve gone down this much they outperformed six months later. You have to be early, buy them two, three months before the earnings revision bottom. You cant wait for them to bottom the third point, valuation. Pricetobook, again it could be imparred but the most effective, the stocks are cheap. I think youve got to be buying them here on a belief that oil will be higher you know 12 18 months down the line. I want to ask you about gdp out this morning. A bit disappointing on the headline number 2. 6. 4. 3 increase in Consumer Spending is a hopeful sign. What do you think it tells us about the economy and the momentum heading into this year . Look i think the u. S. Economys doing okay. Biggest overweight in our portfolio is Consumer Discretionary because i think youll see upwards revision. Im hedged with the energy bet. I think the economy in the u. S. Is doing well to be honest with you. I think theres a reasonable chance that this will end up being a long economic expansion. Were probably in that dip buying mode unless we change our mine on the quarter behavior. I know youre bullish on the market for the next few years here. Chief u. S. Equity strategist at microsoft morgan stanley. Alltime high for apple at 120. On a market cap basis, there have been shares outstanding that have been reduced. Currently 703 billion, got to get back to 715 billion. Thats as high as its been since december 1980. Jim stewart will talk about the reversal in fortunes for apple. Amazon in the spotlight, after blowing away analysts estimates the way surprise surge in estimate. Shares real rally 10 . Google failing to impress wall street with a revenue miss. The internet giant citing rising dollar and slowing growth in ad clicks. The stock up there as we showing at the moment 3 . Lets bring in gene munster. Hello. Before we go further, what is the view on apple, give than apple is grabbing headlines. You cover that stock. Investors are starting to understand product cycle is bigger and deeper than initially thought. One quick takeaway 17 Global Market shares for smartphones in the december quarter. If they apply that for the rest of 2015 that would apply 20 upside to the street numbers. I think that kind 0 math starting to res nature with investors and thats why the stocks moving higher. What is your price target at moment gene . At 135. How do you feel about that . I feel very good. If you look at for example, march quarter, streets looking for 25 i phone growth. They did 46 in the december quarter. Obviously the launch quarter. If they grow at a similar rate youll see the stock move higher, in anticipation of that. The big picture is this. They havent had a competitive offer in the samsung larger phone. They do now. Theyll reap the benefits of that in the next year. Talk about amazon. A lot of people are excited theyve been able to prove the potential, lest anybody forget they can make profits if they wanted to. Now that youve seen what theyve come through with and the big surge in prime subscriptions, which is key. There was a sea change last night in terms of how the companys messaging its margin profile going forward. Thats been the critical issue for investors, getting their heads around how profitability will play out. The cfo mentioned that theyve been in heavy investment cycle and been as in past tense, and more of a focus on productivity. Productivity is basically code for margins. So since thats the first time theyve talked about what that does is give us some optimism this isnt some roller coaster of margins weve had with amazon in the past few years. The amazons more focused on profits, robots working on their behalf and that will benefit the stock going forward. Today, amazon on track for its best day since april 2012. What does that mean for valuation . What does this margin change mean in terms of valuing the stock . It gives us more confidence to use an ebitda multiple in value. So our price target is 420. What we use is 17 multiple in our 2016 ebitda. Its a lot of numbers. But the bottom line is given the greater focus on productivity, it gives us more comfort at using ebitda multiple, some investors say were too early, this is a head fake. We dont think it is but thats how we get to 420. Let me push back on that gene. Even now, the suggestion that is the profitability could be shortlived. I think the expectations it could be 50 million profit to a loss of 450 million moving forward. They havent said that theyre going to abandon, for example, the china expansion. If bezos pushes in the other direction, your view could seem very temporary. Well you know again, amazon could invest in a lot of different areas, it could impact profitability and thats investors concern. Im putting a lot of weight into the comments on the call that suggested theyre going to be more focused on than our point, we think they have some undeniable leverage in the model. I mentioned robotics. The other thing how fastly theyve grown fulfillment, basically overbuilt. The combinations of two will create the higher margin even if amazon goes on these boondoggle spending adventures. As youve been talking, shake shack officially opened for trading a gain of 122 . 46. 54 the last price, after pricing at 21. Already increased 17 to 19. Not bad for a hamburger stand that opened over ten years ago. Took them five years to go from one location to their second location. And now unbelievable evaluation. The plans are ambitious, in terms of expanding beyond here ten locations per year some say thats conservative. Obviously theyre going to be using proceeds from the successful ipo on expanding and growing. The question, how it does out of new york. The brand is the strongest in manhattan and the financials are the strongest in manhattan as well including the margin including the unit volumes. Expect to open ten stores a year for the foreseeable future. They think probably 63 all around the world. Burgers, if you havent heard, the biggest dineout segment. 72 billion in 2013 sales. Pizza zaps pizzas the second biggest category, half of the size of burgers. Talking about five guys and mcdonalds and shake shack and jackinthebox, theres a lot of room. White space they call it in the industry. This follows a number of other successful ipos and fast pops we had habit burger remember that . A 100 . They picked a good time in terms of category toe go public. Fast casual hamburgers. This is clearly a hot area because once you can establish a franchise brand that people want, your marginsen crease rapidly. The question is always after you get that initial bump up maybe one or two ways of franchisees switching other brands can you maintain momentum momentum . Its not a franchiseheavy model shake shack. I cant believe, with this cheerleading, they might not pivot on that model moving forward. I cant believe if the doors are batted down that they would not change that moving forward. Well talk to danny meyer. His corporate philosophy keep the business as small theoreticry as he possibly can. That may change down the road. Well talk to meyer, of course, and a tale of two decades how apple overtook microsoft and how it can avoid the same mistakes. Jim stewart of the New York Times. How to invest in a Super Bowl Ad 4. 5 million a spot. New record. Well talk to Arnold Donald and of course with shake shack open danny meyer and Randy Garutti in a moment. Opinions. Theres no shortage in this world. Who do you trust . Whose analysis is accurate . How do you make sense of it all . A simple unbiased stock score consolidated from the opinions of independent analysts. Is that too much to ask . Nope. Equity summary score powered by starmine, will help you execute your ideas with speed and conviction. And its only on fidelity. Com. Open an account and find more of the expertise you need to be a better investor. If you havent heard, shake shack is open for trade, priced at 21 currently trading 49. 01. Danny meyer, founder of shake shack, ceo of the Union Square Hospitality group. Danny, you have had hopes for this chain from the beginning but did you expect it today . We didnt have any dreams that today would ever come. We wanted to open a hot dog cart to help a cart in Madison Square park. When you put a great product together with amazing people with the heart you felt on the floor, these people are doing and its our staff that this day is for. Were so excited. Well danny, you know i love shake shack, and ive known you for a very long time and im very proud of our relationship. But does this put too much pressure on you . Honestly, the stock supposed to come to 21 it went up all week. Suddenly a valuation i dont know whether when we talk all the time whether it isnt too much. I think it puts pressure on you. But Randy Garuttis just an exceptional ceo of shake shack. And what we do weve said this many times, we cook one burger at a time with one smile at a time. I dont know how you value that. Hang on. Forgive me if my math is wrong, but its like 1. 25 billion and youve got how many outlets. Weve spoke to our staff, many never had a jobthey started at shake shack. They were here on the floor of the New York Stock Exchange and we said youre going to see a loose of numbers and hear about a lot of numbers today. Forget. This is about your hearts. What do you think, danny, for valuation of 1. 75 billion for 63 restaurants . Were grateful for the people who love our bran. Weve always tried to offer great value and for whatever reason, people love standing in line for these burgers. Its true. Maybe that translates to the stock, too. Talk about where the growth is going to come from. Same shack sales have slowed over time and its largely about new stores is it not. Its largely about new stores. Whats happening, theres a Seismic Shift in how people are eating today. People are trading up from qse. I know my kids and my kids generation, theyre not eating fast food. They want more. They expect more. Weve been a part of leading that for the ten years, i think that people who understand this story, people now part of this family understand we have just gotten started. And this is a growth story for decades to come. Do you worry about the brand is so strong in new york and the financials are stronger in new york taking that and opening ambitiously ten stores a year outside of new york. 234i7banyone who has been to our opening in chicago, atlanta, las vegas, dubai, for that matter felt that what we do look were serving hamburgers. Were serving the most massive fuel product in a world to a group of people expecting something different. We know that thats resonating around this couldnt interest and around the world. Thats our goal. But its not competition, even in the area youre playing in. I was in l. A. , i went to in and out burger its delicious. Im a shake shack customer i love. Five guys. I can go through a lot of name where you have competition. Look at it this way, there is certainlied a trade up and arms race for a lot of better burgers. What shake shack does, we put it altogether. We make it a place you can take a date. You can take your mom, you can have a beer. We just make it a place that is okay for every occasion. Thats what makes it different. Thats what people are guy buying into for the long term. Mcdonalds is in the news. What happens if the ceo says ive got 36,000 restaurants that need a boost, please join me please work with me please do something with me give me some of your secret sauce for a business that is thousands of times bigger than you. What would you say . He could make you very rich man. Not that youre not already obviously. That would not be my motivation. Would you rule it out. Shake shack is about culture. I dont know how you can scale culture from 63 to 35,000 overnight. Every time we open a new shake shack, the Management Team that opens it are stars who came from one of our other restaurants. And weve been able to consistently grow shake shacks where you walk in it feels different. Were going to grow at the proper pace. You think there may be something structurally wrong with a restaurant chain that is 63,000 restaurants, from what youre saying in the new world. Im not a restaurant consultant. What were going to do is as soon as the excitement is over, cooking one burger at a time. Im so proud of the team. Can you compensate the team better. Woo doughe do compensate them. So many who got them on the team are shareholders today. Every single manager at shake shack, every one, got options today and is going to be a part of the story moving forward. That has got what got us here. Thats our commitment as we go. Also you have revenue sharing and you pay pretty much above industry norms, right. We do. Every mark youre in. We do why president obama came to the shake shack in washington to give that man a pat on the back. I think he liked the burger too. What do you think about the consumer and what the consumer wants today . People say they want healthier. Your burgers arent healthier even than mcdonalds. Consumers want pleasure. They want to feel good. They want it to taste good. And they dont want to deny themselves pleasure but when they go for a burger or go for a shake, they want to know that it was carefully sourced, carefully made, and thats it. Its kind of like you know when i go out to get a steak, i cant do that every single night of my life but when i do it better be a good one, cooked by somebody who cared how that cow was raised. Randy, im thinking about david mentions competition, im thinking of what a burger in and out, chains where people around the country may know them in their part of the world but not national chains, right . Is shake shack going to be a national chain, these 450 shacks that you envision is that going to be nationwide . It should be. The brand power a unique thing happening. Theres a reason were on saturday night live on saturday night. The brand reached a beloved feeling around the world. We were born in the social media age. Our people connect with us in a different way. I dont think distance really matters. I think its about what you bring. When people feel right. What about margins nonnew york shacks not what they are in the city. Its only one manhattan. What weve talked about moving forward, industry leading opportunity outside of new york and were incredibly proud of that. Isnt it nice to have an incredible base home here in new york that will help us grow from there. Danny, youve been a successful restaurant oour for many years. It takes you a different level, stock price of 49 given your ownership stake, would you be tempted to sell shares to realize the enormous wealth youve gained as a result of shake shack hang on for years to come. I do everything for keeps. Take a look at a zagat survey 3 of new yorks favorite 6 restaurants are ours. One is 30 years old, one is 20 years old, gramercy tavern, and theres shake shack, 10 years old. We do things for keeps. Thats how im looking at this. You expect to be part of it for a very long period of time. Absolutely. Would you sell stock . Ill talk to my financial adviser. But thats not thats not whats on my mind today. Congratulations. To your employees, fantastic work danny meyer. Fantastic work randy. Were starving. I hear theres a vegetarian. The Shroom Burger its got your name on it. Danny, randy, congratulations. Shake shack, currently 48. 95. More squawk on the street back after a break. I am never getting married. Never. Psssssh. Guaranteed. You picked a beautiful ring. Thank you. Were never having kids. Mmmmmm. Breathe. I love it here. We are never moving to the suburbs. We are never getting one of those. We are never having another kid. Im pregnant. I am never letting go. For all the nevers in life state farm is there. Getting breaking news this morning on greece. Regarding the new prime ministers stance with his creditors. Michelle carusocabrera has more on that. Bring up the threeyear yield for greece so you can see instant Market Reaction approaching 20 as a result of this huge move. So heres what happened. The new finance minister has said that hes not going to seek an extension of the bailout process, past theth of february. Thats an arcane piece of process. What you need to know about that, its yet a more antagonistic stance than what theyve taken already since coming into power just a week ago, just on monday. And youve seen yields rise throughout the week here. Throwing down yet another gauntlet to say were not even going to respect the process that you have set up when it comes to the greek bailout program, showing that these are going to be very very tense negotiations, which already started today with a representative from the European Union arriving in athens to try to begin the discussion. Back to you. I want to reframe this if i may. This is a negotiating tactic. This is not theyre not breaking off negotiations with the troika. What theyre saying we have a line in the sand its february 28th, it remains a line in the sand and we will not ask you to extend our bailout unless we get what we want. And that is an extension of the debt and maybe well give you structural reform. This is not a Nuclear Explosion for markets. This is simply part of a bruiser in the case of the finance minister the new finance minister stating his case before he tours europe rome paris, london monday tuesday, wednesday. Im sure the people that bought the yield at 13 are thinking the same thing. I wanted to add value there. I thought it was worth while. I agree, yeah. Part of negotiation. We have to get used to this it may not be necessary. I think i think the next step to watch to see whats happened with the banks because the capital outflows have been dramatic. We talk about, oh when are they going to come to some agreement . They may be forced or brought to their knees by the Banking System if theres enough capital flight and the ecb says were not going to take it anymore. Well have to see. Another key, the most key player in the whole thing. Thank you very much michelle. To both of your points, euro down a quarter of a percent. Overseas tensions, a month after that massive Interest Rate increase, to stop the russian ruble from plummeting russia surprised the markets and lowered Interest Rates. The ruble has been slipping. Strong dollar weak ruble. What is the central bank and the finance ministry and government trying to signal here jeff. Reporter i think they will be very pleased today because the central bankers managed to bring Interest Rates down two Percentage Points and effectively only seen 2 decline on the dollar ruble rate here. We are down more than that. They think they have a window of opportunity thats been provided by the slower decline in the oil price of late. Thats also arrested some of the volatility that weve seen in the ruble. I spoke to the finance minister yesterday, and he said he thought it was about time rates came down and the central bank obviously keyed into that. The Banking System will be delighted by this. I spoke to the ceo of vtb bank russias Second Largest Bank and he said its time rates were lowered. Lets listen. Im not a support of high Interest Rate. I think the Central Banks should bring it down. It stays high for too long i think it will create a lot of problem. We expect already negative economic growth, gdp growth. Reporter bear in mind this is an economy in all sorts of trouble, low oil price, ruble volatility sanctions have just been extended by european foreign ministers. In the december data we saw incomes contract more than 7 and wages fall nearly 5 . So a 2 move today on Interest Rates is not going to bail them out, but i think a lot of people here in moscow think at least were heading in right direction now if were after growth. Thank you for that. When we return the New York Times jim stewart on microsoft and apple. Back in a couple of minutes. On the heels of huge earnings shares of apple are hitting a new alltime high this morning. The companys market cap valued at 703 million. Worth noting because shares outstanding have been reduced, apple surged past 715 to hit a new market cap high. Technical stuff there joining us at post 9, Pulitzer Prize winning columnist, jim stewart. We got earnings from microsoft and the divergence of fortunes between the two. Apple numbers you have to step back and say, wow, and then you know what more can you say . I was really struck by this comparison that this week and today even more so, the market cap of apple is not only bigger than microsoft it double. Microsoft once the biggest Market Cap Company in the world. I thought it would be great to step back and say, how did this happen . How did apple surge so far ahead, once given up for dead, and how did microsoft, in a sense, falter . I thought the answers were really interesting. What did you conclude . A leadership issue. Leadership is definitely part of. One striking thing of apple that is kind of unique its willingness to in fact destroy its own markets to get a bigger share of something else. I mean the it could have put a mode around the ipod and tried to protect that. No, it put music on the phones. Ipod is gone. Now the big screen iphone is threat. Ing the ipad. You need an ipad if you get an iphone 6 plus . Maybe not then dont seem to care. That is very unusual. This willingness to cannibalize your own dominant product is is very unusual. I think microsoft had the opposite problem. Put the mote around windows clung to the monopoly position and the world left the pc behind. Only thing i would ask, now that we are in humongous numbers, whether it comes to apples profits or revenues does the law after large numbers come in and make it hard to move the needle on growing. The answer is, yes and no. Yes, i pointed this out, at this size you cannot have 15 , 20 average annual Revenue Growth every year or soon youre bigger than the world economy. An interesting thing about apple, its either lucky or brill yn oriant or some combination of both, they targeted a huge market then have midteen share in the smartphone market. Thats a call for microsoft. They have 95 , huge share of the pc operating system. How do you grow . There is room to grow. And the numbers are big, but in relative terms, valuation looks quite reasonable. Amazing how many pundits wanted to make a cheap phone for china. Dealing with a population that doesnt make the amount of money in the states youve got to make a cheap phone. They went the opposite direction and thats what paid off. They experimented with the 5c it didnt do much. What apple realizes is their brand is a premium product. You produce something thats this good people everywhere will save their money, do whatever they have to do to get these things. It gives you a real competitive advantage. Its think its a smart strategy and one room for growth. The question is can they do it again . Thats what everybody wants to know. Of course, nobody can envision another anything like the iphone. On the other hand when microsoft was king of pc world, nobody could envision anything knocking out the pc. Who knows what the future holds. Do they benefit from the thak in they had a neardeath experience and that being apple, you know, from what was a height of success to almost bankruptcy . I think thats a good point. I think, yes, it did. Neardeath caused them to focus and did not take anything for granted. Nothing but success, i think, reads complacency. That never happened to steve jobs. He preached this all along, never take anything for granted, dont assume because were ahead were always going to be. If we dont reinvent ourselves, somebody else will come along and blow us out of the water and thats been effective. Neardeath from a corporate standpoint and as he said at stanford in the speech knowing youre going to die changes your willingness isnt elephant in the room hes not there anymore and the question becomes whoever they recruit from rest of the world who are successful who may not have tasted failure, whether they can replicate that . Thats true but you have to give tim cook credit. He decided to go ahead with the big screen iphone. You know people told me jobs would never have done than that. He was hostile. There is a danger the big screen phone cannibalizes the ipad. Cook seems willing to risk that this is the apple way, if this happens, kills the ipad so be it, well have a bigger and better product in its place. Well read the column this weekend. Dominic chu, a quick market flash here. Two Credit Card Companies on fire this morning. Start with mastercard posted better than expected earnings on increased number amount of Consumer Spending. During the quarter the Company Repurchased 2. 1 million shares of its own stock. Shares up 2 this morning and then after the bell late last night, visa came out with their number beating estimate business 4 cents per share. The Company Announced a 4 for 1 stock plit. Split, responsible for 90 points of the overall gain move in the market. Were watching those stocks closely. Back over to you. Dom, thank you very much. Coming up carnivals ceo will join us in a cnbc exclusiveness view giving away a cruise a year for life as part of its super bowl campaign. Thats after this 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. Theres nothing more romantic than a spontaneous moment. So why pause to take a pill . And why stop what youre doing to find a bathroom . With cialis for daily use, you dont have to plan around either. Its the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. Plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Why pause the moment . Ask your doctor about cialis for daily use. For a free 30tablet trial go to cialis. Com on sunday the cruise giant carnival will be advertising during super bowl for the very first time. As part of the its almost twoyear recovery. Our parent nbc selling out of Super Bowl Ad inventory at an average price of 430 million. Thats more than fox managed to muster last year. Joining us for an exclusive interview, Arnold Donald ceo of carnival. Welcome back to the program. Nice to see you. Good morning, simon. Always good to be with you. So there are four adverts on line customers can see and vote which one goes through for an airing sunday night. Why have you decided to make the break. Why spend this sort of money now . Well first of all the super bowls the biggest stage there is. We have four spots that guests and future guests can vote on. Our goal is to get more people to introduce them to the great vacation experience and a great vacation value that cruising is and it represents all nine of our brands. Yeah. Two of those spots have already been featured. Go ahead. I didnt mean to interrupt you. Theres a delay here. Just on this we know for example, just to be more current about it there is brutal pricing, tell me what youre finding in the caribbean because Royal Caribbean stock did so badly yesterday. Too many ships in the caribbean. Are you sure its a good idea to stick with the idea of advertising all nine brands an industry push . I saw an add, offering 50 off a second traveler, 200 to spend. Shouldnt you you be taking them on directly . Well you know not really. Our bigger competition, of course, is people who have never cruised before. Its not the other cruise lines. So we would like them to be successful. In terms of the caribbean, its a little crowded now but it will ease up late in the Second Quarter in the rest of the year. But the reality for these spots, cruise versions one of the spots, one of the major networks, had a show featuring the greatest super bowl commercials ever and highlighted that spot. Another major publication, highlighted one of other spots getaway, that highlighted as perhaps the best super bowl commercial. We may not run either one of those. We have two spots, that would encourage all of the voters to be introduced to the greatest experience of a vacation that a cruise really is. So much inventory, so much crowding on the u. S. Market. It is imperative for all of you to create the impression that youre doing more in china, putting supply in china because its growing so fast. It remind me a little bit of in the dotcom area everybody had to have an internet prens. Sence. Given that you have 100 ships what will move the needle do you any in china. Chinas already moving. We have four ships home ported in change high. Were profitable in china. Weve signed a second memo of understanding with a major entity in china, the merchant group. Were excited about it. Were successful there today. Were the largest in china. Looking forward to additional growth. But were also looking forward to growth in europe and the United States and continued growth in the caribbean. So, were excited about the cruise business. As you know simon, we were up 25 in our eps, 14 over 13 and our guidance to be up another 25 in 15 over 14. Were headed fast and hard towards double digit return of Investor Capital in the next three to four years. As far as sunday seahawks or patriots . Well the Seattle Seahawks Princess Cruise Lines the official cruise line of the seattle saw hawks. We have to be biased since princess is one of our brands. But we love our those who cruise from the northeast patriot fans and looking forward to a great game. More importantly, a great experience with the commercial exciting people about cruising. Good to see you. Thank you for your time arnold. Us. Take care. Enjoy the game. I hope you get to go. Coming up at 11 00 a. M. Mitt romney will be holding a Conference Call with his supporters to provide an update on his decision for 2016. Well bring you all the headlines on squawk alley. Welcome back to squawk on the street. Rick santelli with alex. We will dig deeper in chicagos ism report. One thing i can tell you look january to january which encompasses 13 data points eight of those in the past have had a 60 handle. This number the best since november close to 60 but a whisker under it may look good and it is good. Your comments of the report for me. This is another steady solid report basically we reversed some of the weakness in december. We had the barometer up 0. 6, 59. 4, best since november new order backlogs and production up, thats a tryifectatrifecta, we like to see that since november. That naturally pulling employment up. Up 3. 7 to 60. 1 its best since november 2013. Now what i am hearing about employment is it just continues to be contingent work force, highly flexible. A lot of the parttime workers going to be permanent workers going to contract actual work. Were getting like this big paradigm shift where permanent hiring is not so big anymore. You think some of that has to do with aca, any mention of that in the response . Not so much. The other thing, supplier deliveries couny sies down a little bit but the purchasers take that as a positive. To me if i look at chicago and look at the gdp report and i look at several reports, housing, what i find is is that we still have this surge and then distribution. We have a lot of crazy wild starts but its the sustainability many investors are looking for and the u. S. Economy thats not here. To me inventories drop of 15. 4 to 40. 1 you told me thats the lowest since july of 13, be supplier delivery times down you say its a positive and it is, but its a distribution. We dont keep the momentum. Your thoughts . Right. I looked at that number and it was the second biggest drop on record and you dont really get on inventories. We dont get those kind of moves. This was by design. Were in a cyclical pat were we want to get those kind of goods out the door. We have breaking news to Carl Quintanilla. We are getting word mitt romney is telling supporters he will not run in 2016. Eamon javers in washington with more on that. Thats right. Nbc news learned that mitt romney is telling folks he will not run for president in 2016. That puts the end to a little boom that weve had here of mitt romney news. A lot of people speculating he might run and this morning, we heard that he was convening a Conference Call at 11 00 a. M. For his close supporters to tell them what his decision has been. Nbc news is learning that the decision is not to run. That will clear the field now in the republican on she republican side for jeb bush of florida to make his move. They were pulling from the same group of donors and particularly staffers. We saw the key romney aide from iowa report to the bush camp earlier this week. That was a key defection. Carl clearly mitt romney now clearing the way, jeb bush looks to be the big winner of this decision this morning. All right. Thanks very much. Maybe ann romney got her way when she said, no no no. Thank you. More on Amazon Google apple, big movers in todays sessions. Squawk alley all over it. Were back in two. Good morning. It is 8 00 at Amazon Headquarters in washington 11 00 a. M. On wall street where today the New York Stock Exchange has been rebranded the new york shack exchange for shake shack, kwasquawk alley is live. Shake your money maker you know i got it if you want to come get it stand next to the money shake your money maker you know i got it if you want to come get it stand next to the money like hey hey hey and good friday morning. Joining us nick bilton tech columnist for the New York Times, along with Eric Sheridan internet Interactive Entertainment analyst with ubs. Well get to you on a busy day, kayla tausche, jon fortt and i on set, watching a market that is lower, but being buoyed by thes like of as visa amazon and apple. Alltime high for apple at 119, almost 120 a share, going back to the ipo in december of 1980. Yeah. And the word of the earnings season in tech is ecosystem i think, and apple is the standout here. They are the ones who really have this combination of retail of