Transcripts For CNBC Squawk On The Street 20150226

Win streak. Data coming out as well. Ibm kicking off its investor day. Ceo ginny rometty. An exclusive interview. Net neutrality, the fcc taking up what has become a contentious issue. But waiting on important details for Internet Companies like google and netflix still to be determined. First up wall street digesting Economic Data ahead of the opening bell. Consumer prices down. 7. Strip out food and Energy Prices up. 2. Durables nice, above expectations, above 2. 8. Weekly jobless claims jumped to 313,000. Dow closed at record high. Nasdaq ended the tensession winning streak. Within a stones throw of 5,000. A level at which its closed only two times in history. Take it out today because theres a lot of good chatter in individual tech names. I would tell you we had a gauntlet this morning with the runthrough. When you get through a gauntlet nothing that is earth shaking, whether claims durables, inflation. Ive got nothing earth shaking. I dont feel its going to do anything other than be a decent background for individual stocks, whether mergers, david, or whether it be earnings per share beats that we had a number of in the last 24 hours. European economy showing some signs of life. Jobless down more than expected. Economic confident held steady. Uk gdp was a beat. Insanely low yields. I listened to on another network, bloomberg the irish finance minister talking about you never thought the irish tenyear under 1 they had the best growth in europe. Portugal bonds are low. The thing that makes me excited about this market is not just europe but the chinese numbers in the last couple of days. Third straight day, up for baltic freight. Shanghai up a couple percent. Starting to get december numbers. Look, to get to 5000, youve got to str ahave a lot of things going. Brazil, i see a lot of things going. I put that in so people dont think im nuts because brazil numbers out of petrobras, somethings very wrong in brazil. Scarily wrong. Have a lot of coffee in brazil, the price is down. Frank sinatra 100. Hiring jpmorgan to sell off assets too. Bullard this morning on squawk box, two hours with bullard, amazing amount of time in which they talked about a lot of things monetary policy. But where bullard sees jobless rates going in the second half of this year. Take a listen. These labor markets are improving rapidly that i think unemployment will be down below 5 in the second half of this year. So if youre sitting around you know, you havent come off of zero and the unemployment rates come down below 5 that seems extreme. Bottomed out at 4. 9 in 06. Imagine going back there again. A lot of numbers prerecession numbers that were seeing but tend to be on a micro. Its home depot, lowes saying things. Macro numbers, price of housing going up. Housing onning aga great, not great. Its remodel. Appreciate what hes saying about job growth. Texas, not bad. Texas would be the epicenter of what could bring us down job growth its oil. A lot to like. We do not we can handle 100 basis points. Thats what i was saying. Within thing not back to prerecession levels yields on bonds or any bonds out there at all. Today talking about europe watchingwatch watching spanish yields down 13 basis points, 1. 25. A lot of insanity. How do you invest there . The german bund. 29. This is tenyear paper. You know paying them to buy this paper and thats a ridiculous thing. But now i know when you go jim cramer on twitter say we could go to alltime highs but its the bond market. I come back to the same thing over and over. You know what . They dont asterisk those gains. Youre in salesforce. Com new york ones going to say the reason mark made that number is because of the portuguese ten year. It doesnt happen dont conflate the two. It doesnt work. Ibm holding its annual investor briefing. The chairman and ceo has taken the stage, beginning some remarks than will go on for some time. The schedule calls for her to sort of present there she is and youll hear from the cfo, a number of questions, and answer periods as well for the company. The news out of it thus far, at least, is that theyre going to be shifting this is their words 4 billion in spending to strategic compare sovs of sstive ss comparatives of cloud. No details where shifting from there from traditional old revenues theyll decline, low Single Digits. Its spending, not revenues. Im saying theyre going to starve the stuff, the cash cow, what are you going to say . Expect growth areas, if you will, reposition the company, will represent as much as 40 billion of revenues by 2018 thats 40 of what they expect total revenues to be in 2018. Provided Everything Else holds in thering exactly. And it was theyre about 27 we know from last year. And thats the part of the company thats growing. Right. This is the repositioning that shes going to be talking about a great deal today, in terms of what shes trying to done this is a company that divested 7 billion worth of revenues in 2014. Bought back more than 50 of the stock in the last four years. Is the 4 billion in spending . Claiming absolutely not. Dvr will dividend to grow. The problem with ibm is sales force. Sales force is mobile, social, cloud, connectivity. This companies 27 . A lot of companies trying to get to where sales force is. They say theyre going to be 10 billion in the business there right. Ibm, if they can pull this off, people will like it. If they cant, the stock cannot go higher. Also dealing with excuse me carl, currency headwinds. They see currency hurting headwind growth by 7 points First Quarter and revenue 6 points for all of 2015 thats a big number. 6 . Salesforce. Com i feel like they said they gave us some of the guidance when they reported earnings. But its significant, of course coming on the heels, as it does of hewlettpackard a couple of days ago with its big warning if you will in guidance being lowered. I believe sooner it was tuesday afternoon. Hewlettpackard feels like a lifetime ago. So challenged. Theyre challenged by these companies that youre seeing way higher on the ticker if youre at home. Its difficult to catch up. I mean oracle and s. A. P. Have to catch up. Ibm needs to talk about apple and twitter. That sounds strange. Apple and twitter mentioned on the Conference Call. It helps their multiple. Its not a bogus narrative. Theyre doing a lot of business with apple and mobile. Down two years in row. Buffett on monday we hope to get clarity of his opinion of ibm and exxon mobil and all of his holdings along with the fact that he says he eats like a 6yearold. Saw that yesterday. We know that right . Dairy queen and candy, and cocacolas. I like things explained to me like a 5yearold reddit. I say that he increases position, berkshire increased its position in ibm, something of a surprise i think to those who perhaps thought that given the questions surrounding his decision to go in there in the first place, because he didnt Love Technology stories or buybacks. I know. But hes been there. Its 11 plus billion stake for berkshire. Incredble. They own a lot of ibm in they have 27 has to go to 40 its got to be done in a way that its not because of the revenues dropped to 800 to 80 billion right. They have this challenge, which is how quickly is the other part going to be bleed off. No doubt. Talking 25 billion in revenues now to what they say will be 40 billion by 2018. Do the math. 15 billion in incremental Revenue Growth. They could go to 100 social mobile Cloud Security but thats because of rest of it just disappears. Maybe theyd get a higher multiple and it goes thats the the play where they have three engines out and the fourth is still working. The fourth goes out, maybe they can still fly. Take them longer to get there. Need captain sully in the cockpit. Yes. The fcc expected to approve new nul ruhle new rules. The new rules providers prohibit prohibited in providing fast lanes. Cable and Telecom Companies expected to launch a number of lawsuits if new rules are passed. Highly politicized. All of the talk about unprecedented cooperation between the fcc and the white house, the fact there was no testimony on capitol hill some commissioners calling for a delay in the vote. Its going to be interesting today. In terms of irony, im talking irony, its funny netflix, we have house of cards this weekend, your big enemy is the buffer. Yeah. Its a welltimed political issue. I dont think theres a great deal of question as to the vote. Its expected to go 32, in favor, of course. The question will be the rules. Were not necessarily going to be getting those well get them soon. Right. Not probably today i dont believe. People understand the issue in general . I dont think they fully do. The question is so you regulate broadband, youre determining by wait that broadband means 25 megabits coming down the pike which means its more or less cables product. 55 as defined, no competition within a given market. Will there be in i price controls is the question . Weve been told no. Forbearance on that maybe not but sort of a commitment there wont be. This is why the rules become very important as they pertain to what is now going to be treated as telecommunications service. War of words between various companies. Yesterday netflix tweeting out, what if the internet was so slow it loaded one word at a time in dont let comcast win. Battle for the net. Com. Thats where its at. Netflix already won the battle. They won it. That guy from tumblr from tumblr they made it work for them. Tumblr, did you have it to google on the netflix side but not sure where they want to be. You say the guy from tumblr won because i think he did he get a note from his mom to be out of middle school when he was on . Its amazing. Hes a grown man. Is he . Not to mention he could buy and sell you. Ten times over. Most of these people there are youngsters and dont augment themselves, theyre not going with the brione. Theyre going with the russell, the champion hanes brand. Like the greek finance minister ticked everybody off wearing tight jeans. That guy i told you, everyone says hes got pants by germany. They agree to absolutely nothing. The germans say fine europe wants growth. I dont know. When we come back salesforce surging in reaction to companys guidance. Hear what mark told cramer last night. Premarket. Weve not gotten to kohls sears, l brands this brutal downgrade of Abercrombie Fitch. More squawk on the street. My name is tony sartorio. Im a lineman for pg e out of the Concord Service center. I have lived here pretty much my whole life. I have been married for twelve years. I have 3 kids. I love living here and i love working in my hometown. At pg e we are always working to upgrade reliability to meet the demands of the customers. Im there to do the safest job possible not only for them, but everybody, myself included that lives in the community. Im very proud to do the work that i do and say that i am a lineman for pg e because its my hometown. Its a rewarding feeling. Ive got the power salesforce. Com, up sharply in the premarket after raising fullyear guidance posting Quarterly Earnings in line with estimates for the fiscal year. Salesforce became the fastest Enterprise Software company to reach 5 billion in revenue. Last night on mad money, mark sees more milestones ahead. Next quarter were going to be the fastest to 6 billion and youre right, jim, its absolutely ply dream and im dedicated to being the fastest to 10 billion you can see that. Look at deferred revenue number. Look at the amount thats already on the Balance Sheet that is not yet billed. Its amazing. Set to open at 70 bucks or above. Never been there in no 9 billion hes talking about on the books. The 10 billion goal should maybe reached faster than people think. Things stood out for me in the Conference Call was hes doing well in the consumer Package Goods business. And then doing very well in the financial vertical really took it in a lot of ways to s. A. P. By talking about cocacola, germany winning that. Talking about abb winning. Winning big partnerships in germany, s. A. P. Were coming for you. A moment hes back and forth, old friends with Larry Ellison but he says were coming after oracle, theyre the embedded. He said oracle has a fusion product. He goes they turn fusion into confusion. Analysts cloud doing well exactly where ibms going to try to position themselves in the analytics cloud. 177 billion in transactions. Ge doing all of its stuff on its handheld, with salesforce as is cisco. A remarkable Conference Call. Last year salesforce opened up in the aftermarket and went down. The big pyrowet led to twomonth decline in cloud social mobile stocks im betting the opposite today. Why the nasdaq 5000 is in sight. Workdays not going to get the same kind of love. 68 Revenue Growth never sneer at that. But Gross Margins down big for one part of the business and negative Free Cash Flow for the year 11 . 11 million Free Cash Flow this quarter. Guys are going to stan by because the Human Capital segment is very fast. I think it was a good quarter but not a salesforce quarter. Theyre doing something to point out marc is not doing, profitability can be sacrificed because the opportunitys so great and that became something that people turned on last year. Still profitability not as important as opportunity, and negative cash flow is what people didnt like last year. Maybe they can pull it off this year, i dont know. The stocks had a good move there how badly do you crave profit in this space . I need operating cash flow. For starters . Yeah. Thats good. Youll see a tab low data giving people what they want d. A. T. A. The part that ibms gunning for. You will see that company go up and the opportunitys great. People feel theyre doing both. What is great, a lot of people critical, when is he going to make money . Operating cash flow is money. Froe cash Free Cash Flow is money. The best kind of money. You cover cable companies. People wondered whether cable would be Free Cash Flow positive. Then it did turn quite positive. People bet again telecommunications when they didnt understand. Workdays more challenged because Revenue Growth is twice what benioffs delivered, twice. But one companys a 5 billion company but ones smaller. Work workday. One final point on cloud and web services at least, amazon 385. It getting close to levels its not seen. I saw something cross the wire about we got an obama official joining the company, according to politico. I didnt see that. I tell you amazon heres the chatter, right now people are saying when they break Amazon Web Services innate profitability in the company you did the documentary on amazon. I thought the Amazon Web Services, thats a separate company that may be the greatest. Its growing very quickly. Now, they do cut price all the time. So margins are not particularly high. But they are dominant provider to a certain extent of those services. People love to hate it. Carney, jay carney apparently. Jay carney going over. Talk where he would go. The human face now because they theyve got more pr. Stock hasnt seen 400 since last january. Its going there. Netflix and amazon foot race. When we come back cramers mad dash, count down to the opening bell. Another look at the premarket. Squawk on the street from post 9 in a minute. Opportunities arent always obvious. 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Abgo more than a chip play. Thats very important because they rely on a bunch of big suppliers like apple, if you want to blow the numbers away. I would say this company has been forever for sale. I dont think its thats why one of the reasons. How is the acquirer doing . Abgo should be up 11 12 points. Wow, look at that. Yeah. Now, heres one, david, free money here weve got free money in spain. You referenced spanish bonds. I did. How about this . Uil gets a bid. This is the old united alumnated, spanish companys buying them today. I regard that as takeover thursday. And also merger thursday because weve got this cyberonics merger with soren. Sorin, no k. Creating a new medical Device Company located in europe. Famously trying to do the brain in medical device. A lot of activity. Just a lot of excitement. Decent activity in m a. No blockbusters but a good heartbeat. A very important interview for ibm. Ibm coupled with what youre hearing from buffett monday, its a onetwo punch. 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Because everyone has retirement questions. Ameriprise created the exclusive confident retirement approach. To get the real answers you need. Start building your confident retirement today. Youre watching cnbc squawk on the street. Live from the Financial Capital of the world. Opening bell in a little more than a minutes time. Intraday highs for the s p, closing high for the dow and russell. Nasdaq within 29 points of 5000 waiting on a vote of Net Neutrality. Cross milestones potentially today. Amazon 15 bucks from 400. Netflix 20 bucks from 500. Facebook 80. A lot of reaction is to hewlettpackard. Hewlettpackard, Western Digital digital, micron, they captured the fancy. Put in intel, very negative note about intel, one analyst believes intel will have a down year. Out of the old into the new. And youre seeing that salesforce versus hewlett setting the tone and those stocks are high Growth Stocks what people want right now. You like a good pullback. Weve not gotten one though the ten year has come in. What does that say. We have stocks that rested like facebook and google. And theyve rested now ready. We saw that happen with mastercard ready after resting, under armour. High Growth Stocks resting. Now they can bust out. Google is resting . Thats what you call it . Interesting that piece, google in the journal youtube cant make money with it. Well talk about that. If we got together we could make money. Facebook manages to cobble together 3 billion. Facebook there was Insider Selling that got people down. Opening bell. At the big board, Etf Securities and Zacks Investment Research celebrating two new etfs. A new comedy sear is on abc. You mentioned the google storys interesting in the journal. Youtube with 4 billion in revenue, a billion viewers, no profit. And they sort of asked themselves, if ever is that going to happen. Its funny, i did a video for bar san miguel of me trying to pour a margarita. Instead the waitress takes over. Im thinking ive seen google call me, listen pay us 500. You know if you take an image of the nfl for a second youve got to pay them. Lets go through all of these things see whos using it to promote and say, well charge you. In my lifetime i want to run twitter google and i guarantee higher eps. Really. Yes, let me run those companies. Talking about clones and cybereye. Offcamera. Cyborgs. Dick c. Listen ways to make money. Ive got the google charge method going to blow you away. If thats your goal making money in. No. Running either of the two companies. Id get on that. On the confrienderence qualify can say we care about the stock price, going higher call me in. I can maybe change the attitude of the company. We care about the stock. You know what . We care about winning. Lets not forget that google has done fairly well in making money. Without your help. Yes. Since its inception. We know we can make more money. What are you giving up for the long term as you go for shortterm gains . David, i have both shortterm and longterm philosophy. You do . The same or completely different . Amex the Top Performing dow component. Its the best performing component of the week. Well deutsche takes it to a buy. They say you lose costco lose jetblue, you can make it up by managing expenses in other things. My Charitable Trust owns the stock. The Deutsche Bank note they costco cost them 75 cents, how is that how did we not know that. Amazing. 75 cents . A share. I call that material. Yes. Thats material. There, i cant help them. Im a member since 82. Kohls 1. 83 beat business 3 cents. Comps up 3. 7. Stocks had a big run. So has dillardsing back from the kind of who cares . Those are gasoline plays. A bit of remodeling at kohls. L brands beating by nine cents with 1. 89. Comps up six. Div hike by 46 . I like that people didnt like guidance. Youll see that go down. These are the revenge the shorts the stocks ran so much that theyre all coming in. But all of these companies are very good at managing expectations. I think youll find lb will be back up not long from now. Will sears ever be back up . Let me give you numbers from the quart that sears reported. Domestic sales 4. 4 comprised of decrease of 2 at kmart and 7 at sears domestic. They did generate 125 million in adjusted ebitda in the Fourth Quarter, which Eddie Lampert says, chairman and ceo of the company, improvement, certainly significant improvement yearoveryear. They are continuing to move ahead with creating a reit out of number of the stores 200 to 300 sears and kmart sold to reit with proceeds going in excess of 2 million. Positive in the release. Very positive about that minus 7 comp sales number. Look everyones in the end, you can just keep putting balls in the air and satisfy the shareholder base, which is largely the hedge fund manager. Its eddie, its burke cowits. Not much talking about 4 billion market cap i understand its small but its still sears, still employs many thousands of people. Yes. And look they keep the balls in the air. I mean the yearoveryear was good. Better than last year. Trans oceanoceans going to have a good day. X items beat the street. Ceos out, dividends cut, moodys cut, and now taking impairment charges. No more goodwill left on the Balance Sheet. Look at Energy Services look at esv, heres this is an example of a stock one of the worst performing stocks like transocean in the s p. They had said over and over dont worry about the dividend. They slashed the dividend by 80 . 75 cents goes to 15. These are one quarter behib tran hibhibnd transocean. Look at the esv deck the amount of rigs coming on are incredible. This directly jives with what we thought was going to be petrobras and pamex huge drilling programs, no. Fleet utilization, 72. Year ago 83. Its going so much lower. Look some numbers coming out about onshore drilling. Lets get to it. I mean how many equity offerings can you have. Noble, very good announced big equity offering. How come planes all american big equity offering. Nfx, 18 million coming at you. If you want to buy oil companies, newfield exploration, 18 million. Discount. Nice discount. Cleaning up Balance Sheet, maybe setting the tone for acquisition acquisitions. I thought the Balance Sheet was pretty darn good. We havent gotten to the Morgan Stanley downgrade of Abercrombie Fitch underweight. International business seven quarters of minus double digit comps, forex getting worse. But broadly teen retailing in structural decline. Yeah. You know i read the piece. I think abercrombie could go down more. Its funny to realize, take a look, im sorry to look at my computer, if you look at whats been going on in American Eagle you think teen apparel isnt that bad. Thats making a comeback. Ive felt teens are fickle. Abercrombie is a tainted franchise from jeffreys, i believe. I believe the image got out of control. Retailers have gotten together really figured it out. Brian cornell talked about baby yesterday, big analyst meeting. Im promoting this guy. Its going to come back and bite me. But teen apparel in his sights too. Shares of tmobile up this morning. Yes. At a meeting Deutsche Telekoms Management Team outspoken in terms of saying well consider doing a deal that is for their controlling stake conceivably with anybody, whether its sprint of course they talked about potentially trying to do something and decided against it given the antitrust. But dish. Google. Or amazon. They go through a lot of names here. Citi, for its part weighs in the stock trades 5 1 2 times, 16 ebitda versus peers, sprint trading 7 times. Significant upset here despite showing Great Results recently. And the fact youve got a parent thats willing seller i get. Dish i dont want to say that but they certainly i should take that back. Certainly being open about the possibilities. Its been a great stock. I mean its been a great stock. Its a renrent renegade john legere. Its impressive. Citi does upgrade. Important upgrade, i thought. Yeah. Lets get to bob pisani on the floor. The dow down 11 points. Good morning. Flat open energy is lagging Exploration Production on the downside. West texas intermediate below 50. The thing thats worrying me the continuing drop in earnings expectations. I understand theres no alternative, youve got to put in stocks and United States qe and europe. But the numbers are coming down really fast. Stocks ultimately trade on a multiple of earnings what i still believe. Take a look at numbers. The way i look at it total numbers are for the s p 500, right now for 2015 which is what everybodys talking about, the numbers, this is down to 120. Now, there were people at 130 for 2015 people at 125 for 2014. You can say, theyre going up every year since 2009. You can see the numbers keep going up. But going up very slowly now. And 120 for 2015 thats a very iffy number. A lot loaded towards the Fourth Quarter. My point its very possible that we could go negative on Earnings Growth in 2015. That would be a significant event. The First Time Since 2009 that its happened. And the rate of declines in earnings expectations for the Fourth Quarter and for the First Quarter have been much more rapid than normal. They normally do come down going into the quarter, we all know that. But these declines have been more rapid than normal. So keep your eye on this because i have been concerned about it for a while now. Lets move on talk about other things. Kohls keeps improving. Yeef year every year the earnings get better. They have traffic problems. Fixing a lot of that. Positive comments in earnings report. Samestore Sales Guidance for 2015 1. 5 2 . Thats respectable. Lower than some other ones but not bad. Guidance 440 to 460 within the consensus. Overall, excellent report for them. I know you made a comment, jim, about keeping the balls in the air for sears and thats certainly true. They are doing that. I want to reiterate what david pointed out about the samestore sales decline. Down 7 for sears, domestic and 2 for kmart. Spinning off this reit, announcing this reit, it will happen may or june try to raise in excess 2 billion. What i can see, sears has a cash balance of 250 million, something around there. Theyre likely going to need money from the reit to keep funding their operations. Thats certainly not a very good sign. You see sears down about 3 . Finally, a lot of debt in the energy business. Particularly in the e p end of the business. Noble energy trying to do something about it late yesterday announced secondary offering, 24 million shares. Pay down a bunch of debt and revolving credit facilities. But its down today here. Remainders used for general corporate purposes. This is going to increase share count about 7 . And thats a major reason why the stocks down today at this point with the debt a lot of the companies have that may in fact be the most prudent policy. Now, the dow down 15 points. Back to you. Bob pisani. Lets go to chicago, welcome back rick santelli. Rick . Absolutely. Lots of data. Whats fascinating we did see a better durables and softer headline, no surprise on the inflation front. But if you look at intraday of tens we rocketed up a bit. But you know put it in context. Intraday extremes arent where its at for treasuries of late. They do get volatility. Its about closes. The closes are compacting and consolidating, as you look at yeartodate chart, under 2 . The significant support is 18. Where do we fail . On a closing basis of 2. 14 on the 17th of this month, and keep in mind, 2. 17 closed last year. We fail to get yields above last years close. Hugely significant. Bunds, under 30 basis points. 20year of 7s in the eurozone flirting with negative yields. Negative five year note auction with negative yields something to Pay Attention to. If we look at the bourses in europe a good idea how getting ready to buy securities that are already in tight supply in europe. Look at italian, best level since june of last year but moving up. The cac moving up best level since the beginning of the Second Quarter in 2008. If you look at the dax, of course the german stock market, its off to the races. What is it now . 11250 and climbing alltime records. Back to the european currency you know we lost 113 and 114 handles. Approaching 112. You see on this chart that going back to the ecb meet on the 22nd, very significant. Slowly drifting below the range. As of course we go closer to march when qe starts the last chart a dollar yen. Talk about flat as a pancake. 120 seems ensurmountable at this point. We are slowly creeping back above 119. Carl, back to you. Thank you very much. Rick santelli. Oil may finally have a profitable month but we are giving some back today. Jackie at the nymex. Good morning to you, carl. Watching prices lower this morning, not surprising after the bounce to the upside that we saw yesterday. Wti trading at 4998ing under that 50 mark than seem to be where oil wants to hang out, trading in these upside and downside ranges. But pretty tight ranges having said that. Let me talk to you about crude stocks. Traders are talking about those saying the bottom line is this if we build stocks we have to see crude go lower. But now its hanging out here because were watching refinery issues and seeing what happens in the landscape. You have the products down a little bit today and crude is down on the back of that as well. But back to that stock number. Eia crude stocks reported 63 Million Barrels above levels a year ago. 72 million over the 5year average. We are stocked with oil right now. Fundamentally, this market could go lower. It doesnt necessarily mean it has to because, as i said refinery issues could take us back up. Waiting for natural gas inventories inventories to come out at 10 30. Trading 2. 81. Those time last year well over 6. If we get a big draw this week or the next couple of weeks while the cold weather persists we have enough stocks to not take this nat gas trade over 3. Well be watching that number and see where we go on the nat gas trade from here. Back to you. Jackie deangelis. When we come back dana brunetti. House of cards, the series gets ready to debut its third season. Were back in a moment. The road. It can bring out the worst in people. But the mclass scans for danger. Corrects for lane drifting. And if necessary, it will even brake all by itself. It is a luxury suv engineered to get you there and back safely. For tomorrow is another fight. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. 80 of the poor in africa are rural farmers. 96 of them are doing rainfed agriculture. Theyre all competing with each other; theyre all making very low margins making enough to survive but not enough to get out of poverty. So kickstart designs low cost irrigation pumps enabling them to grow high value crops throughout the year so you can make a lot of money. Its all very well to have a whole lot of small innovations but unless we can scale it up enough to where we are talking about millions of farmers, were not going to solve their biggest challenge. This is precisely where the kind of finance that citi is giving us is enabling us to scale up on a much more rapid pace. When we talk to the farmers and ask them whats the most important thing. First of all they say we can feed our families. Secondly, we can send our children to school. Its really that first step that allows them to get out of poverty and most importantly have money left over to plan for the future they want. . Ibm ceo Ginni Rometty stepped off the stage. Its half of the day in where their watson unit is placed. Setting rather thats martin schroeder, the cfo. Setting aggressive revenue targets for cloud, security, they want it to be 40 of reb knews by 2018. That would indicate 40 billion. Efforts are generating 25 billion. So talking about incremental 15 billion in revenues over three years. Thats a lot. Growing from 25 to 40 percentagewise. The top line is not growing at all at ibm. In fact shrinking a bit. And they did, as last time i spoke to Ginni Rometty october suffered a significant blow in the stock price. 20 a share in earnings this year which theyre not going to hit. Salesforce is a revenue store. Thats what people want Revenue Growth. Ibm can give you Revenue Growth within a segment but if they dont give you Revenue Growth through the whole, the sales forces win. Rometty, reminder will join us today 1 15 on power lunch. I will be watching. Mean time adding to his position in ibm, Warren Buffett will release his annual letter celebrating 50 years at helm of berkshire hathaway. Squawk box live with buffett monday morning. Buffett tells fortune im one quarter cocacola, if i eat 2700 calories a day, a quarter is cokecacola cocacola. I drink 5 12ounce servings. Maybe thats why that stock hangs in there. What is he 83 84. God love him. His mind is incredible. Ill eat whatever hes eating. Amazing. I may switch. The best walking advertisement cokecacola has, 84. The salesforce cokecacola in germany. The 50th anniversary, see what that brings. Ive been reading letters since 83. They are brilliant. And becky will do a fabulous job. That will be mustwatch tv. Stop trading with jim in a moment. Dont go away. Sometimes the present looked bright. Sometimes romantic. There were tears in my eyes. And tears in my eyes. And so many Little Things that we learned were really the biggest things. Through it all, we saved and had a retirement plan. And someone who listened and helped us along the way. Because we always knew that someday the future would be the present. Every someday needs a plan. Talk with us about your retirement today. Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . 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 . Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. Time for cramer and stop trading. Not everything in the food business that says theyre natural and organic is. Bdbd, much more gluten free. People want natural or began knit. Buy wwav andhani. People want to know the highest growth. We thought it was health we thought Human Capital, its disappointing today. But its palo alto that people want. People want cybersecurity. They want cyber, downgraded to sell. Doesnt matter. They want palo alto fort net, they want this group. Cybersecurity remains the hottest thing in tech. Unbelievable. Question, for frustrated bears out there watching this market go get away from them today Albert Edwards famous bear calling for massive slides in the s p writes i must be missing something big. Were in that cycle where i begin to doubt my own sanity. What do you say to those guys . I think again the price to earnings multiple versus cash flows versus the ten year versus earnings per share upgrade, versus china Getting Better europe is Getting Better a world where brazil is sinking and russia and those are by choice lose the b and r, what Wayne Goldberg said yesterday, you have no idea you dont talk about what it means to have energy. All costs are down. Customers are up. This is what the energy decline is meaning for the world. Hes not factoring in energy decline and how its restarting worldwide. Good point. Whats on mad tonight . Interesting show. Rcpt david and i joke about, one of the biotech people thinks going to be taken over. The fundamentals of receptos. Alan mckim, lean harbors, oil service business. Find out what the split means. Alan hasnt been on in a long time hes an honest guy who had trouble with businesses, they were all clean. I cant wait to talk to him. Hes a good man. A lot going on. A lot going on. 1 15, Ginni Rometty, ive got to tell you, ten points on the dow either way. Yeah. Not on the down. Ten points for ibm. Not easy to transform a company but have done it before. Thats why writing them off before you listen to them is a mistake. See you tonight. How much bigger can apple get . Tom mcclellan with eye opening thoughts about the companys surging market cap how it compares to Global Stock Markets around the world. Also chairman Jason Chaffetz on regulating the internet as fcc gets ready to vote on Net Neutrality. Back in a moment. Theres confidence. Then theres trusting your vehicle maintenance to ford service confidence. Our expertise, technology, and high quality parts mean your peace of mind. Now you can get the works, a multipoint inspection with a Synthetic Blend Oil change tire rotation, Brake Inspection and more. 29. 95 or less. So whats going on today . News alert message email calendar update most of us admit to being overwhelmed by information at work. Thats why ibm created verse. It uses powerful analytics to uncover hidden patterns in your email, calendars and social feeds. It continuously learns how you work. And helps you prioritize the people and projects you need to focus on. Theres a new way to work and its made with ibm. Good thursday morning. Welcome back to squawk on the street. Im Carl Quintanilla with simon hobbs, david faber at the new york stock exchange. The markets nasdaq in particular, close to 5000 yesterday. Still crawling back a little bit here. Dows down about 43. S ps giving back almost 7 to 2106. Oil having trouble getting out of the gate. Here we go. The road map for the next 60 minutes the nasdaq inching closer to 5000. S p racks up big gains for february. Well have more on how you should play the market action. Retail index seeing a 9 rise over the month. Find out which names you should be watching now. And apples market cap makes it worth more than all of mexico. Can it really keep growing at this pace . Well talk to tom mcclelgen about that. Jason chaffetz the chairman of the fcc refused to of it before a congressional hearing yesterday which sought to learn more about the fccs Net Neutrality rules. Of course as the fcc gets ready to vote on the rules today. Congressman chafe fets will join us live. The chart, worth pausing and marking that just for the month of february the market has risen by almost 6 . Not a great open today but still positive 9 of 10 sectors positive through february. Consumer discretionary thats leaping ahead, 9 gain. Well break that down shortly. Jeff rosenberg blackrocks chief investment strategist for fixed income. Bill stone joins us pncs Asset Investment strategist. Kohls, coach, disney surging on the month. What is happening here . You know i think a lot of it is just the realization that a lot of companies will benefit from the lower oil prices. Its taken longer than some expected but certainly between that and the improving labor market a tailwind to the u. S. Consumer. What happens now . Well probably gets rougher because a lot is priced in here. But i do think you are going to see some improvement. I dont know if everythings priced in. Were not overweight discretionary at the moment. But i do think at least they will benefit. It is a broadbased rally, though. Its been a phenomenal month, bill. Where are you calling the market to the yearend. If every month could be like february, wed all be incredibly wealthy. I wouldnt be prized that we run into turbulence soon. I probably say that every time we get at highs or near highs but we still think the market can be up high Single Digits by the end of the year in total. Maybe higher but i think thats a fair place to think about it. So we kind of trade sideways to the end of the year, then . Well we could. I mean you will collect the dividends and certainly we have upside chances. I mean i think youve talked a lot about the fact that earnings estimates have come down a lot. I know actually earlier today you know they were talking about it on cnbc and i think we actually have some now that weve revised those, although chances to see some upside to that particularly with the tailwind around oil and perhaps maybe some of the strong dollar coming off of it. Jeff the flip side for fixed income during this period is that these super plumped up treasuries have lost ground, therefore you have yields rising. Its been a long journey for the tenyear yield during the course of the month, the range over 50 basis basisesis point. Where do we go. Its about what the feds going to done the last couple of days thats been the focus. Were going to into march focused around the feds fomc meeting and talking about getting off of zero Interest Rates, and what that mean. For the bond market thats not priced in. A big disconnect shorter maturities, thats your source of market volatility as we reprice fed expectations. I guess the point there would be the question to whether the market will accurately price when the European Central bank is about to start buying bonds majorly. What is it 70 billion a month as of next thursday, i mean thats when potentially they could come through the announcement. Yields driven negatively in europe. Thats got to keep the yields suppressed here which argue what you foresee may not be realized. Im not sure about that. Thats the popular narrative that negative yields the rest of the world, what the ecbs doing, has to hold u. S. Interest rates down. I think weve got to be very careful about thinking about the Global Impact balanced against what the fed is going to done what janet yellen emphasized yesterday is the means to which theyre going to raise Interest Rates is something very different. This time is about paying interest on excess reserves. What that means is that theres going to be a new source of yield in the market. Were not going to just simply look at global relative yields when determining what our treasury yields. Well look at what the fed is paying on interest and thats going to change perspective whether or not yields can stay capped. Certainly yields will stay low. Its low inflation, low growth world but it doesnt mean yields cant rise. We have to be careful about that consensus view. For both of you, for those seeking to protect their portfolio, protect potentially being the operative word with maximum gain maximum return what would you advise . Jeff . Well i think the most important issue for fixed income investors, and here were talking about where people are looking for safety preservation of principal, investors have to take a close look at what theyve been doing in the short end of the yield curve. With the fed moving Interest Rates the most vulnerable part of an investors portfolio is going to be the shorter maturity. Investors have to take another look how much risk theyre taking and what theyre expecting. Expect more price volatility more price declines there and avoid surprises in that part of the portfolio. Bill, how do i protect, how do i grow . So i think, you know since jeff talked about the fixed income side, let me talk about the equity side. Id highlight three sectors, health care, Consumer Staples and financials. Ill focus on financials because i think it ties in well with jeff. They should benefit, i believe, from when the fed finally hikes the rates. I think the steep yield curve and finally getting off the zero Interest Rates and the u. S. Economy, frankly, continuing to be relatively solid, should help there. I think thats a place to watch. Bill stone, jeff rosenberg, thank you for your time. Thanks. Thanks. Fireworks going off between gop house members and fed chair janet yellen in that testimony yesterday prompting a debate on the feds role in politics. Steve liesman joins us with more. Great morning with bullard, by the way. But this was a big part of the conversation yesterday. It was. Substantial part of. That controversy continuing today. Jim bullard defending yellen against charges of political bias and representative scott garrett, doubling down on his comments that he made yesterday against yellen and the fed. What the little clips that you have here talking about is this myth thats been out there that theyve been promulgating for decades the feds independent of partisan politics entirely and for that reason they should not be held accountable on either front on the monetary side or the regulatory side. Meanwhile, bullard on squawk box saying the feds very much in play politically but took particular issue with criticism of yellen for meeting with treasury secretary jack lew. I think shes a very balanced and careful thinker on monetary policy. I really dont see the charges being well founded. One of the charges was the meetings with treasury secretary, jack lew. Wait a minute, now on that every chairman has met with the treasury secretary all the time. Greenspan did it bernanke did it. Mean while, the spokesman for representative bill high zynga criticized yellen withholding twice as many meetings. A spokesman told us he never requested a meeting with the chair. The fed chair almost honors such requests from congress. We will ask these questions and more of Loretta Mester later today. I talked to our colleague, david wessel covered the fed for years, now at brookings. He said this is more partisan yesterdays hearing, than anything he could remember. That says a lot. Thanks a lot. When we come back House Oversight committee wants an explanation from the fcc from the Net Neutrality rules than will not come soon since the chairman refused to testify yesterday. Jason chaffetz will join us live to explain why hes questioning the chairmans motives when squawk on the street continues. The lightest or nothing. The smartest or nothing. The quietest or nothing. The sleekest. Sexiest. Baddest. Safest,. Tightest,. Quickest. Harshest. That says a lot. The chairmans motives when Commission Set to meet later this hour to cast its allimportant vote on the issue of Net Neutrality. The fivemember board expected to approve fcc chairman tom wheelers new rules which, among other things would allow the commission to inregular late the internet like a public utility. Sought to learn details about the proposal and how rules were developed, joining us House Oversight chairman utah republican congressman Jason Chaffetz. Good to have you with us. Good morning. You wrote that this process is at the chairmans discretion. What do you hope to accomplish here . We warrant to learn how this came about, evidently the chairman of the fcc supposedly an independent agency was having regular communication interaction with the white house. And yet we in Congress Want to see what theyre going to vote on ask them a few questions and he refuses to show up. Quick to communicate with the white house and frequently but wont talk to congress. Are you in favor of this vote . Would you vote yes or no . I think the public including myself, should be able to see what theyre voting on. One of the things fundamentally wrong about this is youre going to change the internet top to bottom moving it to this utilitytype of status under title ii nobodys read it. And so its hard to say how you would vote. I have deep concerns that treating it as a utility is the right way to go. Get washington, d. C. Bureaucrats metalling with the internet. Thats going to stifle competition in investment. At least show us what youre going to vote on before you vote on it. These reports of unprecedented coordination with the white house, what do you think exactly happened . Are we talking whats on one side of whats legal and whats not. The wall street journal did a fairly good story on this. We have sent requests to the fcc. They have not complied with it yet, in order to provide documents. Oversight committee has a constitutional duty and responsibility to provide oversight and yet the fcc still has not provided all of those documents. So, hard to tell. Im not trying to jump to conclusions, but the lack of openness and transpair sent when senator obama was a senator he argued this very thing. Hes the president and i hear nothing out of the white house helping us on this nothing there i read the Obama Administration has made more than 200 legal filingings to the fcc on 80 proceedingsen this isnt unusual. Didnt both reagan and bush lobby over media ownership rule backs in the day . The idea of an independent committee and im a guest in the country isnt ant independent Committee Just that the president cant fire commissioners, theyre there for fixed terms. Thats what an independent committee means, surely. Absolutely, independent. Youre right, back in 20072008 the commissioner of the fcc came to congress and testified. They released the rule in advance. Senator, thensenator barack obama argued they should have more time so they delayed the vote. They did have openness and transparency. Nothing happened with than here we will vote on something you havent read i havent read and it fundamentally changes the internet from top to bottom. Thats just not right. How common is it for a chairman to testify this late in the process . There is great precedence to it. And he has discretion on this. The congress has the right to look at these materials. But when theres a big monumental shift in policy the chairman of the fcc has done that in the past. And so theres precedent out there but it didnt happen in this case. And that causes concern. Nobody knows what theyre voting on. Less than an hour away nobodys even seen it yet. Mark cuban well wellread tweets, how long before the fcc rules digital tv must be treated like any video offered by any website and tv as we know it is gone . Another one, how long after tvs treated like any website video before the fcc steps in and applies its decency standards to all streaming video. Cube will join us at 11 00 a. M. Eastern time what happen do you make of that point of view. I think hes absolutely right. The internets working. Its one of the things in our economy thats providing jobs and this wild wild west throughout for entrepreneurs to come up with innovation, its a positive thing. Now its going to be micromanaged by washington, d. C. Bureaucrats . I mean that has got to scare the living daylights out of any entrepreneur certainly somebody like mark cuban or anybody watching the program. You have to have fcc people telling you what you can and cant do on the internet . Are you kidding me . Lets have more Public Discourse on this and read it before they vote on it. On the subject to Public Discourse, and im taking this directly from a New York Times article that ran yesterday, congressman, theyre describing on the other side of the argument the most sustained campaign of internet activism in history, a swarm, as they put it, small players overwhelming the giants of broadband, tushing complex technical debate into a matter of religion. I wonder how we wait and value that as we go on from today and go into series of Legal Proceedings and appeals about what actually constitutes title ii. Well i think they have a very important voice. I look back to what was called the sopa and pipa when congress was trying to change the way that Law Enforcement can manipulate websites. You had this uprising from all of these people across the country and it stopped that legislation dead in its tracks. I hope people understand that every level if you change the status of the internet and regulate it as a utility, there are going to be severe consequences. Its going to change the internet as we know it. I dont think thats going to help any entrepreneurs and those young fledgling companies trying to go from nothing to something on the internet. I really do worry about it. Congressman, vote as you said minutes from now essentially. Bra. Isnt this too late . Isnt this for show . No weve been asking for this for some time. And it just hasnt happened. We called a hearing, did it more than a week in advance. Youre expecting a midnight call from the governor . Im not sure what changes. Well i think the commissioners that are there theres a couple of republicans that are actually on that commission, that called for a delay in that vote so there could be more openness and transparency. The white house has had its say but congress hasnt the public hasnt. Weve been talking generally about Net Neutrality and the positives and the negatives about that. But the rule that i really worry about is the transfer to title ii. And that, nobody has seen. Congressman, weve got to go. Eventually its the courts that will have the final say here isnt that everythings going to end up there and thats where this is going to be decided and its going to be years from now that well know where this ended up. The courts the third branch of government the Judicial Branch will have its say, yes. No doubt a mammoth legal fight on this no doubt about it. Congressman, thanks for your time. Well see what the rest of the day brings. Thank you. Congressman Jason Chaffetz chairman of House Oversight. What a february. Retail index having a blowout month, up 9 outperforming even the broader s p which is up almost 6. Which name should you be watching and which are potentially buying . Well talk retail when we come back. Alright, so this tylenol arthritis lasts 8 hours, but aleve can last 12 hours. And aleve is proven to work better on pain than tylenol arthritis. So why am i still thinking about this . How are you . Aleve, proven better on pain. [ male announcer ] your love for trading never stops. So if you get a trade idea about, say organic food stocks schwab can help. With a trading specialist just a tap away. Whats on your mind lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move wherever you are. And start working on your next big idea. February has been a great month for the retailers, retail index up 9 . A number of companies obvious pli reporting overnight. Some good some bad. Mixed picture overall. There you see, the chart to really hang on to, 9 gain in retail in a mark thats up broadly s p, almost 6 for the month. Oliver chen joins, managing director at cohen covering retail. Good morning. Why is this happening . Why is the index moving like that. Traffic is back in stores gas prices have been positively impacted consumers pockets. Walmart, target the best traffic in two years and thats a great thing as consumer retraces and comes back to stores. The top gainer, one of the top, the s p this month is kohls coming into its earnings figures, up 17 18 . What do people do with that stock now what do you make of the detail . They had a great call this morning. Were on the phone with kohls. Loyalty program, beauty as well as just focus on National Brands and athleticism. Its working for that company. We do have a market perform on the stock. We think the values fair at this level. Houfr we however we acknowledge the business the greatness agenda are taking hold. L brands victorias secret bath and body works, raised estimates multiple times, correct me if im wrong. What was a disappointment overnight. Exciting story. Intimate apparel great category to be in also bath and body works the market share they have the global story. A big theme is giving money back to shareholders. No kidding. Special dividends, precash flow. Its a Legendary Team executing with clean inventories. Are we in a stage where they start to spend . How worry something is that. To be honest a lot of retailers are spending and the big question omni channel and online. But theres no channel. What does that mean in. Ingration ingration of bricks plus click. We heard from Limited Brands the customers smarter than ever with price transparency. Familiarity with the mall. Coming where the labor markets heating up and walmart and tj and gap play paying for employees. People need to invest in employees and loyal, motivated people. And retail is a hardworking sector. I check the mall every two weeks. I admire all of the standing folding. I find it unproductive. Whats your best idea. I like michael kors. A sexy stock, trading towards lower end of the range. We like target. Brian cornell will drive traffic. He has investor day next week. Focus on signature categories. Where do you think it could go to. Low 80s. Wow. Price target right up there. We see this as a great story continues to be really american take on fashion, global great price points sexy jet set style. Speaking of which, oliver chen, thank you very much. When we come back apple dipping lower today. Down 2 for the week. Steadily inching closer to the 1 trillion mark. That is growth sustainable . Tom mcclellan will compare the market cap of apple to global stock market total capitalizations after the break. Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. Heres your cnbc news update at this hour. The identity of the masks executioner clutching a knife in those isis beheading videos has been revealed. A london man is the person known as jihady john traveled to syria in 2012. Theres a new head honcho at Standard Charter. Former Jpmorgan Chase excusive bill winters. Winters left jpmorgan in 20009 called Standard Charter a special bank. The stock is up about 3 . Barnes noble plans to spin off the college book store unit from retail and nook operations it scrap the plan for the ebook business. The stocks up 5 . Its legal to smoke marijuana in washington, d. C. 21 and older to possess and use two ounces of pot on private property in the district. Back to you. Welcome back to squawk on the street. Im jackie deangelis, reporting from the nymex, waiting on the department of energys eia weekly nat gas storage report. The number a draw down of 219 billion cubic feet. That is a little bit less than expectations. But makes sense in terms of the cold that weve been seeing across the country and demand increaseing from last week im point out, traders are looking at overall picture here. Theres two things to consider. The weather, which hopefully will start to be Getting Better soon, at the end of the winter season. But at the same time were looking at overall stocks. The eia said last week we were sitting a little bit above 2 trillion cubic feet which was 50 higher than where we were last year. Thats why these prices continue to go lower. 2. 75, down from 2. 83 before the report came out. Whats really interesting here youve got products rising. Rbob gasoline heating oil, rising and nat gas is going down. Well be watching prices today. Traders are not bullish in the nat gas pits. Back to you. Thank you very much. Its been almost a year finally were here. Decision time, looking at a live shot of the fccs open meeting in washington getting under way now. There will be a vote on Net Neutrality probably before this Program Comes off air. Eamon javers live in d. C. With more on what we can expect. Good morning. Reporter good morning, simon. Its a cold day here in washington, d. C. Most of those protesters out here a little while ago have gone inside got a couple of stragglers here. Theyre going to watch for this vote on Net Neutrality later on this afternoon. Just under way here inside the fcc. What were expecting is a vote here thats going to pass by democratic votes in the fcc on Net Neutrality. What theyre doing is using title ii authority to regulate the internet as if it was a utility. So theyre telling Big Internet Service Providers here that they cant do things like throttle or provide fast lanes for specific Web Companies to get faster access to their customers. Thats something that big Companies Like comcast, Parent Company of this network, have been opposed to and fighting in a lobbying battle. Looks like they will lose at the fcc this afternoon and the vote will have to wait and see when the vote comes, exactly how it goes down. After that about a threemonth period before the new policy becomes absolutely operational. So theres a little bit more time to dissenters to get opinions in to the final product. If this vote passes today, that will be it and then well get an operational date some point in the next three months or so. What about moves on capitol hill . Obviously the republicans are opposed to to the way that this is likely to go. Theyve called it obamacare for the internet. Where are they trying to get some bill passed and bring democrats on board . Reporter yeah, what weve seen on capitol hill simon, the sense that were not likely now to see republicans offer any legislative solution to this to back the fcc off. There are some republicans on capitol hill who are upset about this. They say its regulating the internet its government overreach, some criticism this is like the dmv taking over the internet. But whether or not they have appetite or ability to pass something up on capitol hill is an open question. The guess now is probably not. Well get the vote shortly. Eamon, thank you. Meantime apples market cap 750 billion this morning. For comparison nearly 200 billion more than the total cap tailization of mexicos market half of that in germany. Joining us tom mcclellan. Great to talk to you again. Good morning. Good morning. Numbers arent perfect. Apples market cap current and some of the numbers from Global Stock Markets are dated. But you posted this the other day, what point are you trying to make . Well theres not a real great actionable conclusion you can draw from that but its staggering to think this Great Company that makes a little thing you put in your pocket is worth all of the stocks and all of the Companies Traded in mexico. Its just a really staggering idea. And points to the vulnerability that if apple should stumble, whats that going to do to the entire u. S. Mark where theres a big weighting in the indyexicesndices. You mentioned mexico closing in on russia spain, maybe half of germany, france what happen does a technician do with all of this . Observe it and smile and think about it and then get back to the charts and look what the charts are saying. Right now were seeing a turndown in apples price oscillators and indicators showing a correction which is ordinary and merited, it seems to be beginning. Yeah. Youve also taken a look at crude. Looking at backwardation versus contango. Theres a huge contango in crude oil. If you look out a year its up around 60. That says crude oil futures traders are not believing were sticking around 50 for very long. They dont want to bet on that for the deliverables a year from now. When you see that much of a spread between nearmonth and far month contracts that is a big find the near month will be going up. We do not expect crude oil hanging around at 49 bucks very long. Whats the performance on that spread. Weve been at this big contango a couple of times in last 20 years. One at 2009 bottom after the financial crisis. Another time in 2011. In each case a big rally the month that followed in crude oil prices. How much of a rally, its not able to tell you. Its going to tell you the direction well but how much of a magnitude you just dont know. But if you can get the direction right, the magnitude takes care of itself. Right. We have talked a lot about what amazing month the markets have put together. S p 2110 obviously nasdaq 5000 within sight. All of this chatter, talked about the president ial cycle pattern. How does that fit into the dynamic were in now. Were in the third year of a president ial term and ever since the late 1930s the third year has. An upyear. Were in also a secondterm president which usually sees the stock market top out earlier in the third year than if you have a firstterm president. Typically on average, s p 500 will top out in july of the third year and then you have a struggle during the summer and into the autumn then we get into the more iffy period of the election year. But for now, thats not what we have to worry about. For now we have an up trend between now and july. Im sorry, i have great difficulty on taking that sort of patent matching over time when weve come out of a financial crisis and i almost destroyed the stock market and have a huge move back. Surely that overrides any kind of old housewives tales about president ial elections. Well, except it keeps working. The only time we havent had the third year being up year was 1931, in the middle of the Great Depression and 1939 when hitlers army marching through poland. If you dont have a condition like that third year is an upyear, the president will try to get the bad news out during the first two years so he can spend the last two years declaring victory and running for reelection. Its different in a second term because the president cant run for reelection. But the thirdyear effect is there and its working now. I hate to bet against something that has worked well and is working at the moment. June and july will be interesting, especially if thats fed time. As were speak, the nasdaq has gone positive once again, 27 points from 5000. Tom, good to talk to you. Thanks, carl. Season three house of cards live at 3 00 a. M. Eastern. Midnight on the west coast. But before it debuts here from the shows producer, on what you can expect tomorrow. Also coming up mark cuban, outspoken critic of the Net Neutrality rules likely to be voted on in the next hour. That interview on squawk alley in 20 minutes. Your moms got your back. Your friends have your back. Your dogs definitely got your back. But whos got your back when you need legal help . We do. Were legalzoom, and over the last 10 years, weve helped millions of people protect their families and run their businesses. We have the right people onhand to answer your questions backed by a trusted network of attorneys. So visit us today for legal help you can count on. Legalzoom. Legal help is here. Marks in a range as we await the Net Neutrality vote. Let get the Santelli Exchange with rick santelli. Rick . Well thank you, carl. Id like to welcome my special guest, daniel quinn mills. Thank you for taking the time today. My pleasure. Listen a lots changed over the last five or ten decades. You know every time you check your email or send out a tweet, everybody pretty much knows than but when it it comes to seasonality, seasonal adjustments and the way our datas calculated not a lot has changed. Why seasonal adjustments were created, why they were created, are they still a valid calculation at this point in time . We started adjusting monthly data for a seasonal pattern over the year in the late 1930s and 40s and 50s, when we first developed Gross National product data, et cetera. It was necessary to do that because at that time we had a primarily goods producing economy, construction and manufacturing were well over 50 of all employment and economic activity. Both had a very strong seasonal pattern, construction shut down in the winter months essentially and manufacturing also slowed in the Auto Industry you shut down the whole industry essential lil in january for model change turnover. Now were let me interinterrupt you there auto cycles still somewhat continue. Theres still, you know many Different Industries that have to shut down for maintenance, whatnot. Much of that still may be the same. What else has changed that makes your perspective on these data points seem out of date on the seasonal process . Now, were really a Service Economy now. Probably 80 of employment and Gross National product activity gdp activity is service. And so as a result of that we still have the seasonal patterns built into our adjustments of date and theyre pretty badly out of date. So what youre saying is our economys changes and we need seasonalities but the industries that represent that need are a smaller percentage. Lieu of that you saw the last Employment Data really were going to focus on seasonties in the employment, first friday bureau of labor statistics did you agree with the 257,000 shown on the screen the different models trade off of . No, noknot at all. Data showed the American Economy gave up 2. 5 million jobs from december to january of this year. The government reported instead increase of 257,000 jobs so they adjusted the amount of employment in the economy up by over 3 million jobs. We ought to report the honest data and let the government argue it should be adjusted in this way. Were out of time. Very quickly, isnt there ever a Time Seasonal adjustments intersects and we make adjustment once a year every six months . Final answer. Yes, we have to do that and we do do that. Doesnt it pick it up then . Arent we arguing that it gets out of whack for many months but ultimately comes back in line . No . Well, yes. But everything in Economic Policy and in investment depends on what happens go on now. I see. So what youre saying is those periods when its out of whack they may come in but we may do the wrong thing at the wrong time because of it. Listen were out of time. Thank you. Fascinating discussion. Next time well take this to dotcom and get into it. Simon hobbs, back to you. Santelli exchange. Up next, putting money into startups with multibillion dollar valuations the rage in silicon valley. One investor says that strategy could kill their returns. John baucus joins us live to tell us why when we come back. In my world, wall isnt a street. Return on investment isnt the only return im looking forward to. For some every dollar is earned with sweat, sacrifice, courage. Which is why usaa is honored to help our members with everything from investing for retirement to saving for college. Our commitment to current and former military members and their families is without equal. Start investing with as little as fifty dollars. Welcome back to squawk on the street. Shares of Semiconductor Company avago, soaring at the open after reporting better than expected earnings after the bell yesterday. 2. 09 versus estimates of 1. 04. Acquire Networking Company emulex for 606 million which will boost its Enterprise Storage portfolio. Shares stronger up 14 . All morning drawing your attention how well the stock market has done during february. Consumer discretionary at the top. In fact at the top of the gainers the Online Travel agencies, priceline and tripadvisors which during the course of this month have surged as you can see, priceline arguably a longer story, about Exchange Rates and growth elsewhere. Tripadvisor which this week celebrates its 15th anniversary, more confidence in its Business Model moving forward. And amazon werent always so giant. Both going public with market caps if you recall below 1 billion. But in the age of uber and snapchat when private companies are fetching multibillion dollar valuations are vcs placing too much emphasis on what they call unicorns and how could this impact investors. John baucus the founder and managing parter at new Atlantic Partners who argues it is better to hunt dragons a term he coined rather than try to bag a unikorn. Thank you. This term unicorn has become so low on the cover of magazines. Your argument the funds want to be in it because it is a socalled unicorn. Right. A unicorn is a Great Company. A dragon is a great investment. Every unicorn is not a great investment. Money is made in the private Capital World by starting investing with a Company Small and continuing over time. Its not made just piling in at the very end. Why is there this huge bottleneck in the late stage . Why is that going on . Well, a lot of people want to be able to brag about i invested in snapchat i invested in linkedin, i invested in uber. Facebook and twitter both had 15 or more Venture Capital funds invested in those companies that all claimed parenting. I would just add that the i always find it quite amusing when you get one of these companies that is arguably overvalued and the discussion continues one or two sovereign wealth funds that always come in at the end, i wont mention their names, but to the point youre making need to go back to headquarters in asia and say look were with the big guys. Ultimately, the Public Markets value profitability. The private markets value growth and market dominance. And you have to translate that into profitability in the public market. So theres a chasm. These companies have to cross to be good, successful public companies. You think facebook was the first of these . You mentioned it as the one that got a lot of where it had the logo was enough for some. But facebook you know, twitter is one, uber is one where the logo is important because in our industry youre known by the companies that you fund. Now, what everyone doesnt understand theres a difference coming into the first round in facebook when its valued in the tens of millions versus coming in the last round when valued at 40 billion. So youre not the one whos really creating the value at facebook. The early people are. You dont think this is going to change do you . You think at the very least these companies will remain private for longer . Absolutely. Theres a Seismic Shift going on right now in a transfer of Value Creation from the Public Markets to the private markets. You mentioned a couple of those Great Companies that were started 20 years ago. Cisco, amazon oracle all have gone up 300 x in the Public Markets. No one is saying facebook will do 300 x from an ipo. The important thing about facebook may have been the game changer it came to market and still people watching now who are not on the inside were able to make money, more than doubled, more than made 100 billion. It was the first one that demonstrated the power of the business mod until social media, very small costs, Massive Network effects. Right. Presumably thats why theyre holding them back. This has a long way to run, look whats happening externally. Were doing that too. We our average time from our first dollar in to our exit is about eight years now. It was about five years. Wow. Five years ago. About four years, ten years ago. So were holding them longer. Even with exponential growth . Our portfolio is growing revenue about 70 a year. It will do 250 million this year, did nothing eight years ago for the class of companies. How much do you think is due to the amount of money going into vc and how much is due to the fact that at least the perception of being public is that its more onerous than it used to be . It is hard. I started a company that i took public 20 years ago and it was lot easier than than it would be now. I think people are thinking twice about going public. The jobs act which the national Venture Capital association helpeds pass get passed two or three years ago, has made it easier to stay private longer because it lifted the restriction that said you can only have so many shareholders before you have to go public. I think i mean ken langown will tell you they dont think they could have taken depot public today. Do you believe thats true . Dont know enough about that story but im not sure. In general, the legal costs, the hype around the road show i dont know. A tougher the sarbanesoxley its a 2 millions cost you lay on to any company today. John, what about people watching at home saying this sounds if im getting locked out of the Value Creation in the economy. How do they get in on that . What would you advise them to do . Our investors are endowments pension plans. Right. So what about the Retail Investor . This is a hard asset class for the Retail Investor to get into. Its a hard asset class because its ill liquid. The jobs act is allowing for crowd funding once the sec decides to put the regulations forward, which they havent done for the last couple years. It will be a way for people to get in but they have to have their expectations set correctly because every company is not going to be an instagram, wont be worth a billion dollars what about the accredited Networks Many will be getting involved with . I think theyre good idea. Having some exposure to the private Capital Market is important. I would suggest people limit it to 5 or less. 5 . Of the 5 or less of the total portfolio should be in private capital. Meat where the appreciation is going. These recent ipos and this is going to continue are going out at 3, 5, 10 billion. They want to put more than 5 in. Thats dangerous. Its ill liquid. Thats the challenge. Hard to maintain 5 if the Companies Keep growing like this. Right. Fascinating discussion. Thank you for coming . Thank you very much. Okay. Speaking of techs and startups almost time for squawk alley. What jon fortt has in store for the next hour on cnbc. Good morning, simon. Big hour fcc set to vote on Net Neutrality rules. Well have mark cuban who has made his feelings clear about that dialing in. The hyper loop closer to being a reality elon musks Public Transit vision. Someone is working on building a piece of it. 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For all the confidence you need td ameritrade. You got this. One of the most controversial, one of the most polarizing decisions in this country is about to be made. Thats a live picture of the fcc deciding on Net Neutrality after almost a year of deliberations. That is jeep one of the commissioners who will join us tomorrow on cnbc. The vote from the fcc in washington now imminent. Lets send it over to squawk alley. All right. Thank you very much. Good morning. 8 00 a. M. At youtube headquarters in san bruno, california 11 00 a. M. Here on wall street. Squawk alley is live. And welcome to squawk alley. Joining us this morning, henry blojette, the founder, editor and ceo of business insider. Great to be here. Jon fortt and Kayla Tausche on a day where the nasdaq is just inches away from another alltime intraday high. Netflix closing in on an alltime high. The fcc as simon said is debating rules that will decide the future of the internet. At any moment the commission is expected to vote and approve new rules that would classify the internet as a public utility. Supporters say the best way to