Transcripts For CNBC Squawk On The Street 20150227

Tenyear yields above 2. Fourth quarter gdp revised down to 2. 2, above estimates road map begins with the markets, shaking off that disappointing gdp number. As we kick off the last day of february. But the big question, could today be the day we finally see nasdaq 5k . Retails in focus, earnings miss, jcpenney shares down nearly 13 in the premarket. A better report from gap puts that company in the green. Return of the mac. Shares of mcdonalds up 6 in two days. Why its shares could hit the 100 mark for the First Time Since july. But first up Fourth Quarter Economic Growth slower than the government expected. Up 2. 2 compared with previous estimate of 2. 6. The nasdaqs up 7. 6 for the month and is within 13 point of 5000. The dow rising 6. 1 . Its on track for its biggest monthly point gain ever. S p up 5. 8. You dont get numbers like this too often. No. January was gloomy people saying, gee, as january goes the rest of the year. Completely wrong. We have Conference Call talking about lower energy costs. We dont hear much about the government. Yearoveryear, no one its cold this year good for inventory and blowing it off at major retailers. Retailer restaurants stand out, newer tech that suddenly come alive with pleasure Facebook Google up on absolutely nothing. And then whoa it was nothing. Up on absolutely nothing . Absolutely nothing. More buyers than sellers perhaps the reason there one piece of news they make no money on youtube. Really. They have a lot of money to potentially make on youtube. Are they trying to put a man on what planet . Mars. Mars. But look the moon the moon of saturns. You know why the nasdaqs going to go through in this morning 6 23 you got your notification from netflix that house of cards is now live. 6 23. Thats going to move. Did you know next friday is the anniversary of the hanes bottom . March 6, 2009 . 1268. I should have mentioned, you mentioned yesterday, look at that, nice mention of mark haines. He was where was the s p . 667. Sign of the devil, right . Satan . Meantime, gdp up in we mentioned the down revision. But the biggest boost to Consumer Spending since the Fourth Quarter of 2010. I imagine you think this is gas prices talking. Every night, you are on Conference Calls and it doesnt matter who it is whether a ross stores cracker barrel. You hear these Companies Just say, point plank,blink, were doing better because the consumer has more money. Monster beverage, with a totally monster number. Not ironic. Great things in this quarter. Ill go in to them later in the show. Its hilarious. Talking about things theyre doing, including taking the juice out 0 one of the drinks which increases the taste. What do you put in to replace the juice . Better living through chemicals. Monsters amazing, 72 cents, 13 cents ahead. Since 2010 the stocks up 502 courtesy of the street. Com. Deserving, 34. 8 share, equal to red bull rock star going down remarkably. Its an incredible story. When they remember at the beginning of every conference disclaimers. I thought this was good our products are safe. Always good to have that. Always. Renamed the m80 good process, pulled it ripper linked to a famous serial killer of two centuries ago. You have to wonder whether theyre in on the joke. A healthy increase since the rebranding. Interesting. Are we all are we going to sell stocks monday going into march . Well start worrying about the upcoming fed meeting and all of that business. You know, when you look at the whats going to set the tone next week costco i think better than expected. They have a gasoline lag will back that out. Target an analyst meeting. Brian cornell saved the best for what will happen unfortunately some job losses but rationalize the company. Next week is a light week but autozone reports a bad number stock goes higher when they do their buyback. Most important, i think, will be best buy, because best buys the most important . What . Consumers spending on anything else other than hershey bars and monster drinks. That answered my question. Is that really going to be a reflection in you think thats an effective has not seen that benefit yet. I want the consumer to step up a alea little. Will it get to the tiffany level . Can you expect that . Thats a different class of spending that wouldnt necessarily seem to be as impacted by a 1,000 a year savings on gasoline costs. We want something bought for 600 more than an iphone and maybe best buy tells us that. Im using it as a data point to see where the consumer is. Great the Washington Post piece, looking at dennys at 17year high. Ihop with the best sales in more than a decade. We were going to do mcdonalds. Might as well do it now. That is what 6 gains all about. February could be a turning point. We dont know numbers. Dine equity great social immediate yap dennys was a grand slam sorry, cant resist. Mcdonalds, its interesting, stocks up new ceo taking over. Everyone will tell you, sg a for stores too high. A meeting this week in chicago, a number of hedge funds i know attended, and the incoming ceo said, i was quoted as saying im going to be your best activist. It didnt mean hes going down this reit structure that some are advocating. No, we dont want that. Thats a sears strategy. I dont know about that. Franchise fees and rent on each of the stores are your main every knew streams there. Right. Jim some people will tell you, and im quoting here from one conversation if you recharacterize and lever those through a certain structure, thats a beneficial thing. Is that Financial Engineering . Yes. But does it necessarily create value . It might. Doesnt mean hes going down that road. Seems the focus has to be on efficiently changing the menu so it becomes more efficient, sg a starts to come down on a franchise level. Right. Franchisees rebelled thats why the ceo we had skinner on chairman, said we stick by thompson because whose last day of work is tomorrow. Right. Whats most important, what i see, the franchisees got to win them back over. One of the ways to win them back over make it so its not impossible, not a paneralike menu. The most difficult menu ive ever seen. A meeting in Las Vegas Next week. And the new ceo, obviously, will, one would expect will perhaps even be introducing new ideas. Charitable trust closed out your position february 19th. Yes. We got a change and i thought that was it. I didnt know about the hedge fund meeting. Obviously, sold panera. Panera had been up a lot. You want exposure to the consumers. Moving toward target i think targets got it going. There had been a question of activist in mcdonalds. There has not been one, certainly not of the branding branded activist that we think of. That doesnt mean there are large shareholders there. Perhaps more of the institutional variety who are pushing behind the scenes. I think that theres a case to be made. You had kind of motivation theyve gotten something they wanted, which is a change in the top office. You need that menu. You need bathrooms clean somewhere menus simpler, and then well all go back. Weve been going to starbucks. Which posted its tenth record of the month. Unbelievable. As we watch coffee collapse. Yeah. Look at the margins going to be like. They didnt lower the i believe starbucks, the senior growth stock, it goes higher and higher. People buying it off coffee price, forget it chinese expansion, buy it over the european comeback and buy it over the food buy it over the new strategies, Howard Schultz hitting on every cylinder. Gap Holiday Quarter earnings above estimates, revenue in line as comps at old navy up 11. Gap forecasted drop in full year profits citing strong dollar in the port disruptions. Jcpenney missed forecast weighed down by holiday discounting and investment in store expansions. Comps were up 4. 4 and were looking for 2 to 4, a bite spot. Gross margin not good. Still talking about the selfinflicted wounds of the previous year. Enough already. Enough already with the selfinflicted wounds. Gap stores, its difficult, the new ceo starts out saying were not satisfied with the performance at gap. I like the stock but wait that said other divisions are very good. Theres a sense that athleta is a lulu challenger. I like the momentum. I think the new ceo of gap has a lot of cash behind what he wants to do but has to change the gap stores. Merchandise is already ordered for the fall but the urgencys there. Bananas all right. On fire. Up two. Not bad. No. Navy up 12. Gap down denim, enough denim. Were in the denim glut now. You can see that from pvh. Enough denim, guys. Interesting. They say denims showing signs of a comeback. I dont find denim all that different. Yesterday i was reading a net out of citi levis cap x up 50 . Runway shows showing denim will bleed into mass appeal. Im saying my worry everybodys embracing denim. Denim denims hot. Everybody seizes on denim. No differentiate. Target will not seize on denim. It will seize on baby and i think cosmetic. Did i hear you say jcpenney should no longer be blaming the previous management . At a certain point you own the stores. Target cornell comes in and decides six months im getting rid of canada. Here we go. Some of the best opportunities in home kids and footwear. Still trying to fully recover from the selfinflicted wounds of the previous strategy. No. You cant do that anymore. Its yours. Its yours. If i could still talking about homecoming back. No no. You own that. And the dot. Com we thought exciting, they have to spend money. Ala nordstrom, which spent 3 billion and is getting it right. Disappointed in jcpenney though you read the call it seems like its great. I like gap but they say theyre not happy. Theyre not happy. I like that attitude. Retailers spending some dough right now. You know whos happy . Dress for less. Ross stores quarter thing of beauty. Expanding. May benefit from the port situation. Theyll buy it for little sell for high. Ross stores a word at one of those Conference Calls. What do they call it . Package i forget. Being able to buy at a discount a benefit to a number of companies. I think its schadenfreude is what youre looking for. No. Its not schadenfreude. When we come back return of house of cards, season 3 officially launched what happen it means for netflix which has seen its shares surge more than any other nasdaq 100 component this year. Also ahead fcc commissioner ajit pai voted against the new rules, his take. One more look at futures here. Dows going for its best point gain ever but its going to be tight. Up 1041. The record 1049. More squawk on the street from post 9 in a minute. Ameriprise asked people a simple question can you keep your lifestyle in retirement . I dont want to think about the alternative. I dont even know how to answer that. I mean, no one knows how long their money is going to last. I try not to worry but you worry. What happens when your paychecks stop . 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. Its what fans of house of cards have been waiting for, netflix has begun streaming the third season of the flagship original series with batch of new episodes. Shares up more than 40 so far this year. A lot of discussion from people who were up until 4 00ing 5 00 a. M. Trying to see as many episodes as they could stay awake for. Talked about binging last night, how much well watch, whether we have to husband it to later on. Allowed to talk about season 2 . We had the producer on yesterday on squawk alley. I mentioned something and he says youre never free of spoiler alerts. Really . Then, ill do an antispoil antispoiler. I hope to see zoe again. Shes gone on to bigger and Better Things the actress, i guess, who played her. This is obviously a big winner for icahn. One of the greatest. Wow, their entry point. Interesting to note, icahn enter enterprises reported numbers, did not have a good year last year. Ownership of transocean. Ownership of chesapeake, which by the way, chesapeake down sharply yesterday. Was it yesterday . I mean doing 6 million shares, it probably goes up. The companies have to raise capital. Every one of them. Pure permian. Apple has been the apple of mr. Icahns eye, up 73 in the last year. We have a date for the watch now . March 9th, monday. An event, spring forward as the invitation said. Yesterday, Ginni Rometty did more for apple stock than ibm when she talked about you did more for apple. They were deep sixing it until you brought it up. What she had to say about the partnership announced last july to focus on mobility and the enterprise. Youre going to see these apps. I couldnt be happier, i know i would speak for tim as well about where we respect by the end of the quarter, first 25 apps out, first 12 out already, next 25. To me they really highlight what this promise of they the gold stander for consume ability, us the Gold Standard for the enterprise. There you have it. Apple stock did move on that. Yes, it did did i did a lot of work. What did ibm not do right . The 4 billion number. The Ideal Company to buying splunk amazing stop you, the 4 billion, 4 billion in additional expenditure that they will move if you will towards what they the growth areas, whether its security cloud, mobile, or social. Security and cloud and Data Analytics is the sweet spot of splunk. Put you in for security ala macys. Once in, they offer sweeter Data Analytics. Thats what shes talking about the fast growth but its 8 billion. You have to spend 12 billion to get that. Instead they have to feed the Warren Buffett beast, the buybacks. Still not spending enough in. Martin the cfo, terrific guy, the goal is to try to not pin down how much youre going to spend, but to how well you can dominate and compete against a sales force, how you just go by splunk and say, its yours, its yours, splunk. And its the hunk product of splunk doing so well. Almost uniform admiration for splunks quarter. Blair calls it a blowout quarter across all metrics. Jeffreys takes their target to 90. Thing of beauty. Its funny, these guys from splunk they have a comic approach. Its sullivan, hes dynamite. Hes saying at start of it that was one of your best disclaimers yet. Talk about a rock star quarter, clouds doing great, business is on fire. All of the phrases you need from ibm. Beautiful Conference Call. To your point, the splunks of the world or marc benioff, are they just going to keep taking share from these growth businesses that ibm is counting on. Taking share, taking names, yes. I mean s. A. P. Bought they needed to get in not desperate but not doing that well. But that was a nice big buy. You think ibm should be doing the big acquisition to change the profile and thats not enough to invest 4 billion in these, which are growing quickly, 25 billion in revenues, saying its going to be 40 billion, big target. Growth rate on 25 billion over 3 years to get 15 billion in increment incremental revenue is not insignificant. Im telling them what to do. Giving them 10 billion acquisition that splunk would sell tomorrow. Splunk would sell tomorrow. The guys who run the company, interested in it made money. David, look ginny, david, martin, doesnt matter, by splunking, stock goes to 180. Stop doing the buyback. Do it after becky, after the interview with warren then buy splunk. Im raising my price target to 185. People want to know what happened to zoe. Not allowed to say. You see . A lot of people havent seen season i yet. When push came to shove. Oh. Youre terrible. Cramers mad dash as we count down to the opening bell. Take another look at futures as we close out february. More squawk on the street is back in a minute. Anything . No. You . No. Aflac what are you guys looking for . Claims legend has it these hills are full of em. It can take months for an Insurance Claim to surface. Claimin takes patience. Aflac paid my claim in one day. They got some newfangled kinda one day payin machine . Hehehehe yea, i got aflac at work. Aflac. In just one day, we approve and pay. One day pay, only from aflac. Aflac. All right. Time for mad dash. Final trading session of the week. Where are we starting . Amazon. Bears do not listen to what im about to say it will drive you up a wall. You will be Aaron Rubenson talking about how like costco which reports next week amazon prime is a yield play that they have so much money from identifies a 3. 8 its a faux yield, that amazon can give you. Just saying amazon is going for profitability, dont you believe for a minute that the last quarter was an aberration. I want to understand. Yield play . Saying that its like costco you can have a huge amount of money once they get prime up to a certain price, and they have all of the Distribution Centers in, that that is a major profit driver. You know what . Those who like prime can understand that we pay more for prime. I pay more for prime, costco and netflix. That shows you value, value, value. Prime includes many Different Things including the Video Service which is getting robust. Fabulous. Netflix charge you 7. 99 a month. Exactly. Be aware, rubensons piece federal express. Fedex is one of the stocks as long as airlines ual, look at fedex, this stocks biding its time since it reported that good quarter. Okay Credit Suisse says a great quarter coming. Ground network where the money will be spent. Talk about planes too expensive. Ground network profitable. Theyre saying fedex, the moneys coming. Its going to be very high gross margin quarter perhaps because of the money spent on ground. I love this call. I love this its an airplane company. I know youre a technician at heart. You know that for sure. Absolutely. I can work on lots of things. I own a couple of screw drivers. The opening bell coming up after this. Youre watching cnbc squawk on the street on friday. Live from the Financial Capital of the world. The opening bell in about 45 seconds. Well close out the month of february, going to be tight on some breakevens. S p at least for the week s ps going for its fourth straight week up. Currently up. 44 of a point. And then theres oil to break even for the month. Got across 48. 24. Basically there. Yes. I mean 13 of the s p, but big caps being hurt by oiling obviously. That does matter. The big caps helped by it in some ways across the board but not spiking the way the oils are plummeting. Yes. So with that lets get the final opening bell of the month. Get a look at the s p at the top of your screen. Down here at the big board, Home Furnishings retailer ethan allen interiors, highlighting new product designs. They have a sofa right next to our set. A bunch of iterations coming out. Last quarter was not a good one. They suffered from Inventory People didnt like maybe i believe they werent ready for the new product and people are looking for it. This might be a second half of the year once the new product comes in its being rolled out in stages made in america. Yes. At the nasdaq capn. Monster beverage is going to lead the pack no doubt about that, 11 . Youve got 16. 5 . Coke come cocacola stake. European numbers fantastic. Nothing bad on the call whatsoever. One of great numbers they had to spent 2. 9 million defending themselves from regulatory matters down from 4. 7. A big increase in Gross Margins because they no long have to say were healthy, were healthy, at the same time that branding of m80 to ripper is questionable. A like the story very much. You mentioned the upgrade of fdx, also upgrade of csx at bmo. Its funny, i read that and felt like its wow, take your time like 2016 story. It didnt have the pizazz that i look for in an upgrade. Take it to an outperform cost cutting opportunities, improving pricing all they they say coal continues to remain a headwind and could get worse. The rails have gone out of favor here because frackings not that good. Now i want to hear what becky asks buffett. The Biggest Airline sorry, the biggest rail reevelevered to oil i mentioned airlines because the airlines are beneficiaries, upgrades. Alaska air a hot stock. I prefer airlines to the rails in the transports. Bank of america is going to be the third worst performing s p stock on this ubs downgrade, looking at what theyre calling risk of qualified failure in ccar. A bad downgrade. It basically said look out, not returning to capital you like. Was really a downer. It was. A downer downgrade. Debbie downer. Brian moynihan, wow, time come out but he cant because the governments got your hands tied. Price target goes to 16 at bmo. Qualitative failure, sounds like abort, abort. Yes. Missteps in Capital Planning quote, making us nervous. So well watch all of that. Im nervous. Its interesting how for the course of the month big equity gain but was the tenyear really has its come in its come out. You know the tenyear buffeted by the fact the portuguese tenyears low and the spanish ten year and italian ten year youve got go through them for people. 1. 347 if you fiv your money to italy for ten years. Spain will give you 1. 275. But 25 unemployment . Yeah. Again, tenyear. Listen france. 603. That makes the point. At 2 were like whoa. You know, one of the things that i would do if i were at any money in europe id buy dollars and buy the ten year, its a great trade. Thats whats happening. Strength in the dollar. Talk about janet yellen but its important to talk about 770 Million People who have Pension Plans in europe and taking their euros and coming here. They have to. They have to. Yeah it aint pretty. Actavis goes up. This morning its wells fargo saying they continue to believe actavis is the best positioned company, Specialty Pharmaceuticals with agn in the fold primed for Sustainable Growth organically and through acquisitions. Huge offering this week. That was smart. Really smart. Thats what valeant should do but i dont want to lump valeant in the same sentence as actavis. Im looking for rerating of johnson johnson. People are saying alex gorsky wants to make a move with 14 billion in cash perhaps willing to sacrifice the aaa down to aa to make acquisition. A lot of people throwing cold water on that one the ft did a story, its a done deal that was bad. I like the way j j acts so to speak. Interesting when j j wants to get in i mean so many acquisitions that have been done including salix, already inverted themselves, meaning they conceivably can pencil out better numbers from an acquisition than can another buyer which means its more competitive, harder for j and j or pfizer. They are enormous companies that have ability to pay whatever they want really. But it makes it more difficult. Sure. To do those deals. At the same time j j has good organic growth and they remember mcneils almost fully back at drugstores, thats positive. Yes. And i think that gorskys saying im not going to tolerate divisions that are not doing well and its time they have a good pain focus and a good Mental Illness focus but its time for them i think, to make a major acquisition. Its not going to be buying a sales force offer in drug company. I think its going to be boelgd. I think its going to matter. Really . Thats interesting to hear you say that. Its going to be bold and will matter. Size, it could be big. Yes. Monthtodate, looking at the dow components for the month, best performers want to guess . Dow component for the month . Mcdonalds. Disney. Disney at 16 . Bogb iger deliver, deliver. This is a year if you can raise price, your stock goes higher. You know, monster. Should we call him the mailman, Ala Karl Malone because he delivers . I love that. You know, hes still got a couple of more years at the helm. Quite a few more actually. Kept pushing july is it 17 or 18 . Very strong that story. Very strong. A couple weeks away from cinderella and the frozen short. Yes, so much of a like. Holy china coming. But, theme parks, dont forget they did call out gasoline as six flags. Its so much larger than any other company in the media landscape at 180 billion market value. Deserves it. Priority time warner, well more than twice the size. How many espns can they have . How about the app . Is it not the greatest . Watching like the duke Virginia Tech game. Better figure out the apps. One thing i argue with eight, how much youre paying for espn and the fact theres cord shaving and cord cutting going on and it is a question. Its a question. Sports programming, how much will we continue to pay for it . Particularly if it becomes sort of an a la carte issue. Not that were there yet. Nor will we be for near term. Its a pretty much all cylinders. Some might argue people arent talking movies are just incredible. Broadly, jim, yeartodate spx point move half of the advance is in ten stocks. Its apple, amazon pfizer biogen disney, gilead, boeing lilphilip morris. Justifiably moving up raising numbers. So youre not worried about thinning ranks of leadership . No im not because i think the second half of the year youre going to see energy costs of companies go down i believe the dollar could stabilize. Second half tailwind for a lot of the companies that had hedged energy, Energy Hedges are coming off. I see a lot to like provided oil does not spike here. Aint spiking. Were seeing production numbers from Oil Companies that are dramatically improved from last year. Even as they cut their budget. Lets get bob pisani on the floor. Bob . Carl in an upward market its typical to have a small group of stocks with disproportionate weighting because certain big caps when they start doing well remember s p, market weights even Rick Sherlund have disproportionate. Its not unusual. What the Rick Sherlundearnings situation is like. First quarter 2015 numbers below First Quarter 2014. Right now, and thats a little unusual. This would be the first time in a while, 27. 21 dollar estimates, market cap weight estimates on the s p. Last quarter, quarter 120 147 thats significant. Even quarter two, looking out, where the numbers are above the numbers last year. Its below, 29. 57 for the second, 2015 Second Quarter 29. 77. A sign of concern. Let me move on. Talk about gap here. They reported earnings in line with expectations. Guidance a little bit weaker than anticipated. Heres whats important. Explicit commentary why numbers are below expectations. Look at this 16cent impact. From foreign currency fluctuations 13 cents, delay at west coast sports. Thank you for telling us that. Thats 10 of earnings for two explicit reasons. Why some of the companies are giving conservative guidance. Help from gap putting that up for me. Finally 5 month going. Virtually everything is up 5 . Nasdaq up 7 . This is very unusual. This is only happened several times. S p is up 9 out of the 10 times in the month following it. I think this is very interesting numbers that were taking a look here. You think that put up the box here you think after a month like this, the following month would be to the downside. But in fact its not. According to kensho s p up 5 its up nine of the last ten times this happened. Average gain 2. 4 . I think the point is its a little counterintuitive. When the markets got strong 5 move is not enough to exhaust the upward momentum. Interesting stats from kensho. Back to you. To the bond pits. Rick santelli in chicago for us. Good morning, rick. Good morning, carl. Well, even though 2. 2 is a far cry from the previous quarters 5 indeed was better than expected and the whisper number on the floor was one handle you didnt see huge move in treasuries despite the notion that, if that revision stands for our last look it places gdp at year for 2. 42 and change. Intraday shows down to 2. 02. Down one on the day, eight on the week. Settle at 2. 11. Of course, last week yeartodate chart 2. 11 settlement close to high yield close of the year on the 17th at 2. 14, so the last year at 2. 17. Twoday chart of the bunds dabbled un30 basis points. A smidge above it as you can see on the chart. Maybe the most interesting trade, though continues to be the currency side if you look at this oneday, euro versus dollar, it looks bearish until you put it against a twoday. Yesterday an avalanche of selling compared to today. Were hovering at the lowest level since the fall of 2003 which of course means dollar index, yes, best level since the fall of 2003. The secret chart im showing you today, 28month high on the dollar versus the chinese yuan. Back to you. When we come back chicago pmi, dont go away. [piano background music begins] we are one, we are essentially the same regardless of where we come from. Um, there are definitely things that are different about us culturally and Everything Else but at the end of the day we are the same and we really need to start seeing the world as a place that was gifted to us. [thunder and rain] [thunder and rain] [thunder and rain] snur welcome back to squawk on the street. Rick santelli here. You have a heart condition, cover your eyes because the latest read on Chicago Purchasing Managers survey didnt match 58 for expectations. Its 45. 8. 45. 8. As i was looking to get a comp last time under 50 boy, i could fine the last time we were under 50 april of 2013. But to find a number this low, i didnt bring enough paperwork. That is really a low number. So ill have to get you back tonighton the comp. Not many expecting this number. Whats the response in a marketplace, and it is key, extra ten points of selling in stocks. Interest rates, hovering 2 . My guess is next time you see me top of the hour well be below 2 . Carl, back to you. Not far away right now. Rick santelli. Well see you in a few minutes. In addition to the news you probably heard about this thing going around on the internet about the dress. Did you see black and blue . Did you see white and gold . Buzzfeed traffic, record traffic, jim, for buzzfeed 20 million views. One point last night almost 1 Million People at one time talking about this. You and ive weve had conversations about twitter being episodic and relying on big events. Now day to day. Dick c. Has to follow up dick c. s moment twitter handle, his moment. Hes got to embrace it. Keep the fire stoked. The fact that this could beat the llamas i mean the llamas were major lion share for 45 minutes of the country. True. It was trending in somebody said they needed a part where they release wild animals once a day. I thought your analysis of the llamas they left a man behind. Youre not supposed to leave one behind. There were three and only two ran. The dress i have not weighed in on the color. Tell me what to do carl. My wife and i had a fight about it last night. I see black and blue. She sees white and gold. The morning shows have the same discussion. Twitter above 49. I think twitters doing a lot of things right. That last quarter was impressive if they can figure out a way to block people who do multiple attacks on jimcramer id be happeny talk happy about using phone numbers. Dick c. Im impressed, hes coming back. Prices for used electric cars droppinging. According to the journal, tax credit, battery concerns cheaper gas, conspiring to limit sales, mostly of electric vehicles coming off of leases. The journal cites National Auto Dealers Association stats that electric cars depreciate almost twice as fast as their gas powered peers. We know what happens to values the minute you drive off the lot. We know tesla would dispute than you know if you go teslas a coal stock. You Say Something about tesla, thats irrefutable. Maybe theyll come with an asster risk, our cars have not done that. Is it. Our cars do not lose value. Many moving part tofz tesla. Tesla, still has the field to itself. Still not anyone out there with that kind of car. Its not going to be second half of the year you see plugin hybrids. Theres a pro and con. The love for teslas from Consumer Reports earlier in the week two years running, those who own them love them. Not everybody has them. I say its a great car. Its not a great stock. Thats my take. Well get stop trading with jim. Dows down 42 points on the disappointing chicago pmi. Back in a minute. What does it mean to have an unlimited Mileage Warranty on a certified preowned mercedesbenz . What does it mean to drive as far as you want. For up to three years. And be covered . It means your odometer. Is there to record. The memories. 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It can help find hidden correlations and help your doctor recommend Treatment Options for you. Theres a new way to work and its made with ibm. Time for cramer and stop trading. I talked about how cocacolas had a close relationship with monster beverage. J j does have a close relationship with pharma ci think the cancer franchise is something that j zwrchltj does covet to block celgene. I think the stocks moved up too much. Even up too much to account for potential premium that a buyer would pay . I think so. The stocks moved up too much to do the deal. Thats a stock that can cool auch. Off. I think gorskys got what he needs from the partnership. Potbelly had momentary mojo and the cfo leaves. When a cfo leaves particularly that one often thought of as the master going to a competitor, by the way. Mast somewhere commander of got bell potbelly. Giving back. I prefer dennys. I prefer honestly ive got popeyes on tonight. That was killed. What else . Two stocks. Blackhawk was horrendous, yet i think that bill tauscher has to explain what happened to revenues. Thats a great story. The company that does cards, the wall of cards. Er. Theres answers that have to happen. They may turn out to be opportunities. As we close out february theres a point you want to sell discretionary and buying utilities . Am i wrong . Is that day coming. Somebody upgraded i dont want to mention, had a sellen uil, got a bid from the spanish last night. I dont know. I still i am waiting for the banks to have follow jpmorgan which had a great analyst meeting, thats 17 , 18 of the s p. I think well see continued rotation in salesforce. Com and out of the big cap pcrelated companies, doing not well. A couple of napes we didnt get to arcp remember that name . Of course. Oh, how are they doing. Audit financials will be done by march 2nd, when they said they would be. Now they can go on to find a new ceo at arcp. Big named activists in the stock as well. But its up 5. 5 . And then theres tmobile tmus keeps going john legere saying the same thing he said last week hey, we asked, would it go well with our portfolio . Darn right. Where is he . Where is he . But where is he today . Hes in bond. People are thinking that hes there to talk talk about something major with deutsche tell. And they did say some things yesterday which led people to believe theyre a potential seller. He tweets that. He did ask people to smile more, which i thought was great. Thats why i thought the german confluence wherever he goes he creates excitement. Makes our business exciting. Creates excitement. Have a good weekend, jim. See you tonight mad month money. Breaking news on consumer home sales. Ajit pai. Good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen who is back. Well take it. Simon hobbs, david faber. Closing out the month of february with declines in stocks. Chicago pmi a disappointment. Crude oil, though trying trying for its first winning month since june of last year. To the road map this morning. Fcc approving rules for Net Neutrality. Well talk to commissioner ajit pai about the new rules. He voted against them. Hedge Fund Underperformed broader markets in recent years but hugely popular with big investors. Why . Jim stewart will be here to weigh . Consumer advocate ralph nader thinks walmarts move to raise wages is not enough. Hell join us later on. Rick santelli. News on Consumer Sentiment after the chicago pmi number. Good morning once again, rick. Good morning, carl. I was wrong by the way, were not under 2 . Hat in hand with the feeling in the treasuries last couple of weeks. It really seems as though the buyers have limited impact. Here we go. February final read on michigan 95. 4. Comparison to its mid month read at 93. 6. How does 95. 4 fit . Comps to january where you had 98. 1 which was the highest going all the way back to 2004. Just a quick tombstone on chicago, that was the weakest number since july of 2009. Since that number there have only been three under 50. This is not very good. Now lets go to one of the most economically vibrant spots in the country, washington, d. C. To see what the read is on pending home sales from our expert diana olick. Well rick thanks. Pending home sales up 1. 7 in january, month to month, up 8. 4 yearoveryear, ard coming to the realtors. The fifth straight month of gains and highest level of pending home sales since august. Street looking for up 2 . Pending home sales are signed contracts in january that are future indicator of closed sales that well see in february and march. Now the realtors are saying this is increasing even due to very tight inventory but express concern about rising home prices. The chief Economist Says if we start to see double digit price gains again, thats going to hurt the spring market. Locally, northeast pending sales up 0. 1 midwest west down 0. 7 . South, up 3. 2 . In the west up 2. 2 . One good sign investors moving out, so theres not so much competition for first time buyers. Also all cash sales are dropping. If you miss the numbers i put them on line for you. A Beautiful Day in d. C. Thank you. Diana olick with the housing data. Markets off lows, down 25 points on the dow but in the red in the last day of trading for the month. Tenyear, as rick was saying above 2 after the weak pmi data. Even still both the dow and the s p, of course have had their best months through february since october of 2011. Keeping an eye on oil. We could see the first monthly gain for crude since june. Michael gappen chief economist at barclays and also joining us dave katz. Good morning. Michael, i want to kick off where we are on Consumer Sentiment. Weve had figures come through from rick there within the gdp data Consumer Spending last quarter, climbing at its most in four years. Weve seen an acceleration on the consumer discretionaries, certainly during the course of the month. How would you sum up where we are. Are we accelerating with Consumer Spending. The data reflects decline in Energy Prices we saw last year. The peak of that effect took place in november perhaps into december. We still think its supporting consumption spending. Its supporting Consumer Sentiment. I think that effect will fade by the end of the First Quarter and then youre looking to where labor markets leave the consumer for the rest of the year. So maybe the peak is a bit behind us but its still supporting activity. Michael, talk me through that and explain, if you would, why would we peak . If gas prices are still low, people still making savings, savings that can be spent elsewhere. In terms of the quarterly rate of growth you get the initial decline and it passes through it gives you an initial boost and the quarter rate of changes. Hard to get the growth rate to continue to accelerate. The growth rate shoots up higher first and then comes back down but it doesnt change the picture that the consumers benefiting. Oil goes from 100 down to 50 and stays in that area certainly there will be a windfall to support consumption over time. David, what about the stock market . Whats the best place to be . Obvious obviously the broad market up 6 for the month. Consumer discretionary big gainer in that. Where do you go from here . First we would not chase the rallies. We liked stocks for 2015 but we think youll have volatility. A adown january, stronger february. Dont chase the rallies. Next time you have a selloff wed be adding to stock. We think financials which started poorly are due for a very good year. We like select industrials. Shockingly we think oil and Energy Stocks are going to be a good place to make money this in year. We also like the old technology, thats one of the worst performing groups starting this year microsoft hewlettpackards of the world. Money flowing out for the short term. But a 6 to 12month time horizon, good places to make money as well. Does it seem weird were set for best month with deteriorating Economic Data losing momentum we had from last year and declining Profit Growth . We dont think so because, remember, you had a poor january. So off of a very weak start to the year youve had a rebound. We think that earnings for the Fourth Quarter are in line to the last few quarters 68. 5 of the companies beat. Companies lowered expectations for the year primarily currency related. We think now that the bar has been reset, that earnings are going to do better than expectations as the year goes and the forwardmarkeds a forward looking indicator. The dust has settled on Janet Yellens testimony two day of testimony this week. Where are you on the actions of the fed and what thats like lie to mean for the markets . So i think the big message from yellens testimony is that the feds ready to end Forward Guidance or its pledge to keep the federal funds rate at zero lower bound. I think the message is that starting in june committee will be on a meetingtomeeting decision when to raise rates weep think rates will go up in the second half of this year. But the message is also one of a gradual rate rise where the fed wants to be seen as moving slower and later. As long as that message holds, it shouldnt be too much of a deterrent for the markets although there may be volatility at the beginning of that starting of the rate hike cycle. What do you do with Energy Shares . Now that februarys set to be the best month, at least for u. S. Oil that weve had in the last nine months first up months do you buy Energy Shares or wait this out because what were seeing are wild swings in this increased volatility in the price of oil . We think if you have a 6 to 12month time horizon you can be buying the Energy Stocks here. We would focus on the biggest and strongest companies, the royal dutch petroleums the chevrons of the world, exxons of the world, theyre going to get through this paying a very nice dividend. Since 1983, five selloffs of 50 or more in oil prices. The subsequent sixmonth period oil prices were up over. 70 in the subsequent 12month period they were up over 90 . We think people will be surprised with the bounce in energy at some point in 2015. We think the economic value of oil is 80 a bafrlrrel we will start to approach that by the end of the year. Thank you very much. Have a good weekend. When we come back the fcc approving new Net Neutrality rules yesterday, as you no doubt know. Joined by fcc commissioner ajit pai, he voted against the new rules. Well find out what repercussions are in store when squawk on the street returns. 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. [ male announcer ] whether it takes 200,000 parts 800,000 hours of supercomputing time 3 million lines of code, 40,000 sets of eyes, or a million sleepless nights. Whether its building the worlds most advanced satellite, the space station, or the next leap in unmanned systems. At boeing, one thing never changes. Our passion to make it real. Happy friday. Monster beverage shares staging a monster upside move after the Energy Drink Maker posted profits and sales that beat estimatesen it attributes strength to continuing International Sales growth especially japan which is becoming one of its biggest markets outside the u. S. Monster said it and cocacola expand aspects of their partnership. As a result 13 gain one of the best performers in the s p. Back over to you. It was a good quarter. Thank you, dom. Next, call it a tale of two retailers. Both jcpenney and gap trying to turn around their business but was turnarounds taking adifferent path in the Fourth Quarter. You see it in the shares. Plus ajit pai joining us when we come back here on squawk on the street. Thing 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. 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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. After more than a year of debate, the federal Communications Commission has agreed to impose tougher regulation on the internet, setting up a legal fight with the telecom industry. The new rule allow the agency to prohibit Internet Service providers from granting faster access to companies that pay for that privilege. Outspoken invest somewhere entrepreneur mark cuban minced no words, criticizing the plan on this program yesterday. Its not going to increase investment. Theres no scenario where people will invest more money so theres no scenario where youre going to get more competition because of the regulation. You know its just crazy. Its just you know i dont understand. The decency thing and the regulation of the internet, thats why im shocked. How is octoberocculis going to deliver, how is google able to manage selfdriving cars in an environment where they have to put it over an open internet they could buffer . Joining us fcc commissioner ajit pai. Good to have you back. Great to be back with you. Im sure you probably agree, in some part with cuban, yes . How disappointed are you . Im very disappointed. Most disappointed for the american consumer. In the short term its going to mean broadband bills go up broadband speeds go down and its going to mean less competition, not more in a lot of the markets where theres not enough competition as it is. You called this a solution that wont work to a problem that doesnt exist. What do you mean by that . You could certain in vain through 317 pages to find any evidence of the fcc identifying a systemic problem. They cite case of unknown North Carolina isp a decade ago, comcast from eight years ago. If this was a problem of a broken internet one expect to see examples all over the place but you dont see that. The reason the internet thrived free from government regulation. Even if there was a problem, the socalled solution that the fcc adopts is not going to work. Its going to inject the fcc into every aspect from the user relationship to the core internet. Thats not something the fccs legally empowered to do and its not something we have expertise to do in a dynamic industry. Wheeler did say he doesnt expect onerous regulations like price controls. Why do you say the consumers going to be impacted right away . Most of what im reading today indicates its just a bunch of political rhetoric at least in the short term, and no change in Consumer Prices . The people who are saying that have not read the plan. I have. And what im telling you is that the fcc explicitly opens the door to billions of dollars in new fees and taxes on broad band by subjecting it the telephone style taxes. More over. Fcc brushes away concern from smaller competitors who are subject to other taxes state property taxes, general receipts taxes and the like. But most importantly, i think the critical question of competition. The fcc, theres nothing in this plan that spurs greater competition. As a guest on your show recently put it when asked, isnt it expensive to build these broadband pipes through the home . He confessed that was, quote, outside of my area of expertise. That is rhetoric i think that we should be concerned about. Commissioner, isnt the provision of broadband a very high margin business . I mean how much profits do these Companies Make at the moment . Well whether or not its high margin or not, indisputable point is that it is hard to build these networks out especially in part of the country like Rural America where you dont see an easy Business Case for doing it. My point is i want to have multiple competitors in all of the markets. And youre not going to have that if we first squeeze out the smaller competitors. And then on the larger ones micromanage how they interconnect with providers, what kind of Services Plans theyre allowed to offer. That kind of vague yet broad regulation from the fcc takes us exactly in the opposite diction in terms of competition. The elephant in the room our own Parent Company wants to take over Time Warner Cable in a 45 billion deal. There is suggestion amongst some that, as a result of this perhaps that merger is more likely to go through it gives the political cover for that given you have a broadbased regulation. I think Brian Roberts was even asked phone the Conference Call on tuesday whether le would be willing to sign a waiver not to challenge it in court if the time warner deal would go through. Whats your view . Unfortunately because that matters pending before the commission and i will be called upon at some point to vote on it i cant comment on either the merits of the proceeding or how the fccs decision on Net Neutrality might affect it im sorry. A lot of discussion about the president s Youtube Video urging the chairman to be aggressive. Obviously, chairman chaffetz yesterday saying didnt show us the plan didnt testify in front of congress. Is that all just noise or can that be used later on in determining the legality of this rule . Two different points. First i have been criticized by calling this president obamas plan to regulate the internet. Its telling that the white house and committee touting the fccs action to implement president obamas plan. Second point its critical for people to remember the fcc historically has been an independent agency and when its rendering judgment on industries as important to the American Economy as the internet, its we should be focused on the law and the facts in the record not and on what a political act, acting through political motivations might want us to done thats the most unfortunate thing about the debate. Instead of talking about how consumer access lawful content of their choice weve been sucked into the vortex of political, that have not played a part in the fcc decision making. Were waiting to see the order. You are familiar with it. Mentioned, you know whats in it. Can you give us more sense here when you refer to potential for taxes and fees is that something thats going to happen immediately or is it something simply that could happen as a result of the regulation thats taking place . It will happen. The only question is when. In the short term the fcc tees up in position of universal Service Taxes on broadband. Were expected to get a recommendation april 7th of 2015 on how to impose those taxes. The fcc says in this order, on Net Neutrality it might move that deadline back by a short period. So i would expect at some point in the late spring or fall for the fcc to receive that recommendation and then given its desire to spend a lot of the universal service fund money on things such as lifeline for broadband and the Erate Program well will be imposing those taxes in short order. Some other taxes imposed in the short term such as state and local property taxes, on communication providers will kick in. Example, d. C. The, the washington, d. C. Area taxes Telecommunications Companies 11 on gross receipts. Now, currently some companies havent been classified as Telecom Companies dont have to pay that tax. That 11 tackx on gross receipts should kick in quickly. Ultimately thats going to be pass on to consumers. Yesterday, bloomberg got Steve Wozniak on camera whats your reaction to the ruling in he said sometimes the people win what happen do you say to him . I deeply admire the work hes done. I told him yesterday, dating back to the apple 2. Est, the question is what will these rules do for the American People . And i think, by and large, what youve seen is a great deal of advocacy from people who havent really expressed that opinion based on the facts that are in the record. How the rules will affect broadband competition. I dont doubt 4 Million People weighed in with the fcc but a lot havent explained how these rules are going to create more competition, make more a better Consumer Experience and people like mark cuban and others who understand this business have made cogent arguments on the other side. Even the website went down after all of that. Good to have you with us. Ajit pai in washington. Lets bring in steve liesman, some headlines crossing from dudley this morning. Steve . Carl good morning. Im at the university of chicago booth schools us Monetary Policy conference, in new york every year. And bill dudley new york fed president , speaking and commenting on a paper with implications from Monetary Policy low Interest Rates in the u. S. Partly reflect low rates in europe and japan. And this is sort of interesting, he says if low rates persist, when the fed starts hiking rates, then the fed may have to be more aggressive than otherwise it would be. Its to say what the papers about as to whether or not the u. S. Sensitive period of stagnation, when Interest Rates remain low for a long time. But he sees real gdp lower over the medium term. The fed, longrun fed funds rate 3. 5 . I want to show you exactly what dudley said about this being more aggressive. He said if low shortterm rates, quote, persist even after the fomc begins to raise shortterm Interest Rates it would be appropriate to choose a more aggressive path of Monetary Policy. A lot depending how the markets reashth to the first Interest Rate increases by the fomc. Quick look at gdp. The number revised down 2. 2 from 2. 6. But the internals are okay. Consumption remained a strong 4. 2 . Business investment revised up. Equipment up. The downward adjustment to the inventory number, that means less of the inventory to work off, 25 billion or so less. This question outlet for Interest Rates, outlook for fed policy and the outlook for growth part of the interview i have coming up with stan fischer, 3 15 p. M. This afternoon. Im excited for that steve liesman. Dont get to hear from stan too often. The maestro of monetary economics. Well look forward to that later on. I wouldnt call him sara i wouldnt use that term because the last time somebody was called maestro, it didnt work out too good. The great adult. That was his nickname. That works. That works. Retail now. Tale of two turnarounds, different paths here. Jcpenney missing estimates, while gap beat. Both companies detailing path to profitability for investors on Conference Calls yesterday. Courtney reagan joins us with details. The theme here is challenging environment for retail. Definitely. Retail in general going through major industry shifts with the integration of technology and the increasingly mobile 24 7 shopper. Retailers are going through transformation of their own. For the past three years jcpenney has been going through transformation in two distinct stages. Under two very different ceos. Shares fell more than 60 from ron johnsons transformation to his last day. Shares shed another 40 since oldman has taken over. Samestore sales are positive and liquidity reestablished. Man why believe it will never see 32 billion again. Jcpenney reported break even earnings with comps up 4. 4 . Gap ink has been going through a transformation for more than a decade. Buying and now selling. Acquiring intermission and expanding its brands around the club. Art pack former head of digital for the company, is in his first three weeks as ceo of the specialty retailer succeeding glenn murphy who is credited with gaps resurgence. Shares gained more than 140 under murphys 7 1 2 years at the helm. Gotten rid of the director role of the namesake complain. The banana republics held the first fashion week. It did issue conservative fullyear guidance citing fx and poor issues as potential negative drags. That port strike hit. Courtney, thank you. Straight ahead, just as news comes that carl icahn lost money, his own money, for the First Time Since 2008 jim stewart explains why so many hedge funds are still popular with investors, despite their underperformance. Well be right back. E financial noise financial noise financial noise financial noise 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. Hi everybody. Heres your cnbc news update. Germanys parliament has overwhelmingly approved the fourmonth extension of greeces financial bailout. Greece was granted the extension by its European Partners and creditors in exchange for a commitment to budget reforms. The u. S. Economy slowed more sharply in the final three months of the year than initial estimates. The Commerce Department says gdp grew at an annual pace of 2. 2 weaker than the 2. 6 originally estimated. Carl icahns investment portfolio posted its first annual loss since 2008. Icahn enter prices swung to a loss from a profit of 1. 03 billion the year before. A sad story to report to you. Contrarian investor irving conn known for making money in the 1929 crash by shorting stocks died at ripe old age of 109. Up to the end he was the chairman of Kahn Brothers group which has a billion under management. A guest on cnbc over the years and hell be sadly missed. Thank you very much sue herera a moment to look whats happening in the markets. The dow was down 30 points. Data at the top of the hour better consumer confidence. Dow down eight. S p 500 in the positive. A very strong one on a percentage basis. The best for the dow and the s p since back in 2011. As sue mentioned, Billionaire Hedge Fund investor carl icahn who has outperformed the majority of Hedge Fund Managers posted its first loss since the 2008 crisis. Pulitzer prize winning columnist jim stewart wonders why hedge funds are popular with investors despite their poor performance. Jim stewart joins us explain. We thought calpers pulling out another year of lets face it, bad returns, barely 3 there is over 3 trillion in hedge funds. I just have been asking around like people who are investing, why are you still putting money in these things . What have you fine. The same song weve heard throughout history, which is we will deliver, higher returns at lower risk. Ive heard that sales pitch dressed up i mean i remember the junk bond year that was junk bonds. Theres a market you know incorrect here its not priced correctly, well give you better returns at lower risk. Guess what . Ultimately, you know decades went by. They didnt deliver better returns with lower risk. I think that one thing investors should realize theres never higher returns without higher risk. Yet, the appeal with the fresh memories of the financial crisis every pension fund adviser i spoke to mentioned the financial crisis we cant go through that again. What i found interesting tenyear datas now out and if youre in the 60 40 blend index fun thing over ten years which expands the financial crisis you come out a full percentage point ahead annualized. If you could have ridden it through. I wonder how much is lower Interest Rate environment, Central Banks are easing and negative rates in some parts of the world attracting money to hedge funds that are promising higher rate but was helping main index funds outperform. I have to hand it to the hedge fund great at marketing and their story changes with every twist in the facts. Some said, were treating it as fixed income alternative. Our benchmark is what you can earn on ten year treasuries, 0. 1, they said were outperforming the benchmark, we earned 2 last year. Strictly looking at fixed income alternative it does make some sense. Im not completely against hedge funds. Now the market, i can see a case putting some in now but not before. But on the other hand you have to realize, thats a form of market timing betting regular markets will go down and no one has cracked that mystery either. Youve hit it on successful hedge funds, and i argue theres two ways to measure it but success in terms of the hedge Fund Managing make an enormous amount of compensation is not based on the performance of the fund but as much based on their ability to market. And it does seem that once they attract the capital, they want to take less risk in some ways to simply keep it because they dont get penalized. I watched the industry grow up like you have and its amazing to me how performance has not been strong but yet assets dont leave. I know, astonishing to me. I wonder how many years before these people wake up and realize the money theyve left behind annualized. What part of wall street was a marry tocke merit tock kra si . They want to be measured in that way. You would think the idea is those who outperform will get more of the assets and those who dont will lose them but im not sure that takes place in hedge funds. The pitch is managers we live by the sword, we die by the sword, we only take a percentage of the gains they do take a percentage, but big percentage. When there are losses they are terrible losses and in many chases though close. The number that have closed shop doesnt that Say Something. A Record Number of 2014 of closures. The average they try to adjust but they dont get the data because people who shut down dont turn in returns. Can i pick up the point you made about the ability to short, to perform well if theres a crisis. If we looked at 20year chart of the s p, the most remarkable thing is were at the end of the very long bull run for six years, maybe we dont quite remember how bad it was. Maybe those people just simply want the different voices within the spectrum they want to hear the contrarian voice because before would have been locked into managers who say, as we hear often on the network, by the market maybe they need that to be part of the voice that they listen to . Thats true. Diversification is part of the argument. But diversification to what end, i think, what youve got toask. Does it lead to better risk adjusted returns . Were seeing data that says no. Theyre saying what about a 60 40 blend . They say theres enough diversification with plain old fixed income and equities to get you through these periods. You can also spend based on average returns over four quarts or a couple of years. You smooth out some of the volatility. There are ways of dealing with that in the Old Fashioned low cost mix. I wonder if this fair to paint one hedge fund with one broad brush. The long short equities guess what . They got over 40 billion of new money. The pension Fund Managers and advisers typically chase returns just like individual investors. Now theyre stampeding into event driven running away from long short equity which has underperformed for years. If you go to Hedge Fund Long short equity would be the place to go. Event driven largely activists. Many closers are smaller funds that fail to attract enough capitol make it work. And the money stays with big guy whose put up pedestrian returns. Going back to your point, once you get really big, the key part of the compensation is no longer the 20 or whatever it is of gains, its that chunk of assets under management. So you dont mind mediocre performance, you take lower risk, lower returns to keep that asset base in there. If you can hoover in the 2 3 4 say i beat my benchmark of whatever low number, the institutional money stays and you rake in the percentage. I have to say, its a great business. Capital management. Its better than journalism i have to say. Carried interest tax rates a column i think you may have done. If not, i should get back to it. Look forward to reading comments. Jim stewart. Walmart raising wages as you know for its workers last week. Ralph nader, longtime critic of the retail giant, says its still not enough. Nader will join us live within we come right back. 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. You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. I have the flu with a runny nose. [coughs] better take something. Theraflu severe cold wont treat your runny nose. Really . Alkaseltzer severe cold and flu relieves your worst flu symptoms plus runny nose. [breath of relief] oh, what a relief it is. Mommy hey walmarts move to raise wages bringing the minimum wage talks center stage and leading other retailers like t. J. Maxx to follow suit. We talked to Doug Mcmillon about the wage there we between provide a Great Customer experience. The changes that were making include structural changes in the stores wage increases, Training Programs and this company, as you probably know has always been a people business, its a people Business Today and it will be tomorrow. So our associates their pride in the company the ownership that they take those things are vital to running a good retail business. And today were investing in them and we want them to know how important they are. Some call the move significanting but consumer advocate ralph nader says its not enough. The author of unstoppable the emerging left right alliance to dismantle the corporate state. Good morning. Good morning. Are you saying its not enough . If you are, why you looking a gift horse in the mouth . It. Not enough. Walmart workers in 1968 were making more in inflation adjust adjusted buying power than theyre making today. If the inflation adjustment was made starting with 1968 the walmart minimum wage, by law, would be 11 an hour. Going to 9 next month and then 10 next year still doesnt equate to what walmart workers made back in 1968. Even though worker productivity in walmart has almost doubled because of automation and other streamlining. Yellen was asked about this the percentage of gdp going to capital as opposed to labor, i mean the chart is unbelievable to look at. Why is walmart the problem . Why is this move at least not a start in the right direction . Well obviously its a start in the right direction but you see walmart was racing trying to race ahead of city and state minimum wage increases. People back home not waiting for washington which has been stuck with 7. 25 per hour minimum wage for years. And so what walmart really said to itself is you know we got cities like San Francisco and seattle and states going up to 9, 9. 50, 11 an hour we better get ahead of the curve though we have not urged congress to raise it for all 30 million americans. 30 million American Workers making less today than 1968 in purchasing power. So i dont think it was much of a big step but it shows that walmart is feeling the heat. Costco, for example, started its workers at 11. 50 an hour plus benefits. That was two years ago. So i think walmart is feeling the heat. And the heat has to pervade the u. S. Congress. So we get consumer demand up. Theres no better way to recover from a recession than to give low income people more money to put bread on the table. Isnt that a small part of it, ralph . Isnt that overarching theme the loss of middle class jobs in the country, the fact there has been a steady demand for jobs in retail and restaurants, where those higher quality, higher paying manufacturing jobs are just not what they used to be and this is more of a secular shift in the u. S. Economy . Unfortunately, thats true. While manufacturing jobs are subject to two tier like in the Auto Industry where a new autoworker can start as low as 13 an hour half of what originally was the case not only that but a lot of manufacturing jobs are going offshore because of nafta and the trade agreements and this notorious one, which i dont think will get to congress because of the left right coalition against fast track when president obama takes the transpacific agreement and sends it to congress. By the way the minimum wage thing is attracting left right support, mitt romneys come out for it Rick Santorum has come out for it bill oreilly come out for higher minimum wage. The theorists, conservative theorist runs entrepreneur in california made a great case for it. Thats why i think its going to go through congress regardless of whether john boehner and mcconing like it or not, its going to be a big issue for the 2016 president ingal election. Shame on us for the worker who sweat it every day, growing our crops, dont have a bare minimum to sustain a decent standard of living for their families. What do you make of the president s recent pronouncement on this the rich should be taxed more and there should be wealth transfers to the middle class . Many people suggest thats really not a longterm solution what happen do what do you think . Its a restoration. In other words 19 0s the rich were taxed more corporations taxed more we had extremely low unemployment rate, we had a prosperous economy and weve got to get back to that level. You have supper rich people making low tax rates. Warren buffett admitting his rate is lower than that of his secretary. The big corporations and globalization have found tax haven as broad tax escapes, places like luxembourg and ireland notorious escape from taxes while they depend on u. S. Public services and u. S. Protection which are not willing to fully pay for. General electric, im sorry to say, one of most successful tax escapees over the years in american corporate history. You criticize walmart, and not fair but viewers ask, how many jobs has ralph nader created. Ive created hundreds of jobs in the civic arena, over 100 groups going doortodoor canvassing for clean water, clean air, workers safety. Yeah ive got to answer that question. The head of walmart has got to ask himself, his predecessor was making 11,000 an hour plus benefits and im sure hes not making much less than his predecessor. Thats a pretty big gap between a million walmart workers making under 10 an hour. We have all of this information on our website timeforarace. Org. Its a left right issue now. Arguably free markets catching up. Well see, ralph. Always good to talk to you. Thanks for the time. Thank you. All of in the markets, were about 14 points away from the nasdaq hitting 5000. Bringing back memories of course for many people of the dotcom bubble. 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Take life in. As the nasdaq tps continues its march towards 5,000 whats the best indicator on the crucial question of whether were in a bubble . Dan rosensweig is the ceo of check and joins us this morning. Good morning. 15 years ago i think you were still at pc mag. You hadnt got to yahoo theres no more pc magazine only online. Computer magazines at the forefront and it became obvious around 1996 when we met the yahoo guys. Of course. And the alibaba deal. Whas the difference between now and then in your view . Of the market . Valuations yes. I think what weve seen is a separation of winners and losers. The private market which i dont think you can overlay to the Public Markets, but scale matters. Everything in the internet that is public is scale. If youre not if youre the windshield or the bug. There are companies that have breakaway velocity like the facebooks and googles and amazons and then Companies Like ours which are picking huge verticals and becoming the leading player in that vertical and then we want to see the same kind of ride over the next 10 or 15 years. You have to be in a big category, a platform you have to have a form of modernization and you have to be pure digital because thats where all the profits come from. Youve gone pure digital, your story is phenomenal a great jump and the stock is you did what you describe as a netflix. Talk us through that briefly. Its textbooks you rent essentially. In essence we reipoed the company. What weve been looking towards is how do you get out of the business you dont want to be in because that business eventually was going to go away. We know print is going to go away eventually. Physical books. Physical print textbooks we rented. What weve been a able to do is do a deal with engram and they are the largest distributor in the world of physical goods and starting to be Digital Goods and they are going to buy the books own the books, were going to market and distribute it. We keep all the customers, get all the data the transactionses, and we move from a 10 gross margin business to a 55 gross margin business at the same time weve leveraged that to be our other Digital Businesses i guess the problem will be barnes noble copied the business years ago now. If you go purely digital other entrants can come in and erode those margins. Only on the etextbook side. They cant erode the margins because its an agency model, the price set by the publicer. The majority of our revenue now is something other than textbook related. Its not a print textbook where we take a 20 commission and get my margins or etextbooks, homework help product, tutoring product, College Admission products the ones driving over 70 Gross Margins. Look at the growth rate the whole business now has changed. High growth high margin business trillion dollar category. A whole new company financially which now meets what weve been doing online for students. Those are sorry, go ahead. I was going to ask you about a comment you made earlier about the private market being different than the Public Market. Is that where the bubble is these days in the private valuations of these companies . You hear about the high valuation companies. You dont hear about the thousands of companies that are not getting those valuations. You probably get the argument there isnt a bubble because most companies dont get that. When you hear about airbnb or uber its because when you see their financials you can see them earn their way into it as a public company. But most companies arent getting that or the few that are, are ones people expect google or facebook or apple, to buy, right . Youre actually not going to get monetization from instagram before it sells. I think i think theres not as big a bubble as people think, but i do think that in the Public Market theres no bubble when you look at what apple is trading at. All those corrections seemed to have happened. Salesforces number First Company to 5 billion, First Company to 6 billion and, you know benioff is a great marketer but the numbers are there. I remember being in the parking lot of facebook with you the day of the ipo. 38 was the number then. Today its 80. You dont think that you wouldnt ring the register on some of these. Theres a difference between trading and what the companies can be worth for real investors three, four five years from now. Facebook continues to grow. He makes smart decisions in terms of what he buys right. What is instagram really worth now . Right . What will whatsapp be worth when it becomes a payment model. Its a big bet. Like alibaba is a big bet, but theres always seems to be over a long period of time a separation between the big players and small players and the big players the value accrues to them over time. I cant tell you what its worth today. Thats not what i do. Its been a phenomenal 15 years. Thats for sure. Quite a change. Unbelievable. Good to see you, dan. Good to see you. Thats a good segway to go to jon fortt with a look at whats coming up next on squawk alley. Good morning. Weve got bill gurleys the vc from benchmark to talk about valuations and more. More details on the apple watch, how long that battery will last and finally house of cards is out. A review from time magazine. All on squawk alley. Tune in. 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. Jacks heart attack didnt come with a warning. Today, his doctor has him on a bayer aspirin regimen to help reduce the risk of another one. If youve had a heart attack be sure to talk to your doctor before your begin an aspirin regimen. Over the next 40 years the United States population is going to grow by over 90 Million People and almost all the growth is going to be in cities. Whats the healthiest and best way for them to grow so that they really become cauldrons of prosperity and cities of opportunity . What we have found is that if that family is moved info safe clean, Affordable Housing, places that have access to great School Systems access to jobs and multiple transportation modes then neighborhood begins to thrive and really really take off. The oxygen of Community Redevelopment is financing and all this rebuilding that happened could not have happened without organizations like citi. Citi has formed a partnership with our company so that we can take all the lessons from the revitalization of urban america to other cities so we are now working in chicago, and in washington d. C. , and newark. Its amazing how important safe Affordable Housing is to the future of our society. 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 . Good morning. 8 00 a. M. At netflix Head Quarters in loss guys to, california 11 00 a. M. Here on wall street when i said squawk alley is live. We had fun with that. Welcome to squawk alley on a friday. Joining us Jon Steinberg ceo of the daily mail north america, jon fortt and Kayla Tausche with us as well