To say much. Boeing is falling on earnings what has shares taking a dip . And its fed day what to expect from janet yellen this afternoon and what the Global Markets want to hear. Apple is up first reporting a quarterly revenue miss and the slowest growth for iphone sales since the device was introduced back in 2007. 74. 8 million iphones were sold in apples first fiscal quarter. The Company Forecasting revenue will drop in the Current Quarter for the first time in 13 years. Tim cook spoke about the china slowdown during last nights Conference Call. We began to see some signs of economic softness in Greater China earlier this month, most notably in hong kong. Beyond the shortterm volatility, we remain very confident about the longterm potential of the china market and the large opportunities ahead of us and we are maintaining our investment plans. Cook said we dont live in 90day quarters, we dont invest in 90day quarters. Some headlines suggest he pulled the bandaid off. I think that they dont know what theyre talking about. I think whats happened here is this company is doing a fantastic job. But what were trying to do is the essence of what we all were taught when we got in this business, how do you value a stock. How do you value a stock that may not have numbers, how do you value a stock with this incredible Balance Sheet, where it may be a patent cliff. I mention that because my analysis will come back to not this industry. If you look at this industry, the technology industry, you look at it on a relative comp, it would be an intel or cisco, which have slowed, still have good numbers, but currency numbers. You would see the stock trade up 10 bucks. If you look at the company and didnt tell you what it was t looks like general motors. Has a lot of cash, might be peak numbers could do a buyback. And not growing that fast. That would put the stock at 60. Lets say now you try to reason those two, you say wait a second. 60, but if you x the cash out, youre talk two times earnings. Thats not practical. You cant use f. A. N. G. Theres nothing in f. A. N. G. That works at all for this, facebook, amazon, netflix, alphabet. Theyre growing much faster. I come back and say, its pfizer. Its a pfizer situation. Number peaked, okay. Had big currency problem that doesnt sound so good to me. I have to tell you. Pfizer over the last i will guess the last ten years, not a great performer. Not to mention the presume that were on the cusp of some big m a to drive growth. Exactly. If you use pfizers multiple on this, another company with a patent cliff, so to speak nonrecurring revenues. What multiple do you pay for nonrecurring revenues. Lipitor is the iphone. Fabulous Balance Sheet. Fabulous. Dividend good. Dividend good. You get 130 if you use a down year pfizer, you still get 130. I would add in pfizer, many would say, did not innovate after some of those key drugs. Here were waiting still for this innovation. This market cap reflects the expectation of innovation, however we dont have a tv. Right. The watch has not yet taken off. No. Its not an upsell. The connected car, what is coming on that, what will i see in terms of invasion . You will see the iphone 7, which, to me, is wait a second. 60 of the people have not upgraded. We got that number last night from tim. They have not upgraded from the lower ends. Second, india. Third, the macro conditions. You can say everybody has macro conditions, but the currency here was dramatic. You want to have apples numbers go up . You repatriate the cash, give us four rate hikes, ill give you 40 earnings. The reason why i like the pfizer situation, why . Because its so novel. The apple situation is so novel that the traditional tech analysts are just done. Theyre throwing their hands up. Some of them are using guiding down 15 , 20 for iphone sales. Lets say you r using a pfizer multiple you will get to a stock that goes to 100. It was at 100 yesterday. Im just saying that some people think the stock is going to 80. That was the tenor of the comments. Understood. Lots of discussion about the net interest in apple leaning back into it long, because investors in this space are so tired of playing other areas of tech. Maybe. It sells again, i love to do relative analysis when im stumped. This is a stump situation. I worked for hours on this thing. I said should we get the same multiple as qorvo, avago because of suppliers, in that case 105 the multiple of cisco . 114. I have to find you have to solve what youll pay for those earnings. Nothing in this industry has had this kind of growth and then plateaued. You have to go outside the industry, enless you want to talk about microsoft intel where microsoft then morphed into cloud, which brings me to the second thing. The optionality. If apple is going to sit on the 39 in cash, they dont they can buy additional revenue stream. They talked about the Service Revenue stream, people say maybe theyre trying to make it more recurring. Hes just talking about it. Theyre not good spinners of their stories. Services revenues are incredible. Nobody cares, all people think if they would have done 76 million, we would have liked them. If you think the cash will do nothing and they wont be able to buy another revenue stream, you get 100 bucks. If you think they get another revenue stream, you get 130. Cook about address the mother of all Balance Sheets on the call last night. Take a listen to that. Our financial position has never been stronger. We have the mother of all Balance Sheets with almost 216 billion in cash, which translates to nearly 39 per diluted share of apple stock. We continue to invest confidently in the future and return capital to shareholders at a rapid pace. Basically would take a gamble that they would buy in ways they never had bought before. In company. Theyre about the product. If you have that attitude, everybody elses product is inferior. One thing that was gapped i know im talking about this, i will talk about it next weekend, i know its bugging everybody. We had an analyst came on that agreed with me, they need to be in another business unit. They need to be in the other mobile business unit. They have to take over the car. They have not had great luck in the car. If you listen to the Conference Call, its about the phone. How bad are pcs that the mac has not its not in their dna to acquire. No but i think that when you get a chance to have a multiple thats as low as they are, it requires the power of magical thinking. Its interesting you mention the lack of upgrades. I had a call this morning with john stevenson, cfo of at t, he talked about their Subscriber Base and what he said was were not seeing a lot of upgrades. Consumers choosing in the to upgrade their phone. A part of that reason is the introduction of these things, these equipment installment plans, where suddenly when you go to the store, its not 100 bucks 200 bucks for your phone, youre done, people are suddenly aware of the price tag. If thats the case, look out for september. Thats great for apple. Theyre saying wait a second, thats a lot. Stevenson also said lack of a product. I think the s7, that means you have a patent valley and go up again. Tech tech analogies are not working here. Its not ibm, its not f. A. N. G. , its not microsoft. What you just told me makes me feel better. Were looking at some numbers from at t which looks like it may be down this morning, supported by dividends. It was okay. Okay. They added 214 in subs and directv, but lost about 240 in uverse, analysts were out there with a higher bottom line per share estimate, but the guidance is what many had anticipated. The stock looks like it will be off a couple percentage points. Tmobile is doing so well an verizon doing so well, thats tough. Theyre also driving costs down in the entire network, moving towards the Software Focus as opposed to having to replace equipment constantly. Directv didnt immediately kick in somehow. I was trying to understand the accounting there. Was the first full quarter that they had that. The jets were not turned on there yet. You have questions about the sustainability. Lets squeeze there boeing, the other dow component with a big impact today. Company issuing fullyear guidance below forecasts as it expects to deliver fewer commercial jets in 2016, that news overshadowing the better than expected Fourth Quarter results. 740 to 745 commercial deliveries, down from 762. Sometimes you come in i wasnt surprised. The funny thing about apple, the bulls said it would be x, the bears said it would be x, see how it trades. I was focused on multiple analysis. Bowing is not that. 942 for next year i was looking for 942. They are saying 845 to 865, thats out of synch with what United Technologies told us, what alcoa told us, they have a couple billion screws in every plane, with what General Electric told us, out of sync with everyone. There are so many questions to be answered about this boeing call, other than the fact its certainly not what i wanted to hear. How you could have such a decline in earnings per share with all those orders that we keep talking about . Theyre arguing it has to do with the transition to the max. Not buying it. Really . Im not saying anything about i need to hear more. Yesterday, Lockheed Martin, we come n Lockheed Martin is down eight points. No one knows whats going on. Then down nine points, at one point ten points. Then they start the Conference Call and they say we had a problem wiand then its unchang. I dont want to rush to judgment boeing. Without boeing and apple, dow futures would be higher. Where is oil . Well talk about oil. Well get inventories, the Iraqi Oil Minister saying the russians and saudis are more flexible now. Yellen versus him. Hey, clamation death match. Yellen versus the Iraqi Oil Minister who is more important these days . Im going with yellen still. Are you . Tough little lady. Where is she from . Below 3,000 who . Who . Whos on first . She. What . When we come back well look ahead to the fed announcement, what might be expected from janet yellen, and the wireless wars intensify. Marcelo claure on the turnaround strategy. Another look at the market. Stocks are up three out of four, but the fed decision coming at 2 00. It took dozens of prototypes. Hundreds of crash simulations. Thousands of hours of painstaking craftsmanship. And an infinite reserve of patience. To create a vehicle that looks, drives and thinks like nothing else on the road. The allnew glc. The suv the world has been waiting for. Starting at 38,950. Steve, other than making im here atme move stuff,rade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. So what about this . Your old technology. Its time to get into the new with ford come and get it if you really want it. New is ecoboost technology. New is a footactivated liftgate. New is tougher, stronger and lighter. New is ford. Americas bestselling brand. Now get into a new focus, fusion, or escape with 0 financing for 60 months plus 2,000 dollars tradeassist cash. Only at your local ford dealer. Light piano today i saw a giant. It had no arms, but it welcomed me. crow cawing it had no heart, but it was alive. train wheels on tracks it had no mouth, but it spoke to me. It said, rocky mountaineer all aboard amazing. The retreat in oil prices adding pressure to stock futures a day after a rally in both equities and crude. Thats ahead of inventories today at 10 30 eastern and the fed is set to wrap up its twoday policy meeting, rate hike is not expected. The focus will be on the policy statement at 2 00 p. M. Amid global slowdown concerns. Jim, some people think the rally of the last few days is the market expecting them to walk back on inflation expectations. The last breakdown came when dudley came out and said we pretty much agree with what Stanley Fischer has been saying, we have to go with the four hikes or Something Like that. A lot of the Conference Calls that came out yesterday that were good, thinly went over this discussion. The one i want everyone go to, the most sophisticated and brilliant discussion on currency yet is the Procter Gamble currency call. Fed, without saying fed, you have no idea the havoc you created with the quarter point. Were a Big International company, all our emerging markets have been crushed by what you did. A lot of people here will say a quarter point doesnt mean anything. If youre at wall street, it doesnt if youre on main street, you know you got fired because of what happened in argentina because of the fed raising rates. Its that well laid out. I think that they have to walk it back, we were pricing in last wednesday as of today at noon, we were pricing in four rate hikes. I dont think this economy can withstand that given whats happening overseas, given the peak in autos, the peak in housing. This morning, goldman put out a peak in travel with this priceline downgrade. Whats not peaking . Tell me whats not peaking other than angst. Weve done out toeautos, pla. Cam newton has not peaked. What about von miller . I dont know that oil prices peaked. Decline. But the boeing news, only so many cycles going on at once. The banking cycle got crushed. The aerospace cycle, i was clinging to the aerospace cycle . You were . Holding on . Clinging. Like those helicopters leaving in saigon. Are you still clinging . No, i got in the helicopter, see you later. Every man for himself. Youre leaving. I just im looking for new places to feel good about, you come back and you come back and you just look at these managements that do great things. Th that Procter Gamble call, j j, 3m, we had the streamline, we had the fire, we had to introduce new products, but fed can you understand whats happened in the last 30 days since you decided to kill inflation . Kill inflation. Hello. Its like theres a boogie man in my closet, he looks like chucky, i beat him no, theres no boogie man. We have people who come on air and say its great the fed hiked because it shows things are good. Or we needed it to instill discipline. Like the father who beats his kid every day so that one day the kid doesnt do any wrong. I love you so much it hurts me more than it hurts you. Exactly. That means that the dad wont necessarily change his ways the next time you misbehaves. One time my dad hit me because i broke a lug nut on a mustang. He said youll never break another lug nut again. Youll call aaa. Done. Sometimes the punishment doesnt fit the crime. I tried to fix the flat myself. Good parallel with what you just said there. Well get cramers mad dash and count down to the opening bell. Well look at the premarket. More squawk on the street straight ahead. Understands the life behind it. Lug nut we offer our best service in return. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. We have about seven minutes until the opening bell. Where you are headed, jim . We need to see one day this oil taking down everything, and it will have to come with the airlines. In other words, the airlines will have to just realize the biggest raw cost is oil, any time oil goes down, its fabulous for them. Ubs goes hold to buy american, american is going to report this week. They have difficult integration with usair. Doug parker good ceo. This group is down on the fact that oil oil goes down big, this is one of the groups thats gone down the most. Thats silly. Eight times earnings. If i were an activist, i would say im going to come in. I can win when people start realizing that lower oil is good. I can do a lot with cash flow. These guys are buying back stock. How low would you push them to do it. Maybe give it a 5 yield. Bigger burn on capital. Put a dividend in there. We all want income, david. Were not sensitive to buybacks now. Its funny, you mentioned activists, united yesterday got a couple Share Holders upping their stake. United . Yeah. Well, these stocks are very cheap. Can they go up on their own cognizance . That hasnt happened. Why havent they gone up with Oil Prices Going down . Everybody thinks travel is peaking. Lack of demand, travel is peaking. If you look at southwest, symbol love, thats 98 domestic. You have to believe thats peaking because people believe they wont use it that much. If you could lock in, you could lock in 8 years of oil at 45. Eight years of oil at 45. Look how bad this is. This Company Reported a great quarter, almost no international exposure, not cutting fares. An incredible job. The best management and its hated. This has to change before this market can have a move. The hatred of Great Companies like southwest air with raw costs going down, revenues going up, thats got to end. This will tell you if the tyranny of oil is over all right. We can end the show right there. But we do have an opening bell coming up in four minutes. A lot of stocks to watch. Stay with us. Iall across the state belthe economy is growing,day. With creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in the hudson valley, with world class biotech. And on long island, where great universities are creating next generation technologies. Let us help grow your companys tomorrow, today at business. Ny. Gov youre watching squawk on the street, the opening bell in just over a minutes time. Big fed decision at 2 00 p. M. Eastern. Asia mixed overnight. The nikkei up, china down, report observe their securities chief being in violation of a discipline some sort of the code for this appears to be on corruption. Yeah. Ill tell you, somethings happened that we have to pay close attention to. We decoupled from that shanghai market. Thats in bad straits. It made a little bit of a rally near the end of the session, but that would be a very positive thing, decouple from the chinese stock market. Even as tim cook said china slowed in the last month. There was a time we would live and die by that market. No one wants to talk positives. Ill throw that bone in there. True enough. One positive, the s p fiveday moving average is now positive for the first time this year. Re lets get to the opening bell. Nuvein is there, and at the nasdaq, willis towers watson, a solutions company. We didnt get to ups. 153, beats by a penny, guidance relatively in line, 6. 30 to 6. 60, estimates were 6. 55. They mentioned a tough macro environment. This man has come into a situation, greg smith, who i happen to like very much, a regular straight shooter guy. Frankly hes got a huge china exposure in otis. People dont realize greg hayes. What greg hays has done here, ill get rid of sikorski. Thats something that Lockheed Martin found out yet. I know this will sound like a better mousetrap, but hays has the best engine, a new fan engine that is terrific and taking share in an industry they have a lot of stuff on airbus. Hayes decided lets take out costs throughout the world. He used to be the cfo. Hes reenergized the company. The stock, as opposed to boeing, i think represents value here. Otis is a service business. A recurring revenue stream. Thank you. As much as the chinese may want to cut back, theres something about those unexamined elevators you need your elevator certificate signed. You want that guy to expect the elevator. I think hayes has got himself set up good here. The multiple shrunk dramatically. Its not as levered. They are the number one when it comes to safety and fire. That engine saves a huge amount of energy, its a winner. People say can you believe what hayes has got going . Its odd to have utx and boeing out on the same day and theyre polar opposites on the dow. Its a good quarter by hayes. Its the first of many good ones. People have to recognize that elevator inspection is its great renewable business. Will it explode higher . 3. Does it make sense on a day when boeing is down big . No. Theyll wait. People will say i want to see if someone downgrades boeing tonight, i will buy that tomorrow. This also makes me think of honeywell, they may be good. Let United Technologies come down off boeing, but dont give up on greg hayes, hes a new man, hes energizing that company in a way that makes me excited about it. Not unlike when dave cody came into honeywell. A couple deals to get to. One thats been out there for a while, nexstars pursuit of media general, that deal broken apart. Media general went forward saying we favor the nexstar bid. 10. 55 in cash, that had that a nice run and is up again today. That will create a company with 171 full Power Television stations in 100 markets. Digital media as well. Nexstar having grown from tiny operations through acquisition and an aggressive ceo into what is an emerging small little power in the local broadcast media. Did want to noted that one. Did you see this chinese bed for terex yesterday . Yeah. I saw it. I said hit the bid. 30 bucks. They had a deal with a Finnish Company that was all stock. The chinese come in and say well pay you 50 more, or more than that. The stock is is it zumileon . Yeah. That stock was up sharply yesterday when the news was released by the company. They have entered into a confidentiality agreement with zulion . I dont know. I think steve miller is in play here. Steve miller . Come on, take the money and run. The chinese are aggressive here. The chinese are so gloomy what are they doing buying everything in sight . Get the money out. Get it over. Get it out. I like that. Biogen a nice gainer, guidance in line, 4. 50, beat 4. 08. Im sure you have more on the internals my travel trust owns biogen. We felt the ceo not that they were sandbagging, but they got ahead of themselves. I remember when the stock was in the 400s, everybody felt they were about to cure the terrible disease thats alzheimers. They basically said, listen, whoa, we have to rein in the street. They reined in the street in a way that they could beat it. There was an extra week last year, they still beat the numbers. So they had been conservative. Against that i will tell that you this group has become hellish because Hillary Clinton may, for all i know, bernie sanders, Hillary Clinton, senator cruz and donald trump may see this biogen increase and it could set them off. Theyll all go to twitter and say what a ripoff. These stocks are trading on tweets from president ial yeah. You know, between inversions and drug prices, and Martin Shkreli shkreli. Is he in congress now. Hes not in jail, right . Hes out on bail . Hes out on bail. Jail. He was supposed to be at the hearing, but the snow delayed the hearing he was supposed to be at. Speaking of stocks that move on interesting things, i cant help but mention weight watchers. Because really all it is now is oprah weight watching. Right. Is what that stock has become. Yesterday it was up almost 20 on news that oprah lost a lot of weight. Huge amount. Yeah. 26 pounds . 26 pounds. Now, as she adds to that or i should say subtracts from her overall weight, can we make an equivalency in terms of percentage moves in the stock price . For every ten pounds, does it increase . You can, expanding pe on a shrinking waistline . Expansion on shrink . What if somebody sees her with a cannoli, is it a abe vigoda. Yes. 94. 94. Had been dead for 30 years people thought. I know. I dont know. Weight watchers is one of those stock stocks. There are stocks in this market that are so insane. Im putting that in the insane category. A point per pound. Theres some correlation. Theres someone figuringing out an algorithm between weight and weight watchers. Light sweet crude not allowed on that diet. Recapping apple, as we went over it earlier, by the way, still the biggest net income for any company ever in a quarter, exceeding gas prom and 2011, 18. 4 billion. No one knows how to view it. If tim cook had not said the slowing of the last month you know, hes an honest guy. He puts it out there. Its interesting how much talk there was about the macro on the call, saying theres turmoil here, there, and its true. But in the end, it was a question that was a stop trading question on the Conference Call. He made everyone like this, he goes arent you guiding down . And then its a huge amount. 15 , 20 , and that made people feel like, wait a second, how do you put a multiple on a Company Whose earnings are coming down . The answer is thats why i went back to pfizer. Its hard, unless you want go back to the era where intel and pcs slowed. I try to paint a masterpiece and i struggle. I struggle with the pfizer analogy. You have to get outside your industry to find a patent cliff like the way of the apple. Really . In technology, havent we seen the pentium. Nonrecurring revenue streams, you have to keep selling . People suggested microsoft the thing about microsoft, they did xbox, cloud. Im saying that apple has the Financial Flexibility for you to not rule those out. You came back with a dna argument. I would come back and say do you think steve balmer has steve balmer was the other way, making acquisitions that were deleterious. Deleterious. B i do think if tim cook were to watch the show right now and say why are those guys not giving me credit. I am. Im giving plenty of credit. Im saying what the market is saying, we dont know how to value you, we are trying to figure out if we do a gm peak sales number which is insulting to am. Dont take it personally. Without the good revenue stream, will you go to eight times earnings. That goes to 76. I dont think that should happen. I think there is more to the company than that. I believe the contracts you mentioned will make it so the 7 will be big, 60 of the people have not reupped. Sounds like pipers argument a few days ago. The india argument, ill put that in. Unfortunately the countries they sell iphones in are like the globe. So if you go over Procter Gamble has their analysis about the argentinean market thats so brilliant. I called my wife. I said i cant talk because theyre discussing gillette on this call, its unbelievable the way they discuss the gillette, bringing in the mexico peso im listening. Im listening. Im trying to no, youre i was listening. I was hoping you were going to finish that. I was genuinely interested in where this was going. I question that. Where its going that its so complex that tim cook should listen to what procter did. Theyre struggling the same as he is. In the end youre losing so much money on every thing you make verses what you sell. Igantic fo apple. Everyone else gets a pass on currency, apple no pass . What is this no pass . Apple gets no pass. Im giving them a pass. A hall pass, a pass to go do something in autos. Here, tim, go. Did you see how many they sold since our show started . One a second. That doesnt mean a thing to you, youre a skeptic. Dow is down 98. About 90 of that is apple and boeing alone. Lets get to Courtney Reagan on the floor. Beyond those movers, the fed is really the focus of the market and traders today, which is not a surprise, not that anybody expects a decision to be made. Everything comes down to the wording and the statement as it always does. Will yellen dial back the idea of further rate hikes this year . Will she be mindful of whats going on in Broader Markets . Yes, the dow components are having a big influence on the markets as well as oil prices which are lower ahead of the eia data. If we look at what we saw overseas, asian markets are mixed overnight. We saw downward pressures for the shanghai. The hang seng and the nikkei seeing a rebound. In europe, things are mixed but marginal. Germany, theyre slightly higher. France also higher as well. Not a lot of movement over there. A lot of the commentary from the companies, the dow components were talking about, has to do with whats going on around the world for global economies as well as the stronger dollar. We talked a lot about apple, but Morgan Stanley points out this morning theyre calling tim cooks tone bearish on the call when it has to do with the broader macro environment, also saying that management called out challenges in the macro environment 12 times during the call pointing to international markets. Dow componented United Technologies did beat on earnings by one penny, still mentioned that currency, the stronger dollar as having a big impact. Tupperware under pressure today, shares selling off, down more than 13 . Not sure if you knew this, but tupperware has 70 of their business outside the u. S. Even though we saw they saw double digit increase in china, there was weakness almost everywhere else and in south america. Thats still a struggle for the company. The Broader Market still weighing on stocks, even here domestically when theyre talking about earnings. Last but not least, i want to end with the royal bank of scotland. Theyre putting aside 2. 8 billion for legal fees still related back to the 2008 financial crisis with the mortgagebacked bonds as well as the misconduct, i should say, that became involved with the protection being sold to different consumers for the payments, insurance protections. Shares down more than 4 . Back to you guys. Courtney, thank you very much. Lets get to Rick Santelli in chicago at the cme on this fed day. Good morning, rick. Good morning, carl. Yes, it is a fed day. I dont know, my opinion is some of the markets, many of the Big Fund Managers seem to be acting like spoiled children with regard to the fed. Listen, this loop of fed policy has to end some time. Whether its timing is appropriate or not is the issue. Probably the fed advertising data dependant wasnt such a good idea. Look at dynamics that were out from mid summer to the end of the year on just about every metric, especially manufacturing. The issue of china, the ships dont turn around in a day, a month, a quarter or a year. To think that the september tightening was avoided by china, only to see how the issues of china not only lingered, but to move from an emerging market to a developed economy is a process. But one thing in that process we see on all the countries economies who have made that transition that, your brogrowth starts to come down even though the girth of the economy has grown. Its a changeoff. Look at a one and twoday of tens, 2 yesterday was the second since midnovember midoctober, under 2 barely at 199, were still in that range. 2 is still home base. Lets look at a 20 bar of bunds. Fed raised rates 16th. Lets look at the sentiments on the 15th. Tens minus twos, note the pattern, note the flattening. Historically flattening is associated with the fed. I keep putting asterisks, who knows what the yelled curve tells us when you have trillions of dollars in treasuries locked down on the Balance Sheet. Lets look at tenyear in general. Look similar . Lets look at the dollar index . About three quarters of a cent higher, finally the main issue and not necessarily on the chart. But the volatility in the markets may have been big, but do we want do it all again . Were pulling the rate hike, will that give less confidence . These are questions that you, the viewer, have to answer. Carl . Rick, well see you in a bit. Rick santelli in chicago. Still to come, the critique of twitter today from walt mossberg, their head of product goes to instagram. Dow down almost 100 points. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Bill ackman issuing an apology after his hedge fund suffered its worst year last year. In 2015, pershing lost 15 to 20 . He writes when the stock price rose this summer to the mid 200s per share, we did not sell as we believed it was probable the company would likely complete additional transactions that would meaningfully increase in intrinsic value. In retrospect this was a costly mistake. A number of others as well, platform, a company which has gone down dramatically, Canadian Pacific also. Interestingly he says valeant had actually considered selling some this summer but were locked up because they were in possession of knowing the company was considering a large deal of some kind. Doesnt give us indication of that. Some of the more interesting parts of the letter, after he goes through the portfolio and the disaster that befelled it last year is a build potential bubble taking on the index fund force lack of Corporate Governance and unwillingness to engage and wondering out loud as to whether if we continue to see these flows into all of these passively managed funds, etfs, whether there will be anything left in the market itself and whether it will lead to an overvalue that reverses itself because its simply the buying power of the index funds that pushes up prices too far, and theres nothing left and they start to decline and see outflows. An interesting read. To me, i always felt that would be nirvana for a stock picker. You can the index has 500 stocks, if you can figure out which of the 500 are undervalued, you would buy them. It would be an index fund with a brain, which might justify getting 20 . I a bubble, plus if theres a bubble, you take the stocks that have been bid up by the bubble, that dont deserve it, and you short them. His key is the investments theyve identified have been found out by the s p 500. Theres a lot of ways to skin a cat. Sometimes a simple apology is good. Thank you, my wife, for teaching me that afrnlgchlthat. A lot of apology letters. United, chipotle, a bunch of others. Index funds, you dont have to say sorry. Thats another way of not saying sorry. True. Well get stop trading with jim in a moment. Its hard to find time to keep up on my shows. Thats why i switched from uverse to xfinity. Now i can download my dvr recordings and take them anywhere. Ready or not, here i come whispers now hideandseek time can also be catchuponmyshows time. Here i come cant find you anywhere dont settle for uverse. X1 from xfinity will change the way you experience tv. Its time for cramer and stop trading. Whats happening in United Technologies with greg hayes versus boeing is making me feel bullish about honeywell when dave koning reports friday. We have United Technologies, this acquisition that closed at the end of the year, you can talk about synergies, that was 5 billion dollars. As honeywell co honeywell may be your trade of the day into friday. There. I always love when you rub your hands together. Its a good sign. I pumped a lot of cane down in new orleans, maybe honeywell. Whats on mad tonight. I dont even know just kidding. Ppg is on. That stock has been in a world of pain, and david demshur, maybe he will dispute my oil is going back to 45 soon call. Thank you, rbn, for help on that. I will go to sleep, then come back. Well see you at 6 00. Thank you, tim cook, making it an enjoyable and exciting night. Mad money at 6 00 p. M. When we come back, new home sales and results of apples outlook. Performance. Reimagined. Style. Reinvented. Sophistication. Redefined. Introducing the allnew lexus rx and rx hybrid. Agile handling. Available 12. 3inch navigation screen and panorama glass roof. Never has luxury been this expressive. This is the pursuit of perfection. Good wednesday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen and david faber. Simon hobbs is off today. Markets are down largely on guidance out of boeing and apple on a week when guidance from the big large caps has been okay that seems to be changing today. Oil is one to watch as we wiwil get inventories in a half hour. Apple earnings miss pushing the stocks down sharply. Hear what tim cook had to say about the quarter. Plus we are counting down until todays fed decision. Richard fischer will be joining us to weigh in. And boeing the biggest loser on the dow after a disappointing 2016 outlook. Its 10 00 a. M. , so we have breaking nick news. Lets get over to chicago and Rick Santelli. Breaking new home sales, rick . Yes, sarah. 544,000, thats seasonably adjusted. Annualized in terms of new home sales. We missed making a new high for the year by that much. 545,000 was our february read. This is february 15th, and that was the highest level since february of 08. So base clip third best going back to february of 08. Last months was dinged 1,000 on a revision, that actually was ding dinged to the upside, 490 versus 491. Dia dia diana olick what do you see inside the numbers . These are signed contracts in december. The reason im making this point is that we saw big drops, and then a big jump in existing home sales due to mortgage regulations, closing delays that pushed sales up into december. This is based on signed contracts, people shopping in a warmer than usual december and signing contracts. We saw from the dr horton on monday saying they had good traffic and a lot of people coming in at the end of the year. Whats interesting here is the median price of a newly built home, 288, 900. Thats down. Why is that important . Price is everything now. Affordability, even though we have lower Mortgage Rates than in a while, people are still looking at price. And theyre seeing that existing home prices are rising considerably. So builders, if they can pull that price back, theyll see the sales. Thats what were seeing in these numbers. Inventory will be important because existing home inventories are very low, but dr horton says they have a lot coming on the market for this spring. This is a good read. Back to you guys. Thank you very much for that. Shares of apple continue to fall amid slowing iphone growth, on yesterdays call tim cook did sound confident going forward. Our financial position has never been stronger. We have the mother of all Balance Sheets with almost 216 billion in cash which translates to nearly 39 of diluted apple stock. We continue to invest into the future and return capital to shareholders at a rapid pace. Our next guest is not as optimistic, walt pisac, good morning. Good morning. Everyones strategy is well write off the march quarter, regroup ahead of sechlt you go a step further and say they appear to be struggling to develop in the way of in product categories. Why are you willing to say that now . We knfocussed on r d in th past. The iphone is what it is. You have the down years with the s, maybe some timing when the iphone hits, overall its not that bad for the iphone. The fear is what if Gross Margins evaporated and wanted to cut price. No idea that theyll do that. If were in iphone plus or minus 3 every year, thats fine. Ten times pe multiple, great stock to own, but if you want to get back to growth, you have to have new product. Theyre investing 4 of revenue into r d, spending 10 million a quarter in Share Repurchase, they could go out and make acquisitions to find new products for growth. Without growth theyre dumping into the sherry purchase, which is fine, delivering mid Single Digits Earnings Growth as a resul result. The 200 billi 200 billion pl growing cash pile largely overseas, you can give us an update on what the plans are, if any, for repurchases and dividends . Will it grow . Will it shrink . Is there a chance theyll use that for acquisitions . Growth type acquisitions. The Share Repurchase this quarter is less than half of last quarter. Its possible they knew what the guidance will be like in march. Generating 56 billion of free cash flow, spending 10 billion a quart ser reasonable to provide them with the flexibility of 5 queue zigses. They bout beats, that gave them revenue sales, but thats in decline. Theres other products tles could acquire to drive revenue. The company is more focused in investing in r d and putting up 4 of revenue in r d, its up to 8 billion a year to develop any products to stimulate growth. The iwatch, or the apple watch, excuse me, in three quarters it put up 5 billion of revenue, it doesnt take much, as far as a new product, given all the new opportunities their ecosystem allows them to pursue, to put up 5, 10 billion of profit. If your target is 140, even though youre talking about a passive share repurchasing giant, you seem to be giving them the benefit of the doubt, they will find something to buy. I think were cutting the numbers, so were not giving them the benefit of the doubt in revenue. Where maybe historically, if you go back to some comments that management said. Eddie q saying the best product lineup hes seen in 20 years. Weve taken those numbers out of the estimates. However the opportunities that exist for them are significant. Theyre investing. The stock is trading at a ten pe multiple. In order to get to target you have to assume the market rerates this thing up. Yes, theres some belief that a Company Generating 5 Earnings Growth should trade higher and they will at some point find a product that gives them incremental growth that takes that multiple higher. The sell side Analyst Community has been largely wrong and wildly bullish on this name. Youre not alone today. Oppenheimer, pacific crest, barclays all lowered their price target from the 160s to the 130s, youre at 140. Which still seems optimistic. Its optimistic and assumes youre taking a 10 pe multiple stock right now and assuming it will get a higher multiple over the past year. Part of that is delivering on this mid single digit Earnings Growth, but also providing more confidence that were not in decline or you dont have this gross margin risk that is out there as an incressmental shoe to drop on the name. Walt, when it comes to innovation, i hear you about the apple watch. There are those who expect we see a tv product, the car, thats still to come. Do you think they delivered on innovation the way they would need to to adjust a higher multiple and the market cap theyve seen in the past . They havent to up to date. The watch is 5 billion is a big number. The expectation would have been higher. Apple tv, that was talked about ad nauseam and the challenges a lot of Companies Face getting into that space. They have not delivered up to this point. The belief is there are so many opportunities. The ecosystem they developed, the billion ios devices out there provide this as an opportunity and it shouldnt be difficult to stumble into another 5 billion product which is the failed apple watch, a failed 5 billion product in five quarters. To find products, given their ecosystem and strength in the market shouldnt be that much of a challenge. To your point, it hasnt materialized over the last couple of years. Yeah. Well see what summer brings. Good to see you again. Thank you, carl. Looking at the Broader Market. Stocks are in the red amid another drop in the price of oil. Also investors remaining cautious as they wait to hear the feds latest decision and what is in that statement on Interest Rates. Lets bring in Brooklyn Dwyer and ben mandell. Brooklyn, i like how your note put it. Communication is the challenge here when it comes to the Federal Reserve. They have to walk a fine line between inspiring confidence in the economy and decisionmaking but also acknowledging what is happening in the Global Economy and the market. Do you think theyll manage do that in an effective way . Yeah. We think so. You know, this is definitely a tough spot. Theyre probably privately scared and publicly confident. They need to show that Public Confidence now. Its early in the game to shake things up. Weve seen, as you mentioned, oil prices down today, but theyre up on the week. Then down on the longer trends what do we take from that . We take from that that we should be looking at more of the signal than the noise. Is this signal or is this noise, right now i think the fed will say this is signal, the way to make sure theyre on the right track before they start to defect. Ben, what are you expecting from the fed today . What do you think the market will tolerate . What do you think will be acceptable . What will be a surprise . Theres definitely skittishness ahead of the announcement, in the end it will turn out to be a nonevent. The statement will recognize theres been a tightening in Global Financial conditions, a pothole in growth last year, and weve seen another temporary shock to inflation coming from the oil price. At the end of the day, this is a meeting where they dont change policy stances and they remain resolutely noncommittal regarding what they will do in march. This is an example where it literally costs them nothing to say lets wait and see, see if financial conditions improve. So if youre an investor, i think whether you believe theyre going to move in march or not, todays probably not going to change your mind. Ben, today the Washington Post says that if a recovery does come to a premature end, it will not be because of low oil or china, it will be the same old story, a Federal Reserve that underestimated how much it had already tightened policy, and overestimated how strong the economy really was. Do you think thats true . I dont see a fed that overestimated the strength of the economy. We had a constellation of reasonably good data even in the face of a soft spot at the end of last year. Todays house market data reinforces that point. But you also see a labor market which is fairly strong, the consumer which is fairly well positioned in terms of fundamentals. Then you see a fed funds rate which is measured in a few basis points. To say these are tight conditions from policy, i think that is overstating that case. Where you do see tightening is from Global Growth fears, particularly emanating from emerging markets. Phil, the dollars rise is not making that easier. Bricklin what do you expect for the u. S. Economy . The Fourth Quarter we hit a soft patch. The question is how much were rebounding the first quarter, january through march and throughout the year. Whether the economy can come back in a time when Global Growth is slowing. What do you think . Its tough. You know . Our expectations for q4 growth is basically zero. Thats a whole lot of nothing and a whole lot of not much to write home about. For q1, we gitet a bit of a boue back. We get a bounce in inventories in q1, but looking at this morning residualcies, so all this data is seasonally adjusted. You get some second patterns that emerge. In q1, its typically weak. We know this. We blame it on weather, we blame it on a lot of things, but it turns out we do a poor job of seasonably adjusting data. While we could get a bit of a rebound that may be a bit muted because of just bad seasonal adjustment. I think the underlying trend here is what matters. We think that the trend coming out of q4 will probably be decent. The fed is on a track to digest the data, look at what things are to come. End up hiking rates in march and take their time and make sure things look good to do that. Ben, i wanted your thoughts on financials here. The worst performing s p group. With your optimistic view on the economy and fed, would you be a buyer . Theyve been largely sold on some of these concerns. I mean, what i would do is root that view in what you think Interest Rates are going to do. Its a fairly low bar for policy rates and particularly short rates to outperform what markets are pricing in. 86 basis points on the twoyear note is extremely low relative to a plausible not even so aggressive path for policy. If youre looking at Interest Rate sensitive sectors, thats something to keep in mind. All right, thanks for sharing with the s p now down 0. 8 . Bricklin dwyer and ben mandel. When we come back on squawk on the street, counting you down to the fed decision. A live report from washington. To find out exactly what kind of language investors should be expecting. Later well talk about it with former dallas fed president , richard phifisher. Hell have his latest thoughts on the selloff. Youve upgraded all your old technology. So what about this . Its time to get into the new with ford come and get it if you really want it. New is ecoboost technology. New is a footactivated liftgate. New is tougher, stronger and lighter. New is ford. Americas bestselling brand. Now get into a new focus, fusion, or escape with 0 financing for 60 months plus 2,000 dollars tradeassist cash. Only at your local ford dealer. The dow is down about 165. A few hours away from the big Federal Reserve decision. Steve liesman is live in washington with a look at just what we can expect from this allimportant statement. Steve . Sara, a lot riding on this statement. Markets are looking to the fed to feel its pain and see the world in a lousy way that they see it. Its a world of weaker growth, lower inflation and heightened risk that doesnt need more rate hikes from the fed. So it boils down to this, how much empathy does the fed show today . How much if it is too much is it a wishywashy institution that turns tail as soon as it sees trouble. Joe ma rshg if it does too little, it risks seeming callous and detached and not aware of new realities. Some of those new realities, stocks have sank, volatility has surged. Oil plunged, the Economic Data has weakened, talking about zero to a half point on Fourth Quarter gdp. The jobs numbers, the weekly claims numbers have been softer. The fed will be wondering if the Fourth Quarter weakness is just a phase and if growth will accelerate in the first. So, heres how the fed could likely respond. It will note that weaker growth, but not really be off the charts in terms of the expected weakness. It will mention slower Global Growth, it will support the market view, i think, of at least no march rate hike. It may go no further. Do not expect today a wholesale change in policy direction. Only a time out. One phrase well be watching for carefully, does the fed drop where it says it was reasonably confident that inflation will rise towards the 2 goal. That could lay the groundwork for future rate hike delays down the road. Well be parsing that language in a couple hours. Thank you very much, steve st e liesman. Boeing down sharply after that disappointing guidance. Well get more on that. Were right at that 1889 level. Its intelligent drive is msystems. Ng. Paradigmshifting. Its technologyfilled cabin. Jawdropping. Its performance. Breathtaking. Its selfparking. And selfbraking. Showstopping. The allnew glc. Mercedesbenz resets the bar for the luxury suv. Starting at 38,950. It was always just a hobby. Something you did for fun. Until the day it became something much more. And that is why you invest. The best returns arent just measured in dollars. Can a a subconscious. Mind . A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Sometimes they just drop in. Always obvious. 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. Looking at a 1 decline on the dow, down almost 160 points. S p 500 down 0. 7 . The nasdaq is getting hit the hardest, down 1. 3 . Three big stories going around today. A few hours until the Federal Reserve meeting, oil under pressure again today ahead of that Inventory Data due out in seven minutes. And then apple weighing on the dow, down more than 4 . The only stock doing worse on the dow than apple is boeing after those results. Boeing, 1. 60, beat 1. 28, guidance for the year is no good, whether you look at revenue or earnings. There initially was confusion about whether this had to do with the 787 charge, but just saying weak things about commercial deliveries, things were not hearing, cramer would say, from utx and ge. No, utx shares up almost 1. 7 in stark contrast to boeing. You would expect those would trade together, not in opposition. Not the case this morning. The best performer, freeport mcmo and they were out yesterday with results. Which were well received. Yeah. They said they would tackle debt problems. They have a lot of debt to tackle. Some of the things, ak steel was saying about asp has led some to believe maybe we overshot a little bit on sentiment when it comes to commodities. You hear some managers say that this year in their view would be the year that commodities finally bottom. Not yet. Energy is still the second worst performier in the s p. We have that api number, showing preliminary builds, which reversed all of the gains from oil yesterday. Waiting for that stockpile number out of the u. S. At 10 30 today. Massive build. Biggest since 96. 11 million. When we come back here on squawk on the street, well talk more about this fed decision, some skittishness ahead of that important announcement and the statement. Richard fisher will be here live with his take on the decision. Hell take us inside what happens those fed meetings. And what he thinks of the market action. Secretary of state john kerry is meeting with xi in north korea. Donald trump it making the rounds on the morning news show defending his position to boycott the fox news debate, he said he would not participate because megyn kelly would be a moderator. Bernie sanders will be at the white house this afternoon. There is no formal agenda planned. And tennis governing body said they will commission an independent review of their anticorruption unit to restore Public Confidence in the sport. This follows reports that suggested potential evidence of match fixing was not properly investigated. Thats the news update, back down to the nyse. Sue herera, thank you very much. One hour into the session. The dow transportation stocks trading higher. Theyre up a half percent. This is the second straight day weve seen strength. Potentially a signal of the overall market. Are we at a bottom . Dow transports tend to lead, the dow is down 166. Much of that decline is apple and boeing, accounting for a lot of those points. Apple doing damage to the nasdaq as well. Just about 10 30 here, so were keeping an eye out for oil inventories. Lets go over to the nymex and jackie deangelis. Waiting for those numbers, the api set us up for a huge build last night. Department of energy saying theres an 8. 4 million barrel build in crude, thats less than what we heard from the api, but still a really big number. The fundamentals are back in focus today. Yesterday talking about opec, the russians more willing to cooperate here now fundamentals are in play. Gasoline builds, 3. 5 Million Barrels so were adding to what we have in storage. Gasoline built huge the last few weeks. Whether its gas or crude, its going into storage and filling up space. The session low was 30. 14. We were trading 30. 66 before this. Prices are a bit higher now, but the pressure, it will continue. The range hugging the 30 level at this point. We could go up as high as 35, traders are telling me, but definitely touch back to the 25 level, too. Thats something thats in the cards. Energy investors will be focused on the fed. Guys . As we all will be, thank you, Jackie Jackie deangelis. We are counting you down to the fed meeting today, no policy change expected. Our next guess has said right here on this program, that much of the market turbulence does have to do with the fed. Lets welcome back former dallas fed president and cnbc contributor, richard fisher. I believe the exact quote was that the fed front loaded a tremendous rally now it doesnt have any ammunition left. A ton of interest in those comments. Now that we have seen the turmoil continue, do you still believe this is largely due to the fed . Look at all the attention youre paying to the Federal Reserve as we speak and other Central Banks. Yes. This is why i was so opposed to qe3. One of the reasons was it was overkill, driving down all Interest Rates to historic lows, which changes the way you discount future earnings, and future cash flows. Once you start to reverse that process, you have an impact. Its sort of a as was describe by a journal this morning, its a loop they have gotten involved in. The fed will be guided by what happens in the real economy, in terms of job creation, and whatever is happening on the Price Inflation or deflation front. And theyre not guided by whether or not weve had a correction in the marketplace. I dont know anybody at the table that did not expect that to happen. In fact we talked openly about it while i was still at the fed, i was saying together with one or two other individuals, that we shouldnt go wobbly if we saw up to a 20 correction. This whole thing has been float ed by incredibly aggressive nonmonetary policy for a reason, but it changed valuations, and price is what you pay, value is what you get. The prices are very high relative to underlying values. The problem, as you know, richard, theres a big debate now about what is hoappening wih the underlying economy, with job growth, which looks good. But inflation has not been there. What is the rush to get off zero. The argument is there that they made a mistake for doing it in december. I do think, as you know, they should have done it, in september. Thats when they should have moved. Im not sure they made a mistake in december. Inflation numbers are interesting. People look at core goods, just to give you a data point. Since 1993, core goods have deprecated or deflated 0. 3 . The offset to whats happening in commodities and oil, which is supply driven as these inventory numbers you just talked about show, is Price Inflation in the services sector, which is running at about 2. 7 . So, if you look at the trim mean of the dallas fed, which probably is the best single indicator of the 12month run rate, it is running at about 1. 6 to 1. 7 . If you look at the cpi, you look at the core cpi, particularly when you take rents and include them, even though theyve come down, theyre still fairly high. You cant say that were having overall deflation. What you are seeing is Commodity Prices and core goods which have always through time come down in price, not gone up. But particularly commodities, food, protein, greens, and of course oil and gas. You mentioned that earlier. They are deflating in prices. But the Service Sector is inflating in prices. Thats where the balance is were a Service Sector driven economy. And secondly very importantly this is a supply driven disinflation deflation on the commodity side, not a bad thing. And notcessarily dangerous and damming to the consumer. How would characterize the feds move and policy actions relative to the way other Central Banks loaded up on debt, too the mistakes that the fed has made in your view have been amplified by the fact this was done all around the world. I think we dont know whether quantitative easing is successful or not. The last chapter has not been written. Ben bernanke wrote a great book, but i dont think the story is oefrmt its not over until janet yellen and her team, this Earnest Group of great people, figures out a way to engineer the exit. Only then will we know if quantitative easing was successful. Qe, zert, nerp, we wont know if they worked out or not until we get back to a monetary policy. The story is not complete. The last chapter has not been written. This is chair yellens burden, trying to close this off over time without creating enormous damage to the economy, even though there might be market volatility in the mix. That brings us to the immediate task at hand today, which is nobody is expecting them to change rates, but they are going to be parsing that statement. Richard, take us inside. Youre not in the room anymore, but you were there many, many times. How does this work . Do they put the statement on a Projector Screen . Circle words . I was there for ten years. Eight meetings a year. Thats quite a bit. A paper is circulated well beforehand which gives you options to consider. The chair personally solicits every member, the 12 Bank President s, the board of governors, when you arrive at meetings, these options are changed a bit depending on what the feedback was. You have a discussion about the economy. Usually led by the 12 Bank President s. The last go before the chair is the vice chair of the committee, which is bill dudley from the Federal Reserve bank of new york. Everybody gives their view on the economy. Thats usually the first days discussion. They might tip their hand as to where they think policy should be, the second days discussion. And usually it focuses on one of the three options that have been laid out or maybe there are a couple other sub options in the package of options. Its all done on paper. You sit at the table by yourself with major staff from washington, d. C. Who provide you plus the new york desk with a briefing on whats going on. Youve already been briefed by your own staff. You sit at that table alone and provide your opinions. Nobody else can speak to you, speak with you during that session. Once you have the two goarounds summarizing policy and the second day summarizing your policy preferences, after some discussion by the staff of whats happening in the markets and with financial stability, whats going on in the Global Economy, whats going on in the domestic economy, you then center around a policy option and then the chair takes a vote in the end as to who will support this option or not. Even before that, because its not just a formal vote, its trying to get as much consensus at the table as possible. Janet yellen is very good at this. Shes good leader. Very inclusive. Yep. Summarizes both sessions at the end of each session, but its all done on a piece of paper, done sitting around that big mahogany table and done with a lot of comity and friendship. If you disagree, its a wonderful institution, nobody holds it against you. I remember the first meeting i had with alan greenspan, the first chair i served under, he said speak to the truth, richard. Thats what everybody tries do, give their views, its the chairs job to pull it altogether into a final decision. Were all fascinated by it. Well look at that statement closely. Heres the point very quickly, its a matter of the best judgment of 17 wellintentioned people sitting at the table just trying to get it right for the u. S. Economy and for the United States citizenry. Well leave it there on that nice note. Thank you. Richard fisher, former president of the dallas fed. Thank you. When we come back, the dean of valuation on why hes more worried about the markets this year than last year and our twitter, facebook and apple fairy valued . Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive theres no one road out there. No one surface. No one speed. No one way of driving on each and every road. But there is one car that can conquer them all. The mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. Lease the c300 for 399 a month at your local mercedesbenz dealer. Welcome back to squawk on the street, invests staying cautious ahead of todays fed statement with defensive sectors, like utilities and defensive stocks outperforming. Consumer staples trying to stay in the green. Leading the pack are shares of reynolds american, philip morris, altria and archer daniels. Year to date, Consumer Staples the third best performing sector, but still down about 2 . Thank you very much. Apple shares are down. Iphone sales grew at the slowest rate on record, now the Company Expects revenue to decline in the Current Quarter. Are those catalysts priced into todays stock . Joining us is aswath damodaran, professor of finance. Good to see you back. Nice to be back. Lets do apple in a second. Lets talk the Broader Market. You look at the equity risk premium. You said stocks were resilient last year but youre more wary this year. Why . If you look at whats Holding Stocks up, its the cash that companies have been able to return to stock holders. Others buy back the didividends. Last year they were returning more than they could afford to on the hope that earnings would bounce back. Given whats happened in china to commodities, i think were in for another bad year of earnings. I dont see how they can maintain those cash flows. So that cant come to the rescue again . Exactly. Youre not a market timer you say. Yes. For yourself, your best play is still to buy companies you think are undervalued . My history is when i feel uncomfortable, it does nothing for the market. The market does what it does. In this case, i have to go out and find good investments. Apple as an example, is that a good investment . At app95, i think it is. Its not going to become a growth company. Its more like altria, a dividend paying solid cash cow. People are addicted to their iphones as they are to cigarettes. In a sense you have to do it for about right reasons. Its not a classic growth tech company. Its a very mature cash cow. Can you compare it to another Value Technology company . I think you liked microsoft in the past which has worked out. We have earnings tomorrow. Microsoft, it took a while for investors to adjust to that reality. It took a few years before they said microsoft will not have a double digit growth quarter anymore. Its a different kind of company. So investors take a while to adjust. Apple has been interesting. Watching the stock over the last five years in terms of investors coming in and going out of the stock for the wrong reasons. You may think apple is no longer a growth company, but im not sure they think it is. They have 216 billion in cash, one would think if they believed that they would be returning more to their shareholders. I think part of the problem is 130 billion of that cash cannot be touched. You have to start off by taking 130 billion off. They returned an incredible amount of cash. This is like a cash machine that keeps on giving, but the cash keeps building up. More companies wish they had that problem. Yeah, its a highclass problem. That said, to your thesis that it is in some ways a dividend payer, one that a value stock that will deliver overtime giving back to Share Holders, are they doing enough. The positive aspect of having 200 billion in cash, they can keep paying the dividends for the next 25 years and not feel the pain. If im a dividend collector, i think of it as a gimme on the dividend front. If they can do more, ill take it. Twitter a lot of news this week. How do you approach this one . This is a company in need of adult supervision. They have an incredible resource. Userbased. Ive never seen a company back so much part of public consciousness, but they have been unable to convert it into money. I have a feeling it starts at the top. I dont see how jack dorsey can run two companies at the same time. This Company Needs to essentially find a Management Team that can convert its most critical resource into money. Finally, with the time we have left, facebook . Facebook is the antitwitter. If you look at a company able to convert user base into value, facebook continues to impress me. The way they can take their users and make money off them. Professor, good to have you back. We will cover more names next time. Thank you. We have some news on boeing, which is one of the laggards on the dow. Lets get to phil lebeau with that. We have production changes. Production cut in the 777, it will drop from 8. 3 per month down to 7 per month in 2017. Boeing saying it does not expect production of the 777 as it transitions to the 777 x to drop below 7 per month. Thats scheduled to happen in 2017. On the flip side, greater demand for the narrow bodied 737 is leading the company to increase production in the future. Currently they build 42 per month. That goes to 47 per month in 2017. That was previous announced. The new guidance is starting in 2019 it expects to build 57 737s per month. Thats the new guidance from boeing on the narrowbodied 737s. You have a Production Cut on the 777, and an increase scheduled for the future in the 737. Well hop back on the call. Phil lebeau, thank you very much. Still ahead, the ceo of sprint will join squawk alley live. Well be back with more squawk on the street. Were the hottest Young Company around but if we want to keep the soda pop flowing we need fresh ideas got it. We slow, we die. What about cashing out . No im trying to build something here. How about using fedex ground for shipping . I dont need some kid telling me how to run a business ive been doing this for 4 long months. Fedex ground can help us save money and deliver fast to our customers. Not bad, kid. You remind me of a younger me. Aiden the dog is eating your retainer again. Lets take a short 5minute recess. Fedex ground is faster to more locations than ups ground. In new york state, we believe tomorrow starts today. All across the state the economy is growing, with creative new business incentives, the lowest taxes in decades, and university partnerships, attracting the talent and companies of tomorrow. Like in utica, where a new kind of workforce is being trained. And in albany, the nanotechnology capital of the world. Let us help grow your companys tomorrow, today at business. Ny. Gov so what about this . Your old technology. Its time to get into the new with ford come and get it if you really want it. New is ecoboost technology. New is a footactivated liftgate. New is tougher, stronger and lighter. New is ford. Americas bestselling brand. Now get into a new focus, fusion, or escape with 0 financing for 60 months plus 2,000 dollars tradeassist cash. Only at your local ford dealer. Positive stocks are up. Rick asntelli has the santelli exchange. Good morning. Id like to welcome my special guest from the fed. 2001 to 2006. Thank you for taking the time this fed day. Thank you for having me. Enjoy being here. All right. You know what, i think we could bring something to the table. One of my favorite words has been normalization. Probably 2nd best recalibration. Lets frame what the fed is looking at with regard to their process through the distinction between two terms. Theres tightening and theres normalization. I think theres room for light in between. To me tightening is anything above 1. 25 and 150 basis points. That to me would begin tightening. I think normalization is getting off to whatever that level that really is appropriate. The noncrisis economy which i would think fits the definition of where were at. Can you expand on that . Disagree or agree . No, totally agree. Thats a very critical distinction. If the fed does not get back to a more normalized Balance Sheet it will not have any ammunition for the next time we need the fed to be engaged in stimulating the economy. We have seen the term normalization in each of the last several statements. I expect to see it again but theres another element in that process, rick. You mentioned raising rates. The other thing that will get thwart normalization is allowing for the normal run off of the instruments that have been toured and we are still seeing in the statement that well continue to reinvest those that mature. That to me is a key part of the normalization and thats when well see the fed making that commitment on normalization. Okay now wait just to make sure that i understand you mark, youre saying that they should stop the purchases with the reinvested funds. Exactly. What they should do as maturing bonds as bonds mature or instruments mature allow them to roll up because normalization means a reduction in that Balance Sheet. Thats awesome. As opposed to. I agree. When i look at the flattening yield curve what jumps out at me is you can have a steepening yield curve if you let the treasuries and Balance Sheets run off. They really dont want to do that. Youre offering a 3rd door so to speak, correct . The reverse repos havent figured out how theyre going to work with that but just allowing the run off would be an important step toward normalization. Excellent. The final comment is this is january. The market and many opinions if theres a tiethdenning thats in march, in the interim period if you were an investor would you Pay Attention to true data dependent . I have my question marks if thats as it appears on the face of it. What would you monitor to gauge whether that tightening is moving closer . I would be looking number one at inflation and theres almost no Inflationary Pressure now and so if thats the case, i think it will be tough to move. The other thing i would look at is the underlying economy as opposed to the Market Reaction to it because the underlying economy and i think what well see in the fed Statement Today as a reassurance of that fact, the underlying economy is so hid but not strong. Over 2 million jobs and with respect to the dollar, the dollar hasnt moved much against either of the other two real strong big currencies. The euro or the yen. We would see some of that reassurance but i would look at the under lying economy as opposed to market indices. Its always refreshing to hear some of your critique on the fed in the markets. I thank you and of course next time youre on we might have a little more clues regarding the fed. Back to you. Thank you, rick. Happy fed day. Well see you in a bit. Lets send it over to john with a look at whats coming up next on squawk alley. Apple shares down more than 5 . Thats right sarah. Down near 95 a share. Havent seen those levels in a year and a half. Well be digging into whether its really as bad as the stock looks. Also sprint ceo is going to join us in an exclusive and hell talk about twitter. What he sees as the real problem with that product and service might not surprise you but then again, the solutions could be tricky. All that and more coming up on squawk alley. So im going to take this opportunity to go off script. So if i wanna go to jersey and check out shotsy tuccerellis portfolio, whats it to you . Or im a scottish mason whose assets are made of stone like me heart. Papa youre no son of mine or perhaps its time to seize the day. Dont just see opportunity, seize it applause ii like to think of myself as more of a control. Enthusiast. Mmm, a perfect 177degrees. And thats why this road warrior rents from national. I can bypass the counter and go straight to my car. And i dont have to talk to any humans, unless i want to. And i dont. And national lets me choose any car in the aisle. Control. Its so, whats the word . Sexy. Go national. Go like a pro. Apple headquaters and its 11 00 a. M. On wall street and squawk alley is live. Nice to be back with john and kayla at post 9