Transcripts For CNBC Squawk Box 20140328

By 0. 5 . As for the tenyear here until the United States, the yield had dipped to a twoweek low, falling below 2. 7 . Right now, its picked up a little bit, 2. 695 . Take a look at gold prices. Prices fell below 1300. Up about 2. 50. But, again, below 1,300. Walmart filing ads 5 billion lawsuit against visa, accusing the Credit Card Company of passing along unreasonable swipe fees when shoppers use credit or debit cards at its store. The wall street journal says the suit alleges that visa swipe fees went against antitrust regulations and in turn turns up more than 350 billion over the course of nine years. This has been an ongoing battle between the retailers and credit card companies. There was legislation passed in the senate to change the balance of this. They say 5 billion this is over the course of five years. I guess they figure lets start with this. But more important than the 5 billion theyre looking for, theyre looking to change the course of how payments are made in the future. Walmart does, what, 100 billion a yeah, but the American Consumer spends Something Like 3 trillion a year. The kitchen sink is in here. Basically. All right. Shares of walmart, we can see where they closed yesterday, at 76 or so. Has been flat for about a year. And well take a quick look at visa, which its a great business they have. They dont even have any liabilities, usually, right . Yes and no. Somebody has tofr koit if something gets stolen. This is all the more interesting because of what happens at target over the holiday season. You saw massive fraud pulled off. Because of the credit card companies, the banks will tell you they are providing a Significant Services for these retailers. Its expensive, its not easy to do. If it is, you would think the retailers would do it themselves. But if people dont pay their bills, visa doesnt get stuck with it, do they . I guess it depends on the banks. The banks visa is raking it in. Its a good business. Dow component . Might be. No, maybe not. I dont know. It changed so many times in the last couple of years, im not up to date on it. This is not, but maybe it will be some day. Amazon says it has no plans to offer free streaming Video Service as it gears up for a new event on april 2nd. April 2nd is also awareness day and were going to have a story in executive edge thats really interesting. But thats why that date is significant. Well be wearing our puzzle pins that day. Wall street reported the Internet Retailer is considering an ad supported tv and music streaming Video Service which could include a set top to rival apple tv, our chrome cast or roku. Sorkin is somewhere where he could tell us about these things. Hes in the big easy. Hes in new orleans. He flew straight there from chicago. It is. He has no teams i dont think in the in the ncaa. Amazon was down at the close yesterday. Tonight is a i moved ahead. You didnt want to bring it up. I didnt even realize i was ahead of you until you told me. Yeah, you were. I was afraid to come back on monday because you moved ahead last week. But nobody had stanford and dayton. I had the other three. I dont think anyone had stanford and dayton. Condoleezza rise probably had stanford. They had a shot of her last night. Richard sherman what the was right in front of her. She went to stanford. Stanford was great, but these dayton flyers, theyre on the mend. My perfect bracket. I dont count them who knows. You never know. But tonight is going to be theres some big ones tonight. Everybody has michigan state. So well see how they do. I think i do, too. Uconn always gets better towards the end of the year, but i think i have my fingers crossed for iowa state. Still playing without the guy that broke his foot. Anyway but we digress. And i can stay up tonight. Like last night. Lets tell you about another high profile ipo which is about to make its debut on wall street. This is interesting after what weve seen this week. Cbs outdoor america is pricing at 28 a share. The ipo plans to raise about 560 million valuing that company at more than 3 billion. And cbs outdoors is pau part of a Cbs Corporation and will trade as cbso. Also, facebook wants to deliver the internet to your underdeveloped parts of the world via satellite and drone. The social networking giant says it has hired aerospace specialistes from nasas lab for a new connectivity project. The connectively lab is working on connecting drones, satellites and lasers to deliver Internet Access to everyone. Not entirely sure how this would work, if you would use drones or lasers. But its interesting stuff. Facebook is out there with oculus this week. That purchase of oculus for 2 billion is now getting into the space business. Its interesting, though. Google is doing all kinds of different things. That stock is up about 1. 2 . They talked about the drones. Like a 15pound drone would hurt more than a 2 pound drone. Yeah. Theres already a guy who was killed earlier this year flying drones around. But theyre little mosquitoes. But there may come a day where theyre Walking Around and theyre crashing and stuff and falling. The faa has something to say about that. Falling crashes would be bad. That would be very bad. Plus, you dont know what idiots are using these things. And we know theres a lot of idiots in the world, too, right . In general. Whats that gang that does stupid stuff . Oh, yeah, the guy from the i cant even say the name. Johnny knoxville, is that what it is . Yeah, it is johnny knoxville. You dont want him with drones, right . No. Flying above peoples butt. Okay. He was. That Bottle Rocket video, have you ever seen that . No. You never saw the Bottle Rocket video where they got no, no, no, i know where youre going with it because dont try it. Dont try it. The video i saw last night was i love that. Youre making money off like i wouldnt know i didnt know if that was an urban legend or not. He was 70 when he hit the guy. Youre a liar and youre going to have to go before god and atone for your sins. I dont know whether i was on the moon . Really . I dont know . The stuff that people will tell you. And thats why this plane thing is just reiff with conspiracy theories. If they dont find some of these pieces, there will be people that believe its still parked somewhere. It will be a mystery for sometime to come. Talk about another mystery that we are still trying to unravel from 2008, the liquidation of Lehman Brothers is reportedly still delivering. This has helped drive up recoveries for every major investments. With some getting as much as 6 cents on the dollar, more than lehman initially investmented. For some of the hedge funds that spent the months and years at deep discounts, just a few pennies on the dollar can add up to millions of dollars in the process. Lehman says it would repay competitors an additional 9. 7 million next week. After that money is returned, lehmans critters will have been paid more than 80 billion. That represents a 15 billion increase from the banks initial estimates of how much would be returned to competitors. The collapse was the largest bankruptcy in history. I dont know what that is im guessing there still might be a hole. It was important that they you know, they said we have to do this in an orderly fashion. People are mad that some of the same employees that have been there before are going to be compensated to unwind everything the body and exactly. Lets get a check on the currency markets. Managing director at pk asset management, boris, whats interesting to you today when you look around at currencies . Well, i think the big stories this week and next week will be will the euro finally crack . What were seeing in the market right now is basically all the major Central Banks towards a more normalized policy while the ecb is clearly mired in a deep inflationary cycle. Overnight from germany to spain suggests european deflation is getting worse. So theres an enormous amount of pressure on them which starts to be easing in the exact opposite direction as the bank of england. I feel like this is a story this is a waiting for the story that weve been waiting for the euro to finally crack. It is definitely waiting. Yesterday i tweeted out will smoggie get draghi to finally do qe . Even some of the ecb members are starting to realize what theyre doing right now is clearly not working. The eurozone economy is mired in a nearly recessionary state and they have to act. But they are so constrained by this german and i typically say accommodative. But its really an open question whether next week theyre going to do something really unique. Now, one interesting idea that came out a couple of weeks ago is on this, but what they should do is buying european bonds, they should buy u. S. Bonds. And i thought that was very interesting. The reason why is because first of all, it removes the whole political issue. You ignore all of that issue. Secondly, if you buy u. S. Bonds, it naturally drives the Euro Currency rate lower. That helps the germans. It helps the emerging market nations. There are all these reasons for why they would want to do it. Its such an outlandish idea. It raises the idea t buying german versus italian bonds or french bonds or somebody else down the line, buying american bonds where it benefits potentially none of them. From a political perspective, the reasons you laid out makes no accepts. But from a political football, is that a tough one . That is the quintessential problem. How does russia and everything that putin has done in recent months change this scenario or complicate it . Yeah. Great question. I think for a while, we sort of calmed down, right . They took crimea and everybody relaxed and everybody thinks the crisis is passed. But now there is chatter that they may move into Eastern Ukraine. I think if they move into Eastern Ukraine, its going to be damaging to europe because that escalates the tension. Well see if that happens. Clearly, its going to hurt germany because the economic ties between germany and russia start to receiver a little bit. So its not helpful. Your name is boris, so i defer to you on this stuff. Supposedly now hes hiding with camouflage, a bunch of equipment and troops all along the yeah. And theres a lot more going in there. I mean, you probably just take a little of Eastern Ukraine. Hes not going to take all of ukraine, is he . Ready to hand i think any encouragement is im, like, working for him. I know how hes thinking. Whats in eastern crimea has some great stuff. It has some ports and stuff. What else would he like without taking the whole country . Theres a lot of russians, i know that. But theres some good stuff there, some nice malls or something. What does he want in Eastern Ukraine . I dont think theres anything extraordinarily attractive. No, i dont you know, honestly, i think its more of a political issue. Its sort of, again, the idea that its a greater russia. His primary interest, i think, is to make sure ukraine does not turn west. He want to do Everything Possible to sabotage that. The europeans are going to have to act. I mean, at this point, that becomes everybody would accept the idea that he needed his warm weather ports. But now it becomes almost a replay of world war ii. I just dont i think thats a greater geopolitical issue that people are giving credence to right now. Its just, boris, that a military option for the west, i think he could almost rebuild the entire soviet union before he would ever have the political will to stop them. Yes. But i think theres probably quite a lot of stuff that we can do much more seriously or economically that could hurt them. In any case, none of this is good, right . Were talking about punishing each other, not i just dont foresee its not good for us, good for him. Those are resource rich prices. His economy is awful. Its good for him only in the very near term. Russia is going to turn into a basket case if he continues on this path. Ultimately, all they have is oil and nobody is going to want it any more. Right. But they get more and more of it. We need to frack like crazy. Thats what we need to do, right . I agree with you. So even though youre a big you think we should build that pipeline . Absolutely, 1 million percent. Good for you. You knew you people were coming around. You people . Democrats, yes. The Economic Impact is much more important. Theres no posturing, theyre not going to do that . Its stupid. Yeah. Who was that that said that yesterday . I dont know. They that he said well no on in a he didnt say it was going to be good in a couple of boris, thank you. Coming up, how some employers are viewing autism as an asset and not as efficiency in the workplace. That story is next. As we head to break, check out the price of crude this morning. More squawk coming up in just a minute. Minute. Announcer where can an investor be a name and not a number . Scottrade. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back, everybody. Right now its time for the executive edge. Some employers are viewing autism as an asset and not a deficiency in the workplace. A story in the wall street journal talks about Software Company s. A. P. Which has been actively seeking people with autism for jobs because it believes features of autism may make some individuals better at certain jobs than those without autism. It comprised a program launched in germany and s. A. P. Ames to have up to 1 of its workforce, which is about 650 people, be employees with autism by the year 2020. Jose velasqo is the head of Autism Initiative in the u. S. He says the people with autism are characterized with repetitive behavior, but they tend to pay great attention to detail and that may make them very well suited as Software Testers or debuggers. He has two children with autism. One of the things they talk about is writing manuals for installing software. When you know people like that, theres anxiety, unfortunately, associated with a lot of things which makes, in certain cases, makes them very detail oriented. Really, its hard for them to do anything about it. And for parents, the biggest worry that you have is that theres not going to be a way where they can earn a productive living. Here is someone that you care about so much. And its a huge, wide spectrum that you have and it covers a wide range. Lester was in for brian last night. But i think its now one out of 68 children. And five times as likely that a little boy will have it, but i think its one out of around 40 or 42 little boys. So, obviously, we need funding. We need more funding for it. Its apparent that this is not something you can just put your head in the sand about. But initiatives like this are really important, but also Early Detection and diagnosis and early intervention. You know, at this point, the current thinking research wise, people from Autism Speaks, its a combination of genetic factors and maybe some environmental factors that we dont know about. Coming up on is that tuesday or wednesday . April 2nd is i think its wednesday. Well all have our on wednesday. Well all have our pins on. Its a huge issue because 85 of American Adults with autism arent employed. Right. So this is something where you work to finding the assets. And we know a lot about it. Bob and suzanne with their work with autism. In ten years, Autism Speaks has become one of the premier research and charity organizations. So, you know well talk more about it next week, but theres a great story in the journal today and some related stories, too, about other companies doing some more things. And its hard to tell whether its an epidemic. A lot of it is better recognition. Better detection, but it doesnt seem to add up with the increasing incidents. Thats the same thing i thought yesterday. I thought maybe were just better at the testing. Father res getting older, there seems to be some correlation with age and, you know, who knows whats happening. But theyre making great stradz. But it needs more funding. I think its compared to a lot of other diseases, its still a fraction of what we spend on other things. And its important because in society, its becoming a its going become a huge deal when all these kids grow up. One out of 42, one out of 68, whatever it is. A much larger portion, right. Lets talk about what a robust its been for mergers and buyouts. Facebook buys whats app. The mega deal has gotten a ton of exposure for its big price tag and the even bigger questions it raised about how much the Text Message Service is really worth. If you want to buy a company, but what price should you pay . You can look at multiples as of how many times profit or tax flow youre going to want to pay or comparable sales like in other companies. You can look at synergy, how much would a combined Company Benefit shareholders . Those are a handful of factors. But you have to settle on a price. Bankers advising sellers want to get the highest price possible. So in the end, the deal price paid is as much about numbers as it is about people and negotiating prowess. Maybe thats what got whats app a 16 billion price tag. The comcast time warner merger. The deal raises issues about content provider deals for Companies Like netflix. And the hotly debated net neutrality. When that peep line offers all websites the same speed and access, thats call net neutrality. But some providers want to set up a special lane where data moves faster and only companies that pay extra are allowed to use it. The American Us Airways deals. The mega merger creates the Worlds Largest airline. It creates antitrust issues with some passengers worried about how theyre fare while flying. Welcome aboard. Rest assure these Airline Mergers are nothing new. Since 2001, ten Major Airlines have become just four. Pilot unions are in court battling over issues. Please be advised to be consistent with us airways. Americans will no longer offer fares. But there is good news. The movie is still free. Enjoy. And Berkshire Hathway and 3gs acquisition of heinz. Because despite the fact that the oracle of omaha said doing deals with private equity doesnt cut the mustard, he couldnt resist the taste of the ketchup deal and his private equity partner, 3g. Were going to talk much more about the art of deal making with some of the power players of m a. Andrew will be joining us a little later this hour from the tulane corporate conference in new orleans. Well be talking to the mayor of new orleans and the s. E. C. Commissioner and gallagher. And squawk box will return. We took over your set briefly, but well return in a moment. Redhat rolling out quarterly results. Were going to talk to the ceo coming up in the next half hour. You have not entered the twilight zone. Who is that stewardess . I dont know. Flight attendance. No, greco, it was no one weve ever seen. And are investors getting more cautious . Well talk about the recent swings in the market. As we head to break, well look at yesterdays winners and losers. These days, everything your business does is done on the internet. And tomorrow youll deveno more. Thats what comcast business was built for. Slow dsl from the phone company was built for stuff like this. Sign up for internet and voice and find out how to get four weeks of tomorrow ready internet for free. And youll be ready for tomorrow too. Comcast business. Built for business. But with less energy, moodiness, and a low sex drive, i had to do something. I saw my doctor. A blood test showed it was low testosterone, not age. We talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer, worsening prostate symptoms, decreased sperm count, ankle, feet or body swelling, enlarged or painful breasts, problems breathing while sleeping and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about axiron. [ male announcer ] when fixed income experts. Work with equity experts. Who work with regional experts. Who work with Portfolio Management experts, thats when expertise happens. Mfs. Because there is no expertise without collaboration. Ohoh, oh, oh, la, lala, lala, lala nanana, nanananana some things just go together, like auto and home insurance. Bundle them together at progressive, and you save big on both. Oh, ohoh, oh, oh hey, its me [ whistles ] and theres my dog [gasps] theres my steps i should stop talking. Perfectly paired savings. Now, thats progressive. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick. Andrew is going to join us live from new orleans in just a few minutes. Topping todays headlines, walmart is filing a 5 billion lawsuit against visa. Walmart is accusing visa of passing along unreasonable slide fees when shoppers use their cards at its stores. Another high profile ipo is about to make its debut. Its called becky and it makes is the symbol becky . Though. Why is that in there . Am i supposed to ask you what you think about it . That was smooth. Way to go. Roll that back down. Its friday. You can roll through anything. What is that . Make you can as an aside turn to me or ask me. Are you involved or affiliated with this ipo in any w way . No. Do you know what it is . Yes, because are you involved in Outdoor Advertising . I am not. Cbs is. Did you help get les to appear on squawk on the street . I did not. My guess is that was faber. They might be down there at the u. S. Stock exchange. Anyway, cbs outdoor is launching an ipo today. What scares me is when i see the murderers when youre driving in. Do you see those driving. . Oh, people who are missing, you mean . No. These are people who are wanted for murder. And he see it from a distance and it switches before i get close enough. I could pick them up hitch hiking. Who knows. On todays economic calendar, becky no. I think that was for you to start reading, wasnt it . Sure. Okay. And on todays economic calendar, personal income and spending for the month of february, incomes are expected to be rising by 0. 2 . Spending is expected to be up by 0. 3 . Usually, they have like a you see the gray thing where you can tell its a new read, right . No. I think that was actually supposed to still be you. They probably took some headlines from an old gig that was me and they hate to writing anything new. I dont blame them. Thats a no, then he just reproduce mistakes from the previous people that are working on the overnight that probably theres a program thats inews that you can go in and you can change things. Anyway, march is historically a choppy month for the markets. With only two trading days left, where can investors find opportunity right now . 1849. 04, little lady. Do you see that . I know, i know. Below the close. From the end of the year by by a half point. Joining us now i will probably get in trouble for call you little lady, wont i . Big, strong woman. How is that . Roar, roar joining us now is i just said to counteract the it was a term of endearment. Ryan detrich is from investment research. Everybody comes on, ryan, says this year isnt going to be like last year because it was just too easy. This is what were seeing. Were now flat on the year for the s p. What do you expect for the next three quarters . Thats right, joe. We know small caps and tech are really taking a hit. But the s p doesnt look too bad. Its holding that 1845 area. Flat for the year. But when you get to it, historically the second half of march actually is for the last 40 years. Kind of playing in. And then you get to next month, april handed down the last five years, 10 years, 20 years, 30 years. Its the fist or second strongest month. But you have to be bullish and the s p looks pretty good. Its the overall weakness. Stocks lower. I still think, you know, april could be a move higher all of a sudden. You saw what i mean, theyre just seeing a few, like, morning its not twitter. I dont know whats going on there. Its down a lot. Have you looked at twitter . No, i havent. You should look at that. Biotech . Got a little frothy. Its down. Tipo the other day didnt do well. Are any of these things signs of an intermediate top or some profit taking that we should expect that could bring the market down to a 5 or 10 correction or not . Absolutely. The important thing to remember, though, if you come on last year, it looks like 1995. In 2004, its a sideways choppy market. The bulles and bears alike. Thats kind of what were starting to see this year. The aai 4 came out yesterday, lowest number in two months. But the thing i really like, we look at the total shortage of the s p component. Just recently, despite the highest level weve seen since november 2011. Regardless, to me, theres a lot of Short Interest out there. When shorts get that high, theres buying opportunities and the short has been unwinding and creates a bit to push them up higher. What should we be catching as the canary in the phone line . Absolutely. I think the s p is the key. The 1840 area is the low we had on the s p. Looking at this quarter, the s p potentially put we can be up five straight quarters. The Fourth Quarter, we were lower. But then, of course, it was in the 90s. We are awfully extended and thats why i think the 2004 scenario may be a choppy sideways market. Yeah. Larry lindsay said some scary stuff. He thinks either we you dont grow at 2 or meaning the market is priced ahead. Did you shaffers is in cincinnati, isnt it . Yes. Did you grow up there or did you have to move there to take that job . I moved here. I went to xavier in cincinnati. Oh, you did go to xavier . I sure did. Do you like the flyers or do you not like them . Theyre only 30 miles away, but they beat the bear cats sometimes and they beat xu sometimes. Do you like them . No, thats a big on xavier. I dont like them very much at all. Good. They are good. Dayton is only, what, 50 miles away . About an hour away, exactly. Its your last chance in ohio. Its a rival, so you have trouble rooting for them, do you . All right. Not you . I just watch them and i just love that theyre there, 11th seed or 10 seed. Yeah. All right. Coming up, another Strong Quarter for redhat. We have to get back to that flight attendance. 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. [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, Global Economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Welcome back to squawk box. The dow was down by 54 points. The s p was down by 3 points. This morning, dow futures are indicated to open up by about 43 points if they were to open right now. S p futures are higher by just over 5 points. Redhat posted a better than expected Fourth Quarter. Joining us right now is jim whitehurst, president and ceo of red hat. Jim, thank you for being with us today. Its great to talk to you. Thanks, becky. Its graetd to eat to be here. Why dont you tell us what you see in the environment, what you see in terms of spending and what youre expecting for this current quarter. Were looking at the secular trend from the old serves to cloud computing, which is braet for volumes. Volumus computing is expanding as infrastructure commoditizes. It is where shares taper in that world. Who are you taking shares from . All of the traditional uni exami ix players. Thats being driven by the webb companies. Theyre doing it all in force and we bring those same technologies to enterprise customers. Go ahead. So open stat is one of the hottest technologies in the market right now with a leading contranscripter and one of the few people bringing it to customers. Its an sxloesing business for us. How is what youre doing different from what theyre doing . Well, typically, an ibm or a hewlett packard, theyre ipomakers. Theyre trying to bring their hardware and their software together in a combined solution. Which is the same paradigm over the last few years. So were all talking to either telcos or were talking directly to enterprise customers to know that with our software stat, they can run any hardware underneath with any application on top. Yesterday, when you first came out with the stock, the knee jerk reaction was positive because your earnings for the quarter was better than expected. But it came back down and traded lower on concerns about the outlook for the year. Whats happening . Well, we had a blowout Fourth Quarter. Our performance was up 24 , well above where analyst expected it. Thats where we saw the initial top. We guided for next year that we were going to take our markings down 100 basis points. Our Cloud Technologies in general are ticking off. So we needed to double down our investment in those areas. We had the beauty of the subscription model. The down side to that model is we collect the cash up front, but we recognize revenue over the long run. So i think analysts, were not real happy that we took our markets down to go forward. At the same time, we picked our cash flow guidance up substantially. So cash flow guidance is really positive. Can i just like what you said off the top of your head here. I dont know where the crowd is or how it works. And i like talking about it at cocktail parties. So you are really excited about 2014. Its going to be a defining year when cloud architecture goes to actual deployment. Were going to eventually get to a point where we can interpret it all. You say you havent seen an online ad recently that isnt catered to you because it knows what your Search History is, but this has not been rolled out by the big mainstream companies, but this is the year its going to start happen. Have i got that right . Absolutely. One of the best ways for me to find out what my kids are searching for online is to go to my computer and you see the ads pop up. Were now starting to see banks, traditional retailers, health care, all kinds of industries are looking to leverage their same technology. You could use health care to have Better Outcomes or save money. Its not just about selling stuff that we all want. So this is really going to be it, i should be excited about 2014 that a lot of this comes into reality . Absolutely. This is the first year were seeing customers actually put it into production, which is great. Okay. I had no idea. An open source. Party tonight. Down to 23. 5 from 24. 5 . Were talking about the cloud tonight. Where is this cloud . Is it really just a cloud . Jim, thank you for being with us today. We appreciate your time. Maybe its in north carolina. Guess who is here . Larry legend. Who. Who . Andrew. Andrew, oh, my god. Hes in new orleans this morning. Youre wearing a picnic table clothe. Its been a long night here in new orleans. What are you drinking in that thing . This is a its called a hand grenade. It is a i dont know what weve got in here, but its good. It may make the program is that the second time you were drinking this week for the show, andrew . I think it is, isnt it . Theres been a lot going on this week. When we come back, though, were going to have a Big Conversation with two of the most powerful people and influential people in the world. Mergers and acquisitions, im go the down here at tu lap for them to tom impact. After that, we have the mayor of tipton and then marty when squawk returns. Squawk returns. Well, could help them save on boat insurance too. Hey okay. Im ready to come in now. Hello . Im trying my best. Seriously, im. Im serious. Request to come ashore. Geico. Saving people money on more than just car insurance. Welcome back to squawk box this morning. We are live in new orleans this morning at the tulane conference. This is a big m a conference, the deal conference where we learn about some of the dark arts of m a and how it works with some of the most powerful and influential lawyers. Eileen nugent from scouting is here and rob spatt. Thank you for being here. One of the big issues here, and it was actually something that was talked about first years ago, almost invented here is the idea of whats called go shops in mergers and acquisitions. Actually yesterday there was controversial talk about the dell transaction which was one of the situations where the michael dell in this case came to try to buy out his own company. Instead of having a true action they sold it to him and said well have an auction afterward. Thats what a go shop is. A lot of shareholders and investors say, these go shops, is it a real thing and does it work in practice . Nobody really wants to show up to the bhal after theyall afte hitched up. Although people did show up in dell after that. Sort of. Including carl icahn and bla blackstone, two pretty big names. It went on and on and on. Ultimately blackstone decided not to proceed. I think thats a very good example of a go shop that had you dont think a go shop at some level is a sham, a cya for the boards of directors today where all the lawyers say if you do it this way, we can say we covered ourselves, its all good. What lawyers learn what a board wants to do by definition is the right thing for them to do. If they dont have the confidence theyre sure theyre getting the best price, they should use a mechanism to try to get it. I know theres a lot of cynicism about whether people will bother to come in but in a way, you can also look at it, people like matching rights in a funny way its a matching right. You come in at the last minute. Theres so much around process these days. Andrew, look, your cynicism is well founded. Lets start with that. Thank you. I dont think people should look at go shop as a panacea. You cant take a crappy process and bandaid is with a go shop and say its wonderful. In recent years i publish an article every year here at thence stut called the four ring circus. Its been updated 18 years in a row. Right. And it chronicles all about deal jumping. Thats what its all about. Theres stuff in it, we track go shops and it used to be that go shops werent generating any deals. Right. In recent years, however, theres 15 deals that have successfully come out of go shops. Let me is you another question about the go private transactions. You know rob kindler, morgan stanley, he was here yesterday. He made a controversial comment, this is something, talk about cynicism, because the market feels this way often, why is it that what goes on as a private Equity Company cant happen in the public, as a publicly traded company. You cant make the kind of changes that are needed. He says its a complete lie, its a complete lie that you have to somehow go private, that actually everything you can do in private you can actually do in public and therefore, all of these processes are a bit fake. That was really his implication yesterday. The word can, can you do it . Yes. It may be a very, very strong willed Management Team who basically trains their investors to say, look, take it because heres what im going to do contrary to what you as investors want to try and impose on us. Maybe you can. But it is very hard and very few Management Teams, i suspect, have the will to actually take the really longterm view. I think part of the will is tied into you want the chance to be able to do it and maybe make a few mistakes along the way while youre doing it. Right. And not take a hit to your quarterly earnings. In a Public Company setting thats very hard to do. I think all the rationales for why the whole lbo Movement Began originally, the good reasons why you can incentivize management, the good reasons why you can take a longterm view, they still exist today. We have to leave the conversation there. I want to thank both of you. Thank you. Thank you. Pleasure to be here. Appreciate it. Have i agreat conference. Io, thank you. Wheres the hand grenade, andrew . The hand grenade is right here. I have to keep it close. That could be orange juice. I think it is. I think hes lying. I think he is, too. He hasnt been slurring. It goes right to his head. Remember the other day, andrew, you said you were getting hot. I got a little flushed. I know we had that wine on the set. Thats orange juice. My liver has gotten accustomed to whats going on. Coming up, forbes adding j s jobs. Our guest host today, larry legend. Some people think thats larry bird, no. Larry bossidy, hes ready to sound off on the economy. He has kentucky. Well see about that. Squawk box coming right back. Every year. t does that make a difference . Search cost of Financial Advisors ouch over time it really adds up. Then go to e trade and find out how much our advice costs. Spoiler alert. Its low. Really . Yes, really. E trade offers Investment Advice and guidance from dedicated professional financial consultants. Its guidance on your terms not ours thats how our system works. E trade. Less for us, more for you. Do you have a minute to think ok, how about thirty seconds . At comcast business our internet is fast. Up to 5x faster than slow dsl from the phone company. And our phones better too. Sign up for internet and voice and find out how to get four weeks of internet for free. Time to make the call. 8005016000 comcast business. Built for business. Can you start tomorrow . Yes sir. Alright. Lets share the news tomorrow. Today we failrly busy. Tomorrow were booked solid. We close on the house tomorrow. I want one of these opened up. Because tomorow we go live. Its a day full of promise. And often, that day arrives by train. Big day today . Even bigger one tomorrow. When csx trains move forward, so does the rest of the economy. Csx. How tomorrow moves. The markets, the economy and washington, standing still, former honeywell chairman and ceo Larry Bossidy gets ready to sound off. Ford making more jobs to power its ford f150. We talk with fords chief, live on cnbc. And we talk to the mayor of new orleans. We also go deal hunting with marty lipton, the maker of the poison pill. As the second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin, live in new orleans this morning. Our guest host is Larry Bossidy, former ceo and chairman of honeywell. We have a lot to talk about. We do. You look good. Good to see you. Take a look at the futures. Yesterday you saw the markets close down but just barely, dow down by 4 points, s p down by 3 points and change. The dow futures are indicated above 38 points above fair value. The yield pushed lower once again. You could see this morning its yielding 2. 697 . Yes. Yesterday it was at a twoweek low at 2. 67. Two numbers, an 80 cents loss. Adjusted loss of 8 cents a share. And the estimate was loss of 55 cents a share. Its a 5 billion stock again. I was going to say why are we talking about it . You still have one because you still type on that thing. I have this and an iphone. You have a blackberry. No dead man walking. Its unbelievable. I know. Thats why i got an iphone, too. You have to leave early today to go to the photomat. You have film to pick up. I know where the day is coming where this isnt going to be an option. Im preparing forself f selsels for that. They continue to look for opportunities to streamline operations. The company is targeting break even cash flow results by the end of fiscal 2015. Larry, do you use you have an iphone . I do. Do you use the dictation for emails ever . No. It works. Sometimes you will say funny things but most of the time, it even picks up kind of like i put odyssey or penelope. It picks up weird words but simple words sometimes it messes up. I can talk and the whole thing comes out. Ive done a lot of dictating in my life but not through the iphone. How do you do the typing on that thing . It is hard. And i do it very slowly. I am no whiz. The other stuff it does have, so far i will also tell you for the ipad i have the keyboard you can use on one of them. It holds it up. If you need to type a lot more. I think android apps are the same with what goes on. The apps are pretty cool. Just navigation type stuff. I lived in l. A. For seven years and never knew how to get anywhere. I was out there recently. I was taking short cuts that cabbies didnt know. Walmart filing a 5 billion lawsuit against visa. The suit from the retail king alleges that visa swipe fees went against antitrust regulati regulations. Check out visa as well. You used to be on the board of jpmorgan, one of the big banks that issues a lot of these cards. Im not sure why its visa and not mastercard. Whos right in that situation in. I dont know whos right but the fees will start coming down as a consequence. Is it percentbased or an actual dollar its different for debit versus credit card. It varies. I do think the suit will bring about lower fee structures in the future, whether theyll get a big win over the suit or not, i dont know. Clearly theyre on the right track. The internet brings all fees down. It does. Its been incredibly transformative. Lets get through this. Amazon says it has no plans to offer free streaming Video Services as it gears up for a news event people are waiting for on april 2nd. The wall street journal reported that the Internet Retailer is considering an ad supported streaming tv and music Video Service. It could include a set top to rival apple tv or chromecast or roku. Another high profile ipo about to make its debut, cbs outdoor america. It values the company at more than 3 billion. Cbs outdoors is part of the Cbs Corporation going to be trading under the ticker cbso. Cbs chief les moonves and ceo jere jeremy male will be making an appearance. There have been questions about ipos. A lot of those are biotech. Larry bossidy, former chairman and ceo of honeywell. Its not going to be in the First Quarter. I think well be lucky to get to 2 . You look at autos at 16 million units, housing Something Like 950,000 starts. You look at the Production Index over 55, which means its good. Hiring is still lackluster at 175. 63 Participation Rate. So no xexuberance. We get stronger as the year goes on, get to 3 , which is not what you hope for following a recession but nonetheless, desiene. The do you still talk to welch. Sure. When he was on he said theres optimism like it will be a 3 world but hasnt seen anything concrete. I think the First Quarter has been confusing, joe. Because of the weather . You know, the Fourth Quarter you saw Consumer Spending in the Fourth Quarter as a change yesterday, it was pretty good, over 3 . This is not a blowout. But when we get beyond the weather situation, the economy will continue to strengthen as the year goes on. Well be close to 3 , i hope, in the Fourth Quarter at least. I read again that Companies Just arent spending and theyre not hiring. Theyre doing more with less, investing in technology. It makes more sense to do that. Corporate profits are at a record high. It doesnt feel like a 6 or 5. 5 job market, does it . Is it . I think the job market changes. I think its decoupled in the sense that 1963, manufacturing was 20 of the gdp. By 2012 it was 12 of the gdp. 1953, 16 million jobs, 2012, 12 million jobs, the loss of 4 million jobs. Thats because of technology and outsorts i outsourcing. People are doing more with less. To your point. And the composition of jobs in the country has changed from a manufacturing oriented economy to one thats service oriented. You need more skills to play in the service jobs. We dont do enough training in education. A lot of the people who are wanting, there are open jobs but theyre not qualified. The new normal will be 6 plus unemployment even at a booming economy . If you look at it, the Participation Rate is 63 which was low. If it goes back to 66 , or if it were 66 , unemployment would be over 10 . Yes, were in a 6 plus unemployment, i think, for a while until we know how to create jobs in this country. At least we dont need to worry about the fed going up faster than people think. That was a worry we had yesterday. If they get below 6 it doesnt really feel like a rip roaring 5 unemployment economy either. If the fed starts raising it, it almost reminds me of stagflation. I thought it was unfortunate for yellen in her First Press Conference to talk about when she may start raising Interest Rates. You know whats going to happen. Theyre going to look at the situation when the time comes and make a decision. The forecast when they might do it i thought was illadvised. Yes. Do you is the labor market, do we need to look at some other number . Theres a lot of people that left the work force obviously. Yes. Its the lowest Participation Rate in 40 years or something. Right. Theres a lot of parttime people and people not working as hard as theyd like to work. What is the other u number . U6. Are we approaching full employment . Let me tell you something, joe, you cant compare the labor market today to one ten years ago, for all the differences you mentioned in others. Its been bifurcated in such a way its apples and oranges. You cant compare the two. I think employment in this country is a tragedy. Everybody knows what has to be done. We have to tweak the tax code. We have to bring the 3 trillion back to get it in the economy. We need to have an Energy Policy that takes advantage of our indigenous assets we know what to do but we dont do it. How do you like the way that the Political Class is deciding to set things up for 2014 . Is it all about income and equality, all about minimum wage, this and that. Just totally to sort of get change the subject. Absolutely. You know whats going to happen, well say we cant do anything in 2014 because of the congressional elections. Then we wont be able to do anything because of the president ial election in 2016. The first time we see sun in the sky is in 2017. Its outrageous. We have another election in 2018 dont forget. We do. Youre catholic, right . Yes. Did you see how hes a master. He shifted away from the Birth Control stuff and got it on income and equality. The pope is from south america. The pope grows up down there. He has a like mooned with income and equality and somehow skirts the whole unfortunately in argentina he was down here, not up here. He felt the pain of it. Right. A couple of soulmates talking about income and equality. Beautifully orchestrated for the president. You have to give him credit for that. Hes very good. Excellent. Well have more. I look forward to it. You have ten kids. I ask you if you were catholic. I have nine. Not too late. Yes, it is. When we come back, we go to andrew in new orleans. Hell be joined by the man who created the poison pill, the strategy that keeps companies from hostile takeovers. Right now as we head to a break, check out shares of ford. Youll see that theyre up about 6 cents. That stock is trading at 15. 31. More squawk right after this. Welcome back to squawk box, everyone. The futures have been indicated higher. The dow futures are up by 25 points above fair value. S p futures are also indicated higher, up by 3. 5. Thats about how much the s p closed down yesterday. Ford motor plans to invest 500 million into an engine plan the in lima, ohio. This move will create 300 jobs to support the production of the 2. 7 liter eco boost for the 2015 f150 pickup trucks. Joe hendricks joins u s us this morning. Tell us about the announcement. Were in lima, were here at the assembly line. Were going to build the 2. 7 liter eco boost engine going into the great new truck. The reason youre doing it here in lima . We currently used a number of our vehicle lines using the 2. 5 liter eco boost engine. We have able capacity and floor space here so we can launch the new engine this year. Weve been talking an awful lot about what it will take to get companies reinvesting and hiring and creating more jobs. What do you see happening in the economy this year and where does ford stand . Its been a tough start to the weather and the midwest and the northeast. We see a strong year ahead for the economy. Its growing obviously at a better rate than last year we think the Auto Industry will grow this year as the springtime and summer comes around. At ford weve been hiring over 10,000 workers in the last couple years and growing our vs he investments here. Weve been looking at the economy and seeing what we can do to stimulate jobs. We have heard some concerns from auto dealers, including mike jackson at auto nation who said they were starting to see inventory buildups on lots. He thought maybe some of the big three autodealers were continuing to produce more than was ready. What do you say to a comment like that . Well, we had seen inventory grow during the winter. A couple reasons. One, the seasonality is such you build inventory to produce so you can sell in the spring and summer. In addition to that, the industry was softer in january and february. People were expecting obviously due to the weather. As that comes out in the springtime, we should see the inventories go down and sales pick up. This is Larry Bossidy. I know you have a number of launches this year and i think thats on your plate. How are they coming . And are you getting any sleep at night as you see them come off the ramps . Good morning, larry. Certainly there are a lot of 16 major launches in north america this year, more than ever before. Important names like mustang, f150, the new transit, a lincoln mkt. All the launches are on plan. Theyre going well so far. Its early in the year and we have a lot of work to do. Were excited and weve made progress in quality and ro progress in getting ready for the launches. I personally am looking at the vehicles weekly. So far, so good. I have a dealer that i love. Uhoh. Looks like the christie the Christie Administration just pulled the plugs. Larry, i havent asked you about this. I love my dealer. I do use my dealer. I dont know where to take this car if i dont take it there. If i get a flat, a lot of stuff the dealer does, if i have a recall. Shouldnt tesla if it wants to be be able to do direct sales. Yes, they will somehow. The dealer is tight right now. Its like a lobby thing. Joe, are you back . Im sympathetic to the dealer situation but in my heart of hearts, if tesla wants to do it that way, i cant believe the government it seems like crony capitalism or lobbying money. I see reasons to go to my dealer and i love my dealer. Shouldnt tesla be able to sell direct if thats the model it wants to use . Well, at ford certainly weve had a great relationship with our duealers over the years. As you talked about, joe, theres a relationship with the community and the customer. Were going through a change here with tesla and what theyre challenging in the states. From our perspective, the Dealer Network works, the dealer model works, the entrepreneurs invest in the community and they serve our customers better than we could from deerborn, michigan. I cant imagine going direct to buy undershirts. Were used to dealers everywhere, arent we . I dont know, its weird with auto. It almost does seem like its a middleman that doesnt need to get to take so much off the top you go directly to the company. Well, when you look at it, the Service Aspect of our business. Service. The High Technology vehicles today are an important part of serving the customer. Thats going to continue into the future. So you know, we need to maintain our vehicles and we need to be able to service them and be able to offer the customer the chance to drive vehicles. There are a number of elements that is an important role. It will evolve over time. All right. Its one thing to say the dealers do provide a service but if somebody wants to go in there independently and directly, theyre going to have to pay the price for whatever that is. I dont think they should be foreclosed from doing it. Right. Joe, thank you very much for joining us today. We really appreciate it. Good luck, joe well talk to you again soon. Thanks for having us. Go, dayton flyers. Im a dayton flyer alumni. Very proud. I like the name lima, versaill versailles. I said lima. You know the area then. Im from cincinnati. I just asked someone, and they dont like dayton. Its our last hope in ohio. The ceo of remax on results from the latest quarter and the forecast for spring real estate sales. Andrew returns from new orleans. When we return well talk to the mayor of this city about the economy and some of the more unique businesses right here on bourbon street when squawk box returns. 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. Aflac, aflac, aflac [ both sigh ] ugh you told me he was good, dude. Yeah he stinks at golf. But he was great at getting my claim paid fast. How fast . Mine got paid in 4 days. Wow. Thats awesome. Is that legal . Big fat no. [ male announcer ] find out how fast aflac can pay you at aflac. Com. Welcome back to squawk box this morning. We are live in the big easy at the tulane m a conference, the biggest of the year with the sharpest legal minds around. We have a lot coming up for you. We normally go deal hunting near the bayou but yesterday we did something different. We went gator hunting. Hunting and hunting gator. This is a little bit of what took place yesterday afternoon with a couple of our producers. We hung out with alligators. Andrew . Yes. I used to feed marshmallows to the alligators when my great grandpa lived in florida. Thats how you have to do it. The own i way to get the alligators to do what theyre supposed to do. Can you see that shot, sorkin. I can see the shot. Look at those lines. He stole my beating heart. Youre chiselled, dude. They did a nice job with that. We spent time with alligators. Normally id say well be spending time with sharks in a little bit given that well be talking to some lawyers. He has a carrot. Youre the last guy that would be a guest on duck dynasty but you dont really look that out of place. You look pretty damn comfortable down there. I enjoyed it in the bayou. Anyway, that was yesterdays activity. Within we come back, were going to talk to the legendary marty lipton of rocktel lipton, the man who invented the poison pill. Thats next on squawk box. [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, Global Economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Welcome back to squawk box, everyone. Im becky quick along with joe kernen and Andrew Ross Sorkin. Toyota recalling about 119,000 of its 2003 to 2004 avalon sedans. It knows of no crashes or injuries caused by the program but the company says to dealers will fix the problem by adding what are called electrical noise filters to the air bag control modules. Owners of the recalled cars will receive notice in the mail. And some battery problems for lenovo. They are recalling battery packs. They can overheat and cause the risk of a fire. Plus, were watching shares of blackberry this morning, the company reporting an adjusted loss of 8 cents a share. It had an actual loss of 80 cents a share. We watched this earlier and the stock had been trading up by 4. 5 . You can see right now its back to flat lining. 9. 04. Down one cent is the last trade. They also continued to talk about how things slide across all regions. Well keep an eye on that. Chicago Federal Reserve president Charlie Emmett said the fed will need to keep Interest Rates at rock bottom levels till late in 2015. It says if they dont it could deroyal a recovery thats making steam. We heard janet yellen and larry reference that. We had plosser on who also was one of the hawks. Evans has always been more dovish. Were seeing a lot of the the entire spectrum of voices. A lot of the spin. We go back to andrew in the interim. Theres two reality shows that andrew, that deal with gators. One is called swamp people. Thats the one ive seen the promo for. Ive actually seenen anticipate said of swamp people and Animal Planet has one called gator boys. Whose star was hurts for wr for wrestling the wrong alligator. Theres an opening . You didnt wrestle any of the alligators. We have more tape later. Its possible. Wow. One of those little ones. That one can do tricks. One of the little ones at a pet store. Ill wrestle one of those. Actually im scared of those. Andrew is our own resident gator guy. Hes in new orleans this morning. Theres that shot again. Hes at the tulane Corporate Law conference. Andrew, what do you have . Thank you, becky. We have a legend here. Im thrilled about this interview. We have marty lipton of wachtell lipton, the inventor of the poison pill, the consigliore, if you will, this is martys first interview on tv ever. He told me before we got on, it might be his last. Well hopefully make this more than a onetimer. But marty, for so many years you have been a champion of corporations and boards of directors. And in this environment, when activism has become so popular, you have been one of the people who have pushed back on activists. How problematic do you think activists are right now in terms of your sort of longterm shortterm thinking . And also more importantly, do you think that activism is actually good for shareholders . Well, its a difficult question to answer, yes, no. Let me try and start at the beginning. I think that activism, which is an aspect of shorttermism, is in the long term very bad for not just shareholders but bad for the economy as a whole. Now, with respect to hedge fund activism, i think you have to divide it into two categories. There are the hedge funds that identify situations where improvement is possible. Right. Meet with the company. Suggest changes. And the Company Either adopts the change or doesnt adopt the change and then there are hedge funds that try to find situations where, if the Company Makes an immediate change in its business, its business strategies, spins off a division, does something else, there will be an immediate increase in the price of the stock. What carl icahn is doing with ebay right now, for example. I dont want to talk about ebay specifically because were involved in that situation. I think the example you chose is a very good one. You see a company that has two very good divisions. One would sell at a much higher priced earnings ratio than the other. Right. And together they sell at an average price ratio. They say if you spin off the one that would sell at a higher price ratio, the stock will go up and, therefore, everybody will profit. Right. Thats a mistake. Because what youre doing is tearing apart a successful company. Right. Again the strategic decision of the of the company. There are spinoffs every single year. Some of which work, some of which dont. Some work, some dont work. Thats a management decision, not a decision for a hedge fund thats trying to make a profit. Is democracy bad for the boardroom . You have been one of the people who have said maybe democracy is not such a good thing. Democracy depends on who is making the decisions on what basis. In other words, democracy in the corporate sense is that shareholders vote and theyre the ones who control what a corporation does. But you sometimes say shareholders dont know what the right thing to do is. Im getting to that. I think indeed that there has to be a moderator in the middle. And thats the board of directors. And the board of directors should take into account not just the shortterm interest of the shareholders but the longterm interest of the shareholders and the interest of the employees, the customers, the suppliers, the communities in which the company operates. You cant have a successful Industrial Society if the emphasis is only on shortterm profits for shareholders and, particularly, shortterm profits for shareholders who are not longterm shareholders but find a situation, jump into the situation, agitate to create a shortterm profit and are gone. Tactical question then, one of the things youve seen companies do over and over again. When activists show up, they say were not going to fight this, were going to bring them under the tent, put them on the board, in part as a way to shut them up. Does that make sense to you. It does . Some situations, it doesnt in others. You have to gauge each situation on its own. Ive had several in which ive advised the client to invite one of them on the board of directors because theyve come up with an excellent idea. They work well on boards of directors. Theyre not disruptive. And in every one of those situations, the company has prospered, following their advice. Theres a story in the wall street journal this morning, the s. E. C. Is being urged in part by you, to shorten the window for investor tips. An investor makes a big investment, they have ten days to disclose it. You have said this is a horrible situation. It should be down to one day if not less because these hedge funds are able to accumulate all sorts of shares and potentially not control the company during this window. How short should the window be . I think the window should be one day, which is the s. E. C. Requirement right now when someone who already owns 5 and has reported adds to that holding. Were in a different world today than we were when the tenday period was adopted. We have all of the electronic ability to deal with the information thats necessary in order to file a form with the s. E. C. In one day. What kind of shenanigans are happening during this tenday period . Some hedge funds say if you can take the tenday period away from me, we may not make the investments. I think that will be bad for the hedge funds doing it, a good thing for investors. I think taking off the pressure from these companies will be good for Capital Formation and longterm growth of the economy. Marty lipton, thank you. I know this was your first and hope its not your last. Lets wait and see. Thank you. Joe and becky, back to you guys. Okay, andrew, thank you. I thought we located new video of andrew with gators. Im not sure were going to be able to run it. That bathing suit is a little bit too skimpy. Andrew, you have friends in the control room. Who are protecting you. Not letting joe do this. Apparently its from the movie we play a little from the movie jackass. Hes walking across a tight rope, he has a helmet on. Theres alligators. You cant tell its not you. Hes walking across a tight rope and alligators are jumping up trying to grab him. Were not going to run it. You would be okay with that. Except hes wearing a thong. Thats the problem. Later in the video, someone sticks a chicken down the back of of the thong. Search it on youtube. Were not going to play it anyway. People at home if they wanted to pretend we were playing it, they can pretend on their own. You thought it was okay. I think it was probably the right call not to run it. I didnt know about it. The mayor of new orleans on the revitalization of the big easy. Andrew has that interview and much more from new orleans in just a few minutes. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. Some Brokerage Firms are but way too many arent. Why . Because selling their funds makes them more money. Which makes you wonder. Isnt that a conflict . Search proprietary mutual funds. Yikes then go to e trade. Weve got over 8,000 mutual funds and not one of them has our name on it. Were in the business of finding the right investments for you. E trade. Less for us, more for you. The funds prospectus contains its investment objectives, risks, charges, expenses and other Important Information and should be read and considered carefully before investing. For a current prospectus visit www. Etrade. Com mutualfunds. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Our guest host today, Larry Bossidy, former ceo and chairman of honeywell. Who is a bigger threat, china or russia as it affects our economy . China long term. I think theres interesting stuff going on in china. The Production Index 48 which means the economy is slowing. You basically have a wobbly Real Estate Market. The third plenum outcome was to go after the stateowned enterprise. Corporate debt 213 of gdp growing 56 in the last five years. You had the first bond default. All of which says that theyve got some Tumultuous Times ahead and theyre not going to be growing to 7. 2 , although theyll tell the world they are. When the growth slows, its going to cause internal turmoil. Theres some effects in this market, too, as one of our big trading partners. Do you think its causing turmoil internally . I think its beginning to. Theyll get through it. They have big reserves. Theyll have tougher days. In terms of russia, right now they have the west in a very precarious position in the sense that germany, the closest significant power has 40 billion euros of trade with russia back and forth. So does the rest of western europe of lesser amounts. They dont want to rock the boat on the one hand. Our president , you know, has a Foreign Policy which is difficult to decipher. Hes just taking advantage of a situation. Thank heavens its crimea as opposed to something else. I think the best antidote is to see if we can unstabilize or destabilize the currency. That might happen. It isnt as an attractive investment place today as it was six weeks ago. He doesnt seem very threatened by whats happened to the stock market, whats already happened to the ruble. He will over time. He cant afford to say that he is. If in fact the ruble continues to fall and the market continues to fall and Investment Funds dont come to russia, its a onetrick pony over there, its natural gas and oil. If that gets weakened by virtue of some of the steps, hell be under the gun. Will he take more Desperate Measures in terms of cutting off the gas . Those are things he can do. Look at this guy is an exkgb guy. Hell fight back and do anything he can do to save himself. On the other hand, if you dont do anything, where is it going to stop . Right. So i think we have to we have to mix diplomacy and we have to take steps on the other. We have to let him know he cant do anything and get away for free as he did in crimea. Would we defend militarily. Yes, we would. This may reawaken nato. Its been dead on its feet for the last ten years. It seems to me it can get rejuvenated and also refinanced in the sense of military expand tur expanditures. Are we how are we militarily . Well, right at the moment were underarmed, undermanned, about to get worse. Are we . I think the Defense Budget will take rethinking as well. And, for example, i think we have to mobilize our navy. Because to a large extent its been demobilized. I think we have to raise defense expenditu expenditures, like it or not because i think this guy has the wherewithal to be incensensitiv they had the same incentive to fund defense at this point. When you talk to simpson and bowles. Is there a way to change the breakdown of where the money is spent . Do you think there will be political will in washington . On all three counts. I think we can spend it more intelligently. I think that will change the minds of some people. And i think the whole situation will get rethought. And i think there will be reallocation of resources to better places. At the end of the day well probably spend more money as well. It becomes crucial, not only to defend ourselves but nato as well. Larry, real quick, you have the skyscrapers and theyre all empty. You have these sports stadiums where no one plays sports or anything there. Its just growing quickly enough and theres enough people where theyll catch up with that. It wont be like a bus like we had, some kind of mortgage, a financial crisis . I think it could be. But no one does. Everybody thinks they slow down and theyre able to handle it. They have to do the tight rope towards more private property and more free speech and all that. They have so much to navigate. Joe, they have so much more control than we do in the central government. They can dictate things to happen overnight if they have to. Can a government ever, even that government, can it centrally plan things without screwing up . I dont know. I dont think they can. Also remember, their populous becomes more educated all the time. Theres internet. We have another guest next week. I think there will be turmoil and turbulent waters to navigate and theyll get through it but not without some pain. All right. Coming up, its been just over eight years since one of the deadliest hurricanes in history hit new orleans. The citys mayor joins andrew next to discuss revitalization projects and more. Coming up this weekend, join becky for on the money. Three days left to sign up for obamacare. Hear from the architect of the Affordable Care act, zeke emanuel. And his surprising predictions for the future of obamacare. Will you run the gator video on your show. Probably not. Sunday at 7 30 eastern time on cnbc. Squawk box is back after a break. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back to squawk box, were live in new orleans this morning. We have the mayor of new orleans. Mr. Landrieu good morning. This is one of the Fastest Growing cities in the country. This is postkatrina. A lot of old buildings, there were fortune 500 companies here before. Right. In terms of what new orleans is supposed to look like, in terms of the economy, how hard is it going to be to bring back Big Companies to this city . First of all, weve never been a place where there are a lot of big fortune 500 companies. In modern history we were a smaller, sleepy southern town. In 19 0, the city of new orleans was bigger than atlanta and it was bigger than houston. Over this long period of time, the numbers in new orleans were going down. Katrina hit, cataclysmic failures all over the place. Youre back at 80 . And now the trajectory is an upward, very steady, very quick incline. The city propers about 80 back, in the metropolitan area, closer to 90 the people are that are coming back, are not just the people that left after katrina. Theres a new thing going on the city. We took the catastrophe of katrina and to the peoples credit, they decided to build a city that should have always been. Were trying to get it right by making sure the fundamentals are in place. What kind of business goes on in new orleans then . The structures first, whats going to encourage businesses to come back. It has to have a Good Relationship with the business sector, the government. You have to have a School System that works, a Health Care Delivery system that works and infrastructure you can build on. Weve been digging down deep and going wide in all of those different areas. What you have is a much more entrepreneurial spirit in the city of new orleans. A lot of folks from across the country are coming in, starting businesses. This week is what they call entrepreneurship week. Were beginning to create an entrepreneurship culture. The School System is improving dramatically and so businesses are starting to come. You and i were talking a minute earlier about the new industry we built around film and movies and digital media. We did an 800 million book of business last year, thousands of jobs have been created. Theres a new vibe on the streets of new orleans right now. Businesses are not only going to come, were kons traying on growing businesses that are on the ground. Dare i raise the issue of crime . Sure. How big an issue is that. First of all, theres perception and theres reality. In terms of reality, new orleans in terms of Violent Crime is about 80 in the country. New orleans suffers from an epidemic of murder. Between and amongst primarily among africanamerican men who are shooting each other in the head over things that other people usually try to work out a different way. 88 of them know each other. That is a huge problem here, mayor nutter and i whos in philadelphia have created something called cities united. Were working with rahm. We saw rahm yesterday. All of those folks to drill down on this specific issue. If theres a perception of crime, thats a dissatisfier for business. We have to get ahead of that and work on it. Your favorite restaurant before we go . I love all of them. I will say this, i love to eat. Thank you for joining us. Good to see you. Dont we all. Thank you. Private equity player jay jordan, well find out why hes worried about a potential 25 drop in stocks. Thats right after this. Latte or au lait . Sunny or bubbly . Cozy or cool . Meow or woof . Wheels or wheeeels . Everything exactly the way you want it. Until boom, its bedtime. Your mattress isnt bliss its a battleground of thwarted desire. Enter the allnew sleep number classic series. Designed to let couples sleep together in individualized comfort. Starting at just 699. 99 for a queen mattress. Hes the softy his sleep number setting is 35. Youre the rock your setting is 60. That works. Hes the night owl. His sides up while youre in dreamland. 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We are live on bourbon street, talking deals and dealmakers with the head of m a for goldman sachs. One of the commissioners of the s. E. C. Who may be going after some of the biggest named activists in the business, the third hour of squawk box begins right now in new orleans. Do you know what it means to miss new orleans and miss it each night and day welcome back to squawk box on cnbc, first in business worldwide. Im with becky quick, im joe kernen and Andrew Ross Sorkin is in new orleans at a conference. Futures indicated up 41, 42 points or so. Walmart filing a 5 billion lawsuit this morning against visa accusing the Credit Card Company of passing along unreasonable swipe fees when shoppers used credit or debit cards at its stores. The wall street journal says it alleges the swipe fees went against antitrust regulations and turn up more than 350 billion for issuers over the course of nine years. Shares of walmart havent really reacted to this news. Down 5 cents to 76. 0. If you take a look at visa, i dont believe those shares have reacted either. Larry bossidy is our guest host. He says this could lead to lower fees. Amazon says it has no plans to offer a free streaming Video Service as it gears up for a news event on april 2nd. There are reports that its considering an ad supported streaming and tv Video Service to rival apple tv, which doesnt exist yet. The apple tv thats out there. And cbs outdoor america is pricing at 28 a share. The ipo plans to raise 5 0 million. Valuing that company at more than 3 billion. Cbs chief les moonves, they will be making an appearance on squawk on the street later this morning. We are watching shares of blackberry, the company reporting an adjusted loss of 8 cents a share. Stock is up. The 8 cents is what you must compare the 55 cent loss estimate to. Thats about an 8 gain in the shares. Thats much better than investors had been anticipating. Our next guest warned his investors of the market fallout a year before the financial crisis. Now he says he has some of the same worries that the fed picks up the pace of tapering. Jay jordan is the managing principle of the jordan company. Your comments scared the heck out of me. Im usually wrong. You shouldnt be scared. You said a potential drop of 25 in stocks. Its no the just stocks. Its all assets. Weve been living under the cloud of financial repression for the last four to five years. Now, that is a condition when the sovereign interferes in artificially manipulates the price of anything. The government, Interest Rates are a price. Its the price of money. Theyve manipulated this, two things happen. Theres a terrible misallocation of assets and number two, theres a mispricing of assets. When volcker did this in 1981, what happened . Financial and real assets depreciated dramatically. The tenyear bond traded up to about 14 . When he pulled off this repression, this manipulation, we had a 30year bull mark net bo in bonds and a bull market in stocks. Bernanke created a situation where hes driven up asset prices through the manipulation of Interest Rates. Theres a big speculation bubble out there. Youve seen it start in the emerging markets. Its facing us. The currencies are getting destroyed, theyre even complaining to the fed about this tapering. When this tapering occurs, im very afraid of financial and real assets are going to readjust equilibrium. That will only bring us back to it would be would go there and come back. It would bring us 25 would bring us back to the beginning of 2013 when the qe 3 or qe 2 started. It would be a round trip back. Right. Theyve inflated this up this much and when they take it away this goes down this much. Let me also comment no central bank has the experience of rebalancing a 3. 5 trillion Balance Sheet. Heres the other thing. When you take away all of this fed manipulation, there are people that think that the bond market would not be that different than where it is anyway because of how weak the Global Economy has been because of the financial crisis and the hangover caused by that. Even when we saw the fed start to taper, the tenyear initially ran up over 3. We see how weak the economy is and how do you know that it manipulated it that much lower than it would have been anyway. Dont look at the u. S. Based economy. Look at what happened in the emerging markets when the fed began to taper. Chaos. Even the leaders of brazil particularly were complaining about u. S. Manipulation of Interest Rates. Why do we think thats going to bounce back to us . 25 is just a number. Okay . I seriously believe that asset prices are seriously overguided. When you start sucking the liquidity out of the marketplace, what happens. The idea was always that the economy would pick up, it would fill the void. Take the baton. Thats great economic theory. Weve seen this lap, go back to 81. Go back to the price controls nixon imposed in the early 70s. This is financial repression, what i refer to as. There can be chaos. What do you think will be done to mitigate him . Obviously with the politics being what they are today, there will be every effort made to mitigate such a decline. Do you think thats possible . I heard what you said. There is a 3. 5 trillion fed Balance Sheet now. They say that it never went out, though. Thats what Warren Buffett says. It never went into the overall economy. My theory about stimulating the economy and abate some of the problems is the fed to start charging, take negative Interest Rates. Charging the banks to keep money. It will flow out and it will have an ebulent economy. This is based on an overall experience and being in the markets for over 40 years. I could do it on murphys law and based on no free lunches. The fed, bernanke is a feeling nice guy. Everything the smallest amount of pain that anyone was experiencing in this country, he felt like the fed had it upon themselves to alleviate the pain. None of the markets cleared. Even after the financial crisis, we tried to minimize the pain. Were in a new society where no one ever has any pain. They did it by opening up the spigots. People have said, the exit will be messy. This is an example of the exit being messy. Im partial to murphy myself. Right. It always happens. If it can happen, it does, right . The fed, of course, has a dual responsibility which is problematic. They not only have to main stain stability and Interest Rates but low unemployment. Every guy who is unemployed the fed feel like its their fault. Remember one thing that happens, corporations have never been stronger. They have more liquidity than ever before. Theyll have tools to use in the opposite direction, whether it will be enough or not is a fair question. Interesting point, larry. I think youre 100 correct. If you look back over the 41 crisises we have had since world war ii, not necessarily in the United States but around the world, the one single entity that was not distressed was corporate equities. Youve had pricing go down, corporate debt, the corporation, thats where you want to put your money. Yes. You have a risk of the market risk but did volcker really manipulate rates higher or did he allow rates to go where they should have been . I think he let the free market work, took off the manipulation and broke the back of inflation. Was that a manipulation or lack of manipulation. I think it was a manipulation. He brought rates up to 21 . Sure. Prime was 21. For good reason. For good reason. Did he that to stop inflation. Inflation is ultimately the worst task you can have, particularly with its regressive burden on the poor. We have to go. If you think this is whats happening, what are you doing right now . Not spending on anything because youre waiting for the big price drop to come before you buy . In 2008, 20072008, in our firm, we were very scared. We delevered. We were one of the few operate equity firms that had not one default, no renegotiation of covenants. We skated through it. Its all about leverage. Did you lever up since 2008 . We are not big leverage players. If we levered three times, our portfolio is not levered over three times. Are you out . Now is a good time to sell, sure. You want to buy, we have plenty for sale. What have you got for me . Its got to be one of your smaller things. I can talk to larry, we can put something together, maybe. You have a checkbook on you . I do but i dont have any checks in there. Larry has been one of my heroes. This private equity business is a treacherous business. We need the expertise of great operators because its a value add business now. Thats right. Those of us who grew up in the world of financial manipulation, were sign sodino 20 is a bear market. Youre not calling for anything thats absolutely unheard of. It would bring us back to january 1st, 2013. It takes away what you would call speculative fluff. Its a feeling from my point of view. In 08 you had a lot of data. You dont have as much data now except whats happened historically in terms of the fed Balance Sheet and what volcker did in this manipulation of prices, which i dont trust myself. I think once youve rebalanced and let market take over, its going to be chaos. Theres data there. It shows whats happening. And the hot money is leaving and coming into so it hasnt affected us yet. It could very easily and im nervous about it. I may be wrong. Im usually wrong about these things. I may be wrong this time. Im still quite nervous. Wow. You havent been wrong. Maybe we catch an alarm. Maybe we can go up 25 more percent and then come down. Myself personally, i went flat stocks six months ago. People say that was a dumb decision. No, its gone in where in three months. Nothing like cash to get you through. The dollar isnt what youd like it to be either. Right. Thank you so much for coming in. Great to see you all again. Great seeing larry. Ive admired you for years, larry. Thank you, jay. Maybe we can get you involved in something to bail us out. He could do it, the whole place probably. When return, we head back to new orleans. Goldman, the head of m a group, michael carr will join andrew next. As we head to break, check out the squawk box market indicator. [ male announcer ] this is joe woods first day of work. And his new boss told him two things cook what you love, and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. Welcome back to squawk box this morning. We are live in the big easy at the tulane m a conference where some of the biggest dealmakers come annually every year. Im pleased to have michael carr here, who is head of m a at goldman sachs. Good morning to you, michael. How are you, andrew. Im great. Thank you. Heres the big question pop you gave a presentation about where m a is going. For the past three or four years, we thought we were going to see a huge uptick in deals. How long does this go on for . Well, hard to say. But id say the following. Number one, for the first time we have three things that are in our favor. Number one you have ceos that are confident. That happened about 18 months ago. That has turned. Number two, you have a benign financing market. You have wide income fixed income markets. The piece thats different this year is shareholders are very, very receptive to m a transactions. Theyre looking for earnings growth. They believe m a can help generate that earnings growth, as a result theyre trading the stocks to the buyers up. A lot of the conversation has been about activism, the role of activists to Push Companies that they otherwise might not. Does that make a board scared to do a transaction or more apt to pursue a transaction . Thats a very good question. Up till now, its caused boards to hesitate. No one wants to be criticized. When you make an m a transaction, its a big decision. They dont want criticism. The environment is a lot less risky for companies to do m a. Theres been talk that activists, bill ackmans, carl icahns, dan lobes of the world, that activists are perhaps in cahoots or colluding. How much of that do you think is happening. Its not clear, its opaque. We dont have insight into those communication channels. I asked marty lipton about this. Part of the strategy tactically, to suggest to a company, bring him into the tent, put him on the board, that way we can shut him up. Is that the right or wrong way to do it . Whats your blanket strategy . How do you approach it . The first thing you have to did is do a bunch of selfexamination. Understand how an activist could approach you, make sure you scrutinize your organization from the Balance Sheet to the business. Make sure youre prepared. If they do happen to approach you, theyre shareholders. You should meet with them, understand their point of view and respond to their issues. What do you think is going on in washington in terms of the regulatory environment, the antitrust environment for big transactions . One of the arguments around the fact that we havent seen huge transactions is just that maybe washington for big deals is not open for business. Maybe thats a good thing, maybe thats a bad thing. Hard to say. I think its changing. I think the Justice Department, im not an expert on ftc and Justice Department matters youve seen big cases make their way through. I think most Company Managements are still very, very careful about anything that has to do with antitrust and Justice Department related transactions. How often do you i mean, behind the scenes, we see the deals that get announced and sometimes the ones that are rumored. How often are there talks beginning on between really Big Companies where people say we cant do this in this environment. It happens all the time. Companies are cautious. Last question, rob kindler, i talked about this earlier in the show, he said that private transactions, the move towards going private, that everything that can be done in the private market can be done in the public market, its a fallacy, a myth that it cant be. Where do you stand on that . I think theres a small fraction of companies, situations where going private is the right outcome to make large transitions in their organizations. I think for the vast majority of companies you dont necessarily need to be private to have the type of does that mean that shareholders should be pushing back . Yes, youve seen some of that in the last seven days where prominent investors have called for companies to provide growth. Back to you. Within we return, our guest host today, Larry Bossidy on the economy. Plus, personal income and spending numbers coming up. And later, spring is here and that means the Real Estate Market is heating up. The ceo of remax will give us an early season update. Squawk box will be right back. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. 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Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Lets get back to our guest host, Larry Bossidy, former honeywell chairman and ceo and cnbc contributor. We continue to kick that around, didnt we . I guess someone says 25 . Weve been talking about it for the last ten minutes. Gets your attention. I can go either way. I always can. I can definitely figure it out. Hes been four years, i was a broker in 1980. I dont think i was ever right about a top. Its much harder to figure out. This is a sage guy. He doesnt bolster, but hes been right. I question the depth of the decline. I dont think well go down 25 but he does make the point that we probably inflated the value of these assets and there will be correction. On the margin, wouldnt emerging markets, just because on the margin theyre much more sensitive to changes in the economy. Sure. I dont think that necessarily could be the evidence. Things do start there. Remember . When you put together all the emerging markets, its a fairly sizable market. Right. Theyve all shown distress in the last 18 months. I dont know if i agree with the depth of the 25 . You have to assume, though, then that improvements in our underlying fundamentals didnt justify where the stock market went. There have been improvements in underlying fundamentals. Consumer paying off debt, there have been things that have been youve never seen a recession and corporate earnings held since 2009. I mean, generally you see income of corporations plummet during those periods. They didnt plummet. I think corporations in america are in better shape than theyve ever been. Theyre prepared to withstand some pressure. Maybe if Larry Lindsey is right, if the economy stays stuck at 2 , because weve had false starts before, where its been stuck at 2 for five years, maybe the market is ahead of itself then. If the economy were to get to 3 , would you say 1850 on the s p is all fed, all orchestrated by the fed . No, i wouldnt. I think its been orchestrated to some extent but not to the extent that price level would suggest. You look around the world. You mentioned to jay at the end of the conversation, were still the prettiest house on the block. Right. I mean, in terms of other issues and nations western europe, eastern europe, who we know have plenty of growth problems as well. I understand thats a problem for the developing nations. It makes more sense to me. It does. Were not trouble free. But if we could get a government that would take action on thing that are crucial to our future, wed be dramatically better off. Where would fed funds be if the fed was not holding them at zero. 3. 75. Would there be the demand . No know. Thats my guess. I dont know if there would be the demand in borrowing to get it up that much higher than it is right now. Thats true. There isnt the need to borrow. I dont know if its manipulated then. If you had a 3. 75 fed rate it would indicate the economy is better and there would be more investment and more demand i would argue. It seems like the fed had already started pulling back. A lot of the rates didnt move. The chinese we heard the chinese juan was manipulated to pull back. Its supposed to be higher, instead it drops. In terms of widening the band by 1 , which they did a couple weeks ago, it did decline. Well be back, breaking news. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. announcer scottrade knows our and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back to squawk box. February read on personal income. Up 0. 3. On spending, up 0. 3. Expectations for both was up 0. 3. Any revisions to last month . Nothing on the income line, which remains at 0. 3. So 0. 3 are wild. On the 0. 4 increase in spending last month, that did get lopped in half to up 0. 2. We can go through some of the internals. I dont know if theyll move the market much, pce deflator up 0. 1. Thats where its been running and expected. On a yearoveryear basis, were up 0. 9. That is cooler than the last look which was 1. 2, down close to expectations on the core monthover month up 0. 1. You get the picture there. The biggest news for the week continues to be how little change in the initial shock that flattened the yield curve a week ago wednesday by the fed, remains intact. As a matter of fact, we havent done much work below 1. 70 in a fiveyear note. Pay attention to that. It was 1. 54 before that statement. The long end is a different story. There seems to be buying there. Whether its against arbitrage and overseas, yield curves, whether its an implication of a recession, believe me, theres people talking about that type of interpretation of the curve. I would suffice it to say i do agree theres international arbitrage. But softening on the Global Economy. I dont know if u. S. Recession is in the cards or not. Back to you guys. This is one of those instances, rick, where you always say if the markets arent going where they need to go based on what they want to do themselves, its hard to make any interpretations but a flat yield curve when were supposed to have 3 , for the year, you know, thats troublesome. Troublesome trucks, isnt it . It is troublesome. You brought up the salient point you always do, joe. Not only is it difficult to interpret the yield curve with all the influences, its impossible to judge where fair value was or ought to be, so thats even more of a rearview mirror, because of all the affects of the playing around with the test tubes and the leaches by all the worlds Central Banks. The other debate, you get this, the people in the water splashing, meaning the people playing the markets now, or is it how much water is in the pool already in terms of what the fed or Central Banks have done or what they already own . It really gets pretty difficult to figure out your gps. I just thought, rick, the bond market behaved well after we tapered. I act like its terminal pricing, like weve tapered. They are still doing 55. Every month, theyre still on, arent they . Both faucets are still on. We will get down, they say, to where the faucets are turned off. How does a stock market react when the faucets are turned off . Listen, yesterday the fed bought 4. 2 billion in securities. In addition to, of course, auctioning off 29 billion on the sevenyear. They continue to be players, maybe at a slower rate. It just it never ceases to amaze me how, you know, the fact that were doing 55 billion a month now is considered, you know, minuscule amount. To me thats far from a minuscule amount. Im under the impression that were tightening now. 55 billion a month. So that scares me with jay jordan, too. He says there will be a day of reckoning for all of this. I dont know if you saw him, rick. I did. Believe me, there is a day of reckoning the issue is the game will get pushed longer into extra minutes, over time, extra innings and any traders possibly imagine. I remember the guy trading the puts in 86, 87 within 88. Mr. Jordan was spot on, repression is one of the big words down here. Ira and i have been using that word ira harris that you talked to many times for probably 3 1 2, 4 years now. Hes spot on. Well, i dont want 25 to come off the stock market, rick, im sorry. We need to go up 30 before that happens. You know . Anyway see, thats what they did, though, they wanted to build it up so when it normalizes it wont feel so bad. Right, maybe thats it. Did you fill out a bracket . Or thats not your thing . You know what, i didnt want to put too much pressure on mr. Buffett. Hes getting enough flack from other areas these days. We didnt even make it through the first round. You knew that. That was the easiest bet in the world for him. It was. I know. I love insurance executives. They certainly im not just talking about mr. Buffett. I dealt with a the lo of Insurance Companies when i was in the business. If theres a product they can sell you that has virtually no chance of dinging their own payout portfolio, theyll find it. Do we have that shot of warren . I think we got a shot of him, we took that picture right after he had written i dont know if we have that. The smiling shot . Yes, the smiling shot. Hes got the biggest smile in the world. I know its right after someone paid him. Hes like, youre joking, right . Joe, who are you picking now . Florida. Florida. Okay. I have kentucky. Thats weird that you picked kentucky. Because of last year . No, because they have the best they werent any good until they played wichita state. Theyre all freshman. Theyre all Getting Better. A couple games going forward, theyll be there for that. Maybe if they unionize theyll stay for four years. They might make more money than they make in the pros. It might be good for college sports. They shouldnt be permitted to go after one year. I dont think so either. Two years maybe but not one. Up next, have home sales stalled . You know who i love . My heart is with ira. I love the way they play, dont you. Yes, i do but my heart is with connecticut tonight. Theyre going to lose tonight. Well have i areal estate assessment, thats coming up next. Within we come back, well talk to one of the commissioners of the s. E. C. And ask him whether we have broken any laws. Squawk box coming back right after this. Alright, that should just about do it. Excuse me, what are you doing . Uh, well we are fine tuning these small cells that improve coverage, capacity and quality of the network. It means youll be able to post from the breakroom. Great did it hurt . When you fell from heaven . awkward laugh . A little. laughs im sorry, i have to go. At t is building you a better network. Remax earnings out after the bell yesterday. The Company Reported higher profits for the first two quarterly reports since going public last year. Joining us now is margaret kelly, director and ceo of remax. Congratulations on the results but will you just address the notion that affordability is something we need to deal with here that could we need housing to get to 3 . If affordability becomes an issue and that stalls, well have trouble and people are going to be wrong about the gdp this year. How is affordability . And is it affecting sales . Affordability is at a fiveyear low but its still the fifth best in history. Rates are going up a little bit, prices are going up a little bit but when you look at it over a 30 or 40year historic rate, its still tremendously low. Is this were coming into the sweet spot. I have some selfinterest in house selling and things like that at this point. Are we coming into when people do things . Where will the interest peak . Does it start april 1st. It usually starts in march and april. Again, it depends on whether weve seen a slowdown in pending home sales and closings because of weather and tight inventory and also some tight lending. We usually go into april through about september. Because a lot of people want to move, they want to buy a home while their kids are out of school and get established before they start school again in the fall. Margaret, Larry Bossidy. Is the recovery uneven across the country . What are the hot spots . Im sorry. Say that again. Is the recovery somewhat uneven across the country . And what are some of the hottest Real Estate Markets . Well, weve seen that colorado, texas, minnesota, actually their prices are at equal to or above prerecession highs. Areas like florida, arizona, nevada who are hit so hard before are actually still 20 below what their prerecession highs were. We see recovery spotty as far as home prices, but theyre all beginning to improve. What is this . These are a bunch of double negatives here. The national Real Estate Market has a low supply of homes for sale. But yeartoyear inventory losses continue to shrink. What does that mean . What it means is we are slowly gaining inventory. Right now were at about 5. 2 months of inventory. And 6 months is considered equilibrium, equal buyers, equal sellers. Were at about 5. 2 months. A year ago we were at 4. 6 months. Were slowly gaining that back. For a couple reasons. Home owners who as prices increase are no longer have negative equity in their home. Now they can sell their home. That addsinventory. Were beginning to see construction pick up again. Housing starts are at 900,000. As that all adds to inventory, its a good thing for us. We have a lot of buyers out there. Okay. Then its not what you would think. In other words, supply and demand would say if theres too much inventory, then it would be a buyers market. It can help sellers if theres more inventory. It indicates that the markets better because theres fewer houses under water then . Right. As prices go up, theres fewer under water. Right. Okay. Then it makes at fordability harder. Its all these sort of crosscurrents. On a scale of one to ten, is it a good time for the Housing Market and whos in the drivers seat, buyers or sellers . Right now its pretty equal. I would say its a little bit on the sellers side which is unusual from the last five years weve talked about. Inventory is low. Prices begin to go up. We are seeing in california, florida, areas that are hardest hit, were seeing multiple offers, were seeing bidding wars because people want to get those homes. Its leaning towards the sellers side. Okay. In new york, in manhattan, is as hot as a pistol . Always, right . New york and San Francisco always seem to weather it well. Theyre not you know, theyre not making anymore. Theres mountains blocking things out in San Francisco. I thought it was funny the first place you mentioned in colorado. Im thinking a bunch of stoners. How about minnesota . Why minnesota . It just is. It didnt go down as much in the recession but, come on, im in colorado right now. I had to say it. Its the warm winters in minnesota. Oh, yes, thats it. We understand colorado. Everybody wants to move there now. Margaret, thank you. Thank you. I dont know if id want to be the first state, you know . You get the reputation that youre a bunch of stoners, right. Thats your age group. The Younger Group think its a wonderful happening. It was basically legal anyway, wasnt it most places . It was available. Lets say that. Not legal. As a parking ticket in most normal it had been decriminalized in most places. Youd have to go to shady places to get it. Why are you asking me . I went to school in colorado in fact, i thought it was legal in the 70s. What, its just now legal . What. The s. E. C. And deal making, commissioner Dan Gallagher will be giving the keynote speech at this years m a conference. Before he does, hell be speaking to us on squawk box. And coming up this weekend, join me on the money. Youll hear from the architect of the Affordable Care act, zeke emanuel. If your employer gives you health care, be concerned about what he has to say. Thats sunday on cnbc or check your local listings. Squawk box is back after a quick break. [ male announcer ] there is no substitute for experience. For what reality teaches you firsthand. In the face of danger, and under the most demanding circumstances. Experience builds character. Experience builds confidence. And experience. Has built this. Introducing the 2014 glk. The engineering and the experience of mercedesbenz. See your authorized dealer for exceptional offers through mercedesbenz Financial Services. [ male announcer ] youre watching one of the biggest Financial Services companies in the country at work. Hey. Thanks for coming over. Hey. [ male announcer ] how did it come to be . Yours . Ah. Not anymore. Its a very short story. Come on in. [ male announcer ] by meeting you more than halfway. Its how edward jones makes sense of investing. [ male announcer ] by meeting you more than halfway. Could save you fifteen percent or more on car insurance. S Everybody Knows that. Well, did you know bad news doesnt always travel fast . clears throat hi mister tompkins. Todd . Youre fired. Well, gotta run. Geico. Fifteen minutes could save you fifteen percent or more. Welcome back to squawk box. Live in new orleans at the biggest m a conference of the year, the tulane Law Institute and i am here with the one of the commissioners of the s. E. C. , Dan Gallagher. Good morning to you. Thanks for having me. Thanks for being here. For joe, can you get in on this tie . We talk about great ties. This is a tie that has a bull going up and a bear going down. Nice. For those keeping score. I know you always enjoy that. Youre right. I dont own any. I happen to have one on. Thats great minds, andrew. Thats cool. Pretty cool. Apparent lu you had to get it on ebay. Yes, you cant get it in the stores anymore. Lets talk about activism. You made a speech really looking at activists and whether all are created equal, also the issue of democracy in the boardroom. Thats right. I talked yesterday about a subset issue of activism, which is the shareholder proposal process. Not one that the big activists tend to use but its one that really has an impact on Corporate Governance. You think that certain activists little guys who dont have a lot of skin in the game shouldnt necessarily be allowed to make proposals the way activists who have a lot of skin in the game do. I think you should have skin in the game if you are going to make a proposal. What we found the number of proposals is going up every year, that the commission has to expend a lot of resources and companies spend a lot of money. Is it fair for carl icahn who has a lot of money to make the proposal and the little guy doing nothing . Thats the real issue. This is a subset issue. Carl icahn isnt typically making shareholder proposals they are using other methods in their activism. This is an area where some gadflies, some smaller investors, are using a process where the thresholds are low and they are causing management, companies, to spend a lot of time and resources to address them. The s. E. C. Needs to readdress the rules. The where do uf stand on High Frequency trading . The problem with High Frequency trading right now theres a perception for the little guy that the markets arent fair. That perception to me is a reality. Something we need to address. I get the arguments on both sides of the debate. Liquidity provision by the High Frequency traders, right . Right. You know, the nefarious nature of some trading strategies. Identify understand that. Ive been calling for years now for the s. E. C. To begin a wholistic review of the equity market structure. Its gotten too automated. And its gotten automated because of our own rules. And i think well do it this year, andrew. The other issue the s. E. C. Looking at reducing the amount of time that hedge funds and other investors have in terms of the disclosure process about their investments. Right now its ten days. How many days should it be and does it go to the system feeling like its rigged . Weve got a lot of legacy rules. Sometimes congress mandates that we look at these things, the jobs act was about rules we hadnt looked at in years so what the right number is, i dont know. We havent paid attention to this issue quite frankly since ive been a commissioner. Do you think the jobs act will be a good thing . The ipo market is definitely open. I dont know if thats a function of the jobs act which changes some of the Disclosure Requirements or if thats a function of the market being what it is. A year, two, three from now are we going to see the ipos that will all look like duds, i dont know and well raise questions about what this was all about. I have a time predicting these things but i think the jobs act is a great thing. The use of the confidential filing process has been a tremendous success. Tech Companies Feel comfortable testing it out, sending their filings in and i think thats great. Weve had a real success there. Crowd funding. Rega i think its terrific. I wish wed gotten to it ourselves but, you know, huge bipartisan bill. Theres an article in the New York Times about bill ackman doing a lot of lobbying in washington over herbalife and it feels like not necessarily strictly lobbying other shareholders and investors but lobbying regulators and this goes to the little guy who thinks he doesnt have a say and doesnt know whats going on in the corridors of power of washington the same way the big guy does. What do you do about that . I think theres an umbrella problem that activism and the politicization of Corporate Governance is taking up way too much of our time. This is a new avenue that folks are using whether its going to congress, whether its petitioning for a rule making at the s. E. C. Look at dodd frank we have rule makings mandating the disclosure of minerals in the congo. Thats not something that the average investor cares about and certain groups do for good reasons but is the average investor being disadvantaged by the pet projects of a certain few . I think its possible and happening and i think its something s. E. C. Needs to Pay Attention to. Insider trading always a big issue on wall street. We were jutalking about the wo of wall street at a dinner. Do you think its gotten better . It seems like it may have gotten worse in terms of the headlines were reading about it or are you just catching up to it . Theres a long gestation for these cases. Some of the cases i worked on for chairman cox, you know, back in 20072008, it takes a long time. The networks are incredibly complex. The good things weve got a lot of interest from the criminal authorities are who are Getting Better information. I think we have to assume its never going to go away. Last question dodd frank how much is left too much. In terms of implementing . 400 dodd frank in the statute and 100 to the s. E. C. And we have over 55 left to do at the s. E. C. That can take years and years and years, we need to comply with the law but weave in our what is the most important of all those on the table whats the one you think matters most that hasnt been addressed . The removal of references to Credit Rating agencies in our rule book. We have a couple material ones left and it has something to do with the financial crisis unlike the rest of dodd frank. Thank you for being here this morning. Really appreciate it. Back to you. All right, andrew. Well be back and talk to him before we leave. And make sure that you keep it locked right here on cnbc, moonves cbs president les moonves and jeremy male will join david faber to discuss the Outdoor Advertising ipo market and guarantee david will ask les about the rest of media as well. Squawk box will be right back. 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Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. All it takes is one guy. Larry, we have three days supposedly until the deadline for signing up for the Affordable Care act. There have been some extensions. What do you think about it . I think its been very unfortunate for the american people. This act has been modified 38 times already in terms of waivers and deferrals and loopholes and so nobody knows what the act is. Its a shambles compared to what it was when it was announced. Even the core of the bill the individual mandate now has been postponed for two years, so you think at least the government would say, okay, were not going to change it again so people will know at least what it is now and can anticipate what their decision should be as opposed to seeing it changing every day. They said yesterday they reached 6 Million People having enrolled. They didnt tell you how many of those people are uninsured and thats an important statistic. How many are young. What was the mix between the young and the old. The young people need to be in there to pay for the old. Theres a suggestion that didnt happen to the extent apparently 15 to 20 havent paid their premiums yet. So, i think its, you know, when you look back at it, you got to say even trying to look at it in a balanced way its one of the worst constructed legislation packages i think you think its going away at this point . No, i dont think its going to go away. Larry, want to thank you very much for being here today. Always a pleasure talking to you. Thank you, becky. You got zeke emanuel on your show and he says surprising things about whether you know, how long employer plans are going to be around. By 2025 he doesnt think they will be essentially. Well watch that and your interview. Me, too. Make sure to join us monday. Squawk on the street is next. It feels good yeah it feels good good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the new york stock exchange. Busy friday morning shaping up. Three ipos capping a busy week for new issues as you know. Blackberry earnings, more news about a potential iphone 6 launch date. Futures are higher at the moment. Ten years a shade below 27. Personal income and spending was in line although they were jitters in europe. And the roadmap begins with blackberry reporting