Personal spending was a disappointment this morning. We begin with the first trading day of the month after a monster february. With an eye on nasdaq 5,000, will the momentum continue into march . Warren buffett on the record on the economy, ibm and the news that these were places amex as costcos credit card partner. The biggest acquisition in tech. Exclusive with the ceo of nxp in just a moment. And after lots of leaks, it is official hewlettpackard also vying Aruba Networks 2. 7 million when you back out the cash. A bit below the stocks close on friday. First up futures are mixed as we begin a new month of trading. China cut Interest Rates for the second time in just over three months. Here in the u. S. February was a pretty nice win for the bulls. The nasdaq up more than 7 . Its best month in three years. Dow up 5. 6. S p, about 5. 5, each posting its best february since 98. Interestingly, last february was also the best february since 98. So the pattern to the years has been pretty good for the second month. People take profits, then they come back and start buying unless the stocks get knocked down. Candidly, im mesmerized. I have to say it right up front, becky quick, unbelievable three hours of Warren Buffett. I keep thinking about hes talking about the long term versus the short term. And february was great. Its just the kind of thing where he basically says look youve got to stay in. If you got out in january because january looked so good, you missed february. So just stop trading at over time. It was just a fabulous fabulous interview. It felt so great about owning stocks after that interview. And one of the things you really got was dont go in and out. You would have missed some month. Absolutely. And talking about the economy, he says its been 5 1 2 years. 2 real growth in his words, not all that bad. Right. Housing hasnt come back as quickly as he thought, but autos came back faster thaenn he thought. Yes, and he does own Clayton Homes. I just love this one. Everyone has to read this note this weekend. The preachers of pessimism pralgds endlessly. I love the writing about americas problems. Ive never seen one who wishes to emigrate. Although i thought of a few for whom i would buy a oneway ticket. Hes the master. Brilliant. He really is. The in which he calls berkshire the gibraltar of american business. Goes through all the business lines. Its essentially a treatise on the modernday conglomerate and why berkshire is able to do things that others couldnt do. Great using the Balance Sheet, what a couple dozen people in the actual main office. I was thinking about david when he just basically says this idea you build a conglomerate that you shrink to grow and its been investment feed. You buy, you spin off. You buy, you spin off. But there are moments in this thing, there are very few people as candid as buffett. He says Burlington Northern underperformed versus union pacific. Hes not just saying that. He talked about how he blew the Tesco Investment. I mean this guy is just basically saying i am so not good. I bought i bought dexter for 440 million. I had to write it to zero. It belongs in the guinness book of records for the worst financial disaster because they got stock and they ended up with 5 billion. This is just masterful. Yeah. And of course, a lot of focus on the letter in terms of his successor. Right. 84 years old. Munger. Looking good on five cokes a day, had strawberry ice cream even this morning. That diet may be the new one to keep you going. Interestingly, that munger is the one that mentioned these two, and they dont see each others letters before its published. They dont change anything. Again, he did not tell us. My friends who are in the Insurance Industry he is the king. If you take a look theres so much about insurance and how great the Insurance Business is and how the deals that he makes. No one wants to make the deals that he makes. And he gets the best return. He is responsible for the float. A lot of the exercise in the letter is explaining the float as his main advantage versus other investment managers. And this ajit j achltain, if he becomes the head of Berkshire Hathaway, i think hell do fine. Floats gone to 84 billion in 12 years. 12 years. Its doubled. Staggering. Thats the base of that earnings power. Right. And i think that mr. Jain is a competitor. I know that he is considered a shark in the business. He comes in he wants the whole deal. They talk about the size of these deals that he does that are just monstrous. A Big Insurance Company might just say, listen i want you to reinsure all of our business. Typically to be divided among many reinsurers. And underlined throughout this letter is weve got the Balance Sheet, and a lot of that Balance Sheet comes from reinsurance. You want to go through some of the Big Investments . Sure. Lets do ibm. I like it he says. He likes the buybacks the move to social. He says one misconception is people think we dont like it when a stock were buying goes down. Well he bought more. And the fact is he did buy more when the stock went down. Now, it is still trading, i believe, below his average purchase price, if im not mistaken, but he is extremely large shareholder there with over 11 billion position. Right. Now, i think its important to remember he loves the buyback because it ups his stake by nature. I also feel i talked david had this great interview with the ceo. Look, if they can pull off this transition, if they can become social mobile Cloud Security data analytics, then Warren Buffetts going to be right. If they cant pull it off, then it could be like the Tesco Investment that he made. Then its a shrink to grow. Yeah that was a shrink. Yeah thats a shrink to shrink. It would be a shrink to grow. I think its jump ball. I dont know if ibms going to pull it off. That doesnt mean theyre not. Im just saying. They have in the past but it is not an easy task particularly given the competition ibm faces in various businesses. Right. But his endorsement is not unimportant for that company. No its very big. And remember, i have felt that if they didnt spend so much money in the buyback, maybe they could do a bigger acquisition a splonk Something Like that. Not added but would very quickly change the mix which is what they have to do. Ibms been very humble. Warren buffett these are really humble people. The reason i am saying that ibm may not pull it off is because ibm is not saying, listen, its a slam dunk. Theyre saying anything but. So i feel like if theyre reserved about it, i have to be. Deere, he said faces several tough years ahead. Something right up front. Exxon confirmed their exit. Also called it one of the greatest investments in berkshires history. But there are other ways one of the themes through the letters is that he finds new ways to deploy capital in a better way. People are buying deere, buying deere because hes buying it. Hes basically saying im lowering numbers. Deere, it doesnt matter its a great manufacturer. You would not buy deere. He made the point over and over again, dont buy because i bought it. Go buy an index fund. And i think that made sense because he did leave exxon. He did lose money in tesco. American express has been a terrible performer this year which is one of his big ones. So there are you know, hes saying, look my perspective is a 20 30year perspective. If youre trying to gain me or hes not going to do that. I have to admit, American Express, i am surprised this morning, again this costco deal goes to visa. Yes. And that is a very bad thing for American Express even though theyd say listen were not going to give business away. 70 cents of their earnings power. Youre still reeling from that, frankly. Would never have bought that stock for my trust. Everybody was blindsided. Never would have bought it. Had no idea it was this big. I thought it was much smaller. And buffett wants to take a longterm view. Theyre buying back stock and thats great. There are issues when you lose a lot of your future. You basically are an americas best client the moment they do that. And this was bad. Yeah. And i wish the company had been more forthcoming and saying dont worry, theyre raising rates on small business. Buffetts confidence in it makes me feel better but i would feel more confident had i known how important costco really is. Visa will become the new credit card network. Citi will be the issuer of the cobrand of credit cards. That amex deal goes back 16 years. In korea suddenly amex has got a foothold in korea. Obviously American Express felt they couldnt come to terms. This is one where a lot of people feel wow, we didnt know how important it was, and double wow, why did you do it . We mentioned the macro viewbuffett. Take a listen to this. Its gotten a lot better. And incidentally, 2 even 2 real growth is not at all bad. I mean if you think about it if population growth 1 and you have real growth of 2 thats 20 in a generation. He mentioned some average Household Income numbers. 100 and some odd thousand dollars. Obviously, its not equally as divided, but that got pushback this morning. Right. I also thought it was great when he said our bluecollar borrowers for Clayton Homes turned out to be a lot better than some of the wealthier borrowers. Theres a lot of theme throughout this about good underwriting discipline disciplined capital management. Disciplined across all areas. And then pulling back the moment its not disciplined. And i think that he has great faith in the common man. And i know thats a term that sounds condescending. I dont mean that at all. There is an undercurrent about the Great American worker and how that person is a very responsible individual. I dont know. I felt very good about america after reading this. Maybe thats what he was trying to do in some ways. Its very hard not to feel better about america after you read this newsletter. When we come back the ceo of Nxp Semiconductor on his deal to buy free scale, biggest tech deal in the u. S. Since facebook bought whats app about a year ago. Hell talk about hp buying aruba. The dow hasnt fallen in march since 2008. And it was down by 3 points that year in march. A lot more squawk on the street is back in a minute. Ple a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. At ally bank no branches equals great rates. Its a fact. Kind of like shopping hungry equals overshopping. Dutch chipmaker Nxp Semiconductor has agreed to acquire free scale for about 12 billion. Kayla tausche is here along with the ceo of nxp. Good morning. Were happy to have the ceo with us fresh off of the Conference Call this morning, talking to investors. An 11. 8 billion deal one of the biggest ever in the semi space. Im wondering how long did this take to come together . Why did this happen now versus any point in the last few years . You know the real opportunity is with the progress that weve made over the last few years with our capital structure gave us the ability to think about much more significant transactions to really bring together a true powerhouse in the industry. And so thats what allowed us to really be able to do this. A lot of the investor discussion this morning centered on synergies. Youve called for 200 million in year one, 500 million after that. And then potentially revenue synergies down the line. How feasible are those targets to hit . So its very clear, it doesnt require a lot of hard work. Its more support and g a functions. Its not really anything thats significant, any program killing. Its really the ability to Grow Together and bring the fundamental Core Technology together. Rick this is an amazing deal and the stock correctly is going up. One of the things i loved about it, you own the pay business. You really do. This is the auto business. I look at freescale from the motorola basically, the origins, they were the first transistor on the radio. This is about internet of things. Its about devices. Together, what will the Company Look Like and how will it dominate versus the rest of the industry . So clearly well be the number one Automotive Semiconductor manufacturer. Well bring a complimentary Product Portfolio together that will really make a difference with the automated driving in the future and driver assistance to make driving safer. But even on the other side well be able to bring our security and their processing capability to address the internet of things going forward. Where we can drive a solution for our customers thats really very powerful and very safe. You also theres such a host of connectivity. I dont know if people understand the regular viewer even the semiconductor people because you know there was a semiconductor who was very negative on your stock, but you are the connectivity semiducter player. We are. And you know our focus has been looking at beyond smartphones and tablets, the opportunity for the connected world and bringing security to that. So that transactions can be safe. Your i. D. Can be protected, your wallet can be protected. So really the value for us is providing that security and the safety associated with it. The stock is up sharply, as jim alluded to as a result of your cost synergy targets, i would argue, as much as 500 million. What about revenue synergy . It will be significant. It wont be for the first couple of years just because of the nature of the Automotive Design wins and some of the development of the internet of things. You go out a few years and its an opportunity to increase the revenue by. The point of this deal is to be number one in the auto space. The combined company will have a 13. 7 market share. But any time you talk about being number one in a market there are regulatory concerns. And thousand people are starting to wonder how much revenue will you have to sell to actually get this deal done . Whats your stomach for that . So the only real issue that we have we believe we have a regulatory issue is is in the rf power amp business. And so combined we basically cover that market. So we believe that to be able to get the Regulatory Approval well have to sell our business. By selling our business we can do that before the closing so that we can be in discussions and take advantage of that to facilitate the Regulatory Approval. You said on the call this morning youre already starting a process. You have a couple interested bidders. Any price point youre expecting that to go for . Its too early to say. Its a relatively small part of our business. Its not a critical part of our secure connections activity. Its really more on the infrastructure side. So it really gives us the opportunity to really think about it. And do you need Regulatory Approval in china . We will. We will. And i think thats the reason we have to do something specifically on our highperformance rf business to be able to address that. 10. 75 piece of paper that freescale has. Its still at a couple hundred million. Can you just wipe that out tomorrow . Theyre actually planning to pay that down before the close. Theyve talked about paying that down in the past. Over the next few quarters theyll be able to take care of that. Theyre going to need a shareholder vote creating one of the largest players in a couple different areas. One always wonders given that possible somebody were to come over the top or make a bid for you. Given this is a consolidating industry, i do wonder what your thoughts are. You know, for us, its really about bringing the value for our customers and shareholders. We feel very comfortable that the value we can create the synergies and the ability to really address the customers with a very significant strategic bid will play out well. Is there more deals to come in this industry do you believe . I think so. Its a consolidating industry when you think about the intellectual property requirements and the efforts associated with it and the large investments to be able to support that i think its only natural that the industry continues to consolidate. Just a quick note on your field, communications, which you dominate. I know theres a customer its very difficult to talk about them. Ill mention the name apple. Do you see the world going toward apple pay . Do you see the world abandoning other ways, and can you get into a walmart with that . I mean some of these retailers are fighting. So you know were the leader in mobile payments. Whatever form it takes, you know, weve actually announced the android pay in china, working in china aggressively to be able to address that. In the u. S. There are some retailers looking at other alternatives. I had a banker who told me he changed where his prescriptions were filled in new york city because the other organization accepted apple pay, and the up with he was using didnt. So as that happens, i think youll see all the retailers really accept apple pay and move forward with it. A lot of tailwinds moving in your direction, rick no doubt about that. Im wondering where freescale is concerned, 60 of that company right now owned by private equity sponsors. About 20 , i believe, of the combined company. Do we have any reason to believe they wont just sell when this deal gets done . I dont think they will. Theyre really focused on the value opportunity and the opportunity to create value going forward. My understanding is theyre excited about that. And so we clearly believe that its a real combination that will make a difference and be