tv Squawk on the Street CNBC January 18, 2013 9:00am-12:00pm EST
i don't know this song either. young blood hawk? you know what song was playing last night, the song on oprah. >> rebecca and barry for the last word. you've got 15 seconds. >> i still think japan is going to move further. china in particular. for those people looking at export stocks, don't forget switzerland. the swiss franc is having a big sell-off now that europe is stabilizing a little bit.
>> you need a watch. >> yes, davos. >> i think the fiscal drag is underestimated the timing is overestimated. capital spending recovery. >> we'll take that to the bank. join is on tuesday. have a great weekend. inauguration day. "squawk on the street" begins right now. good friday morning. welcome to "squawk on the street." i'm melissa lee, with carl quintanilla, jim cramer and david faber. dow looking to add about 16. the s&p 500 looking to add about a third of a point here. yesterday, of course, the s&p closed at five-year highs in what is notable, transports, airlines, housing and cyclicals all at 52-week highs. in europe, juiced by china data which we'll talk about. a mixed wag over there. signs of the rally here could continue. china's gdp topped estimates,
general electric beats by a penny, caterpillar catches an upgrade from piper. >> morgan stanley showed improvement in investment banking. the latest decline of the pc, intel trading lower on its earnings with a pop in cap x spending. >> reuters says sharp has nearly halted production of the ipad screen. r.i.m. gets an upgrade from jeffries. that is sending shares soaring. >> the morning after the s&p 500 hit another five-year high, the dow ended the day short of a similar milestone. fourth quarter gdp came in above expectations. general electric seeing growth in china.
revenues beating forecasts. the link here between ge and china, jim, of course, industrials, the margins were great. hitting on all cylinders and the forecast for 2013 also very strong. >> there was an analyst meeting a month ago and there were reports that was subdued. this is not a subdued this morning. countries with natural resources spending again. china definitely decided that. also, many, many articles today. i don't get it, how this is still a financial company. this is the least i've ever seen it be a financial company in the time i've been following general electric. i think that whole wrap is being put to bed right now. >> it is still a significant portion of earnings. less so than it was. when we looked back at '07, it included nbc universal as well. the rest of the company was bigger, yet it was still 50%. >> leverage is lower, the risk
is lower. it's just kind of a -- it's going toward a united technologies -- >> still, it would be the fifth largest bank by assets in the world, 50,000 employees. it's still not as small a piece of the business that they would eventually like it to be. >> it's much pr run, takes much less risk. this stuff's expensive. >> yeah. >> the order backlog, 210 billion. >> didn't you love that? >> up sequentially from the third quarter by about 7 billion. couple that with the gdp out of china, people are beginning to wonder if the industrial play in the fourth quarter is true. >> it's clearly turning in china. electricity usage. pmi, chinese numbers -- it really is an interesting moment.
i think the electricity can't be phony. there's a couple -- just the words, he's talking about great momentum. this is a different kind of talk than we've had in a long time. >> he said there was an investment pause in the fourth quarter amongst corporate customers, presumably the fiscal cliff and the uncertainty is going to be under the year that took its toll. now going into 2013 in the fourth quarter, that's extremely positive. >> the only way to read it. as unmitigatedly positive as the analyst was, remember, the stocks recovering what it had where people said, maybe it's not that bullish. >> thesis upgraded by the cap over at piper. price target 113. concerns about china inventory, mining demand, overdone. they think plus the strong macro
there all adds up for an upgrade. >> cat pillar, i was thinking the market would be go into 2013, i think his numbers are still too high. this is an excellent thesis. market's going to look right through that. they're going to look at the second half of 2013, into 2014, and they're going to buy the stock. maybe i'm too skeptical. maybe this market's powerful enough people say, you know what, they cut numbers, but the second half is going to be good. it would be a different thesis looking through numbers to get to the other side. >> no doubt. listen, i think there are some who are probably surprised at the strength that was potentially evident in the fourth quarter. we'll see. >> confidence? >> what it might have been had there not be crisis after crisis dealing with the debt ceiling. >> you said last night, you've got to put on a yogi bear costume to make sense of it.
>> returning a lot to shareholders. >> one wonders. >> $12 million they're talking about. >> they have been increasing, of course, ever since the huge cuts that had to take place. what is it going to be now, four years ago, right? >> that period, $6. >> yeah. >> march of '09. amazing, coming up on the four-year anniversary. >> do you ever worry about your paycheck? >> yeah. i think you worry about money you had in any bank account or anything. sure. ge was to cushifocused in the ff '08, that was the moment where it could all come to -- >> that was after the ge bailout. >> sorry, not to revisit the -- >> we have to remind people where we came from. tim geithner leaving, david faber is worried about his
paycheck. >> speaking of paychecks, let's talk morgan stanley. wall street firm reporting fourth quarter earnings 45 earlier on squawk, james gorman said his firm is poised to improved market environment. which shows a lot of promise if uncertainty is removed. take a listen. >> $90 billion is sitting there waiting to get into the market. if we see confidence coming through from the political sector, the global economic recovery, this thing has legs. >> guys, barring what they called a terrible quarter in commodities, a lot of things working in their favor. margin goals being met, all that. >> i want to talk about something that david faber said, came on air and said the different stories, there was a lot of chatter on the web, they said the company was in big trouble. you said they were dead wrong. i almost gave him credence on air. i apologized to mr. gorman about that.
that was a very good call. you knew that there were rumor amongers that were spreading things that weren't true. >> we were in the mid stl of the european crisis, we're certainly not in the midst of the same crisis. any exposure you had to the sovereigns were seized on. morgan was suffering from that. that was a while back already. >> how did you know it was okay? >> how did i know? >> yeah, how did you know? >> i try to do as much reporting as i can. >> as opposed to people on the web who were saying it's bankrupt. they didn't do a lot of reporting. >> it doesn't appear that they did. >> that's the web. >> it's important for people at home to understand how stories happen. there's someone perceived as legitimate on the web, saying that mr. gorman can't go to every person -- >> to every blog. that would be an endless job. in terms of the optimism,
expressed by mr. gorman, this is a pivot point for morgan stanley. they demonstrate leadership. equity and sales trading, and to your point yesterday, david, the future of fic, that may be in question, because those results were pretty much flat. the question is, do you continue going down this road with a unit that's not necessarily pulling its weight in this business? >> right. commodities in particular i think this quarter. but again, especially given we saw the shareholder reaction to ubs's decision to hold back from the very businesses, ubs having similar profile. morgan stanley, let's not forget, it is an asset manager more than anything else at this point, or a wealth management company with all those brokers. they're going to be taking full control of that joint venture. >> yeah. they met their margin goals for wealth management. they've been in the news regarding compensation, gorman
said they're done with job cuts for now. but there are still, in his words, sporty compensation packages on the street. regardless of how these bonuses are being spread out. >> i like a guy who comes on and says, we didn't do a good job and gives a line item. i think that was terrific. >> let's talk about shares of intel, those shares are falling in pre-market. the largest chipmaker 27% decline in fourth quarter profits by weaker demand for pcs. projecting a bigger than expected increase in capital spending for 2013. jim, it was aparent in tracking the after-hours action in intel, what was funny is the intel release came out a couple minutes before the closing bell, which is sort of weird. but that's an aside. the stock initially popped on the numbers. when they started talking about how much they were going to spend on cap x and op x, that was a huge red flag.
basically they said we're going to spend this money this year. >> this is a nixonian call. i thought intel was reduced to a pitiful giant by analysts. there was an open rebellion at one point. i also felt at various times they had to address the fact that they really are a good company. i hate the defensiveness. this is my theory on what's happened to intel. they have adopted a customer is always right attitude, but it turns out the customer was wrong. they had the wrong form factor, the wrong device. there was a moment in the call where it took my breath away, where paul said, they're talking about the fablet. this is a great american company. i'm like, you know, i actually said, i feel bad.
>> they might have the wrong customers. if they have pc makers -- >> i know apple -- i did think this call was -- it was -- i mean, it's literally, are you guys getting any bang for your $10 million in research and development in 2012? they got the israel one going 24 hours. >> and chipotle. >> i shop and i go to factories. >> i have to tell you, this was an intel that was -- we're not as bad as you think. we're not as bad -- no, guys, have some pride. you're great. >> it seems at this point, jim t is a show-me stock. >> oh, is it ever. >> was there any mention of who might replace ottolini? did you see that in the transcript of your call?
>> no. >> what is the strategy for intel? it will spend a lot of money next year. the chip prices, by the way, for smartphones are higher than average in the industry. that may be a sign it has limited penetration in this space. and by the way, there's going to be a new ceo coming in, and we don't know who that is. >> they're talking about a hockey stick fourth quarter that is going to do worldwide macro. that's a shame. because i remember in the conference calls that andy grove used to run, they weren't a macro play. they were a growth play. and stacy, who is a great guy, he says, listen, wait a second, we've overcome the weakness of the tablet business. we still jen rate $6 billion in cash flow. we paid over $1 billion in dividends. we're generating plenty of cash. the defensiveness was painful. >> and to put a period on it, i saw a headline this morning that ottolini is going out with a
whimper. they're going to name a successor any day now. >> andy grove, craig barrett, titans. go back to the steve jobs, talking about the stodgy intel. there's a funny moment where andy grove basically told him to shut up. but there is a sense that intel didn't move fast enough. at one point they're talking about, listen, our battery life will start exceeding the arm. put on your apple hat, all right? they would rather do business with samsung's chip, even though samsung is their biggest competitor, than switch to intel. >> what are we missing? there's uniform negativity here. we'll look back on it at end of this year and say, wait a second, we should have thought of that. >> don't throw that. >> that pc was bad, and they had
every right to go out the window. all right, i've calmed down. >> there's no hope? >> anytime you have that budget, you can do it. i like stacy very much. it's a great manufacturer. there's hope. >> okay. >> there's hope. same level of hope. silver lining theory i call it. >> okay. when we come back, a wall street analyst known for being a longtime bear on netflix. and from textbook reynolds to the linked-in for college students, we'll talk to former yahoo! ceo. [ "i'm only human" plays ]
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tech names in the spotlight this morning. apple, reuters report said japan sharp has halted nearly all production of the screens for the ipad. that comes as demand shifts to the smaller ipad mini. meantime, research in motion is up pre-market. it is getting mega bullish. jeffries' words for the blackberry 10 operating system.
apple trading at $500, $498 is where it looks to open. and let's talk about these reports. we certainly had a lot of reports about supply chain checks that indicate the component orders are down. for this particular report, what reuters is reporting sharp is saying is there is a switch from the ipad screen to the ipad mini screen. but there's also the possibility that perhaps apple just switched suppliers, isn't there? >> you take a company like this, they spent a fortune to develop a new apple -- building apple products, okay? they were never allowed to mention it was apple. it was entirely because of the apple plant. when they got the business, they weren't able to say what made jabil better. we don't know. jabil, you couldn't get it. you couldn't get it on the record. they're spending a fortune. this has become a parlor game of
guessing about apple suppliers. it's a parlor game. that's what people do now. >> is it worth doing? to all the different cross-currents and different information. how do you end up at some conclusion -- >> i think this report is incremental to the reports we've seen. i don't think it should make you think that the sales for the ipad mini are significantly lower based on this one supplier. they could have switched to another suppliers. there's not enough information from this one report. >> right. my associate put together a list of downgrades. it was like all the people who put the price target up and had good things to say, took the price target down had bad things to say. this is a highly emotional situation. it's not a caterpillar where the numbers are really bad and people love it. it's a company that everyone
tries to have something to say every day. that gets tiresome to me. it's tiresome. >> we'll talk more about the r.i.m. call in a minute. how do you go long ahead of the long weekend? cramer will put you on the right path as "mad dash" is next. a lot going on today. we've barely covered all the companies we need to cover. we'll get to it. still two and a half more hours to go on "squawk on the street." don't go away. ♪ ♪ ♪ [ male announcer ] don't just reject convention. drown it out.
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favorite names. >> you know how much i believe in the company, both ubs, and wells fargo say it could be a better than expected quarter. you know this had become shockingly a dog of the dow. this new ceo getting focused on promotions. this could propel the stock back to where it was. so many people are negative on mcdonald's, and i think it's back and i would encourage people to take a hard look at this because it's not an expensive stock. >> no worrisome parallels to chipotle. >> that's one of the most amazing things, it's almost as if chipotle's got -- remember, mcdonald's and chipotle are old friends. they're seeing things that mcdonald's isn't. mcdonald's is a global company. you may have a headwind of the stronger dollar turning to a tailwind. you know something, carl, wouldn't it be terrific if that
great american company could make money again. i want to be a buyer of mcdonald's. >> walk me through this one. >> container board, the package is like, amazon, this is perhaps the most sensitive to the economy commodity in the world. ip took out a lot of capacity. ip is a genius. this company's had an unmitigated run. capacity's constrained, prices going up, 95% of capacity. that is like -- you can put the price increase after price increase, that says the economy is much stronger than expected. this is the first commodity to raise prices big when things get better. they're raising prices consistently. very bullish. >> that is a great, great tell. still more to come this morning. get ready for an ipo hat trick, sunco energy partners, norwegian cruise lines, all making their debuts this morning.
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you're watching cnbc's "squawk on the street." the opening bell set to ring in just about one minute's time. morgan stanley, again, those results, it looks like morgan's going to open at a new 52-week high, after a pretty nice run. this could help the spire financial sector in today's session. the leader in this most recent run-up. >> i think it adds credibility. there's a very nice comment this morning about goldman sachs. i think goldman is a rise in time. i think m & a is going to be the big tailwind for 2013. >> you know, people are perhaps a bit shell shocked from previous years. the rest of the year was in the doldrums. maybe they're underestimating. i am hearing there's a lot of activity. but a lot of activity doesn't always result in deals, as we
well know. but there is a lot of activity. >> and signs of life if the ipo market. there's a couple that we'll be watching. [ bell ringing ] >> very interesting thing happened. this is very much like the old days in a bull market. at $19, priced above the range, it is a bit of a premium for carnival. they're saying, listen, i don't want the norwegian that's raising all the ships, and i think it's rather amazing. >> lifting all the boats, literally. >> well put. lifting all the boats. >> get it out there.
>> too heavily shorted names. we talked about the netflix upgrade, which we'll have tony on later this morning. jeffries says the fact the corporate e-mail will be allowed to run on iphones and android devices is underspreshtd. obviously the high short squeeze. they believe carriers have agreed to a commitment on volume for the first couple quarters post-launch. so is this even now a more dangerous short than before? >> i think the carriers want very much to have at tis to androids and to apple. it's very important for them to offer the panoply. they want to pick now and then these different suppliers. >> although it hasn't really helped in terms of the subsidy that they're providing, in terms of apple. one wonders if that battle is yet to come, if apple continues to not have the lock on market share, perhaps the level of popularity. will verizon and at&t start to say, push back a little bit. >> how the at&t last night,
meaningful? >> the pension, $10 billion to the pension. meaningful, is that what you're talking about? >> yeah, was there any insight from cell phone subsidies? >> nothing new there as far as i'm aware in terms of the subsidy side. the bigger announcement, $10 billion charges resulting in the -- >> the stock trade d hideously after hours. it's actually positive. >> in terms of the study, the drum beat of good news coming in, just this past week or so, earlier in an upgrade from charter after a big two-day rally in the stock. and even earlier this week we had the blackberry 10, the manual leaked that. that got people all excited about the launch. this is a sell the news kind of event? >> you go back to what happened with r.i.m. the company reported the quarter, a lot of it because of cost cutting. they laid off a lot of people.
and it got it very low. now it's taking at a level is a good quarter. i think this has become one of those stories that people say, they have all these subscribers, the keyboard's interesting. i'm sure someone's going to slide over with the levitation thing going now. oh, i remember when r.i.m. was at 70. this is bull market behavior. i'm not saying, listen, it's crazy, but these are stocks that people remember, wow, r.i.m. used to be much higher. it's almost like where it was verifies that it can go higher. i don't like that kind of analysis. just not as powerful. samsung is powerful. there's a very good article in the paper today how samsung is trying to outguess their specs. samsung is the best. the biggest and -- well, this story was the best. i love my iphone. i'm not going to change it.
they're not going to get me to change. >> we can try. >> that's an endorsement. >> you will have to pry my cold dead hands off my iphone. >> really? >> do you use siri? >> i'm there for you. >> are you a snooze? do you hit the snooze button? >> yes. then it follows with you, and then you really wake up. >> you better get the heck up. i'll come to your house. i'll come to your house if you don't get up. >> wow. that's frightening. i'm getting up. >> what's amazing, there was no people, they were able to work on saturday. it was fantastic. i'm not irish, so i can't step in at all. >> there was one in ireland and
israel? oh, i got it. >> israel was the -- >> they're trying to show me that the plants were open on saturdays. they were able to do the fab plant, for the new 486, without any people. talk about automated. >> that takes me back. let's do a little visa. what do you say, really quick, before we get to bob. cutting to neutral saying card use likely de sell rated in q 4. >> short that one at your own peril. wow. >> but would you go long? jpmorgan, which is visa's largest issuer, had suspending data. customer increased spending by 8.8% in the fourth quarter, down 11%. that sort of gives credence to the notion that customer spending was down in the fourth quarter, maybe transaction volume was also lower. >> mastercard, which is going to be pulled down with visa, and i
think mastercard the ultimate paper-to-plastic. i'm still reeling from donahue and what he's accomplishing with paypal. i think mastercard is a very good company. >> all right. well, from visa to bob pisani, let's see what's moving on the floor this morning. bob? >> we've got our third master limited partnership this week. sun coke energy, looking at 19. that was the low end of the price, 19 to 21. these are master limited partnerships. three of them this week. and of course, the attraction is the juicy yields. this is about 8%. three of them, that's pretty impressive. i think, guys, we're still at 19. that's what they priced that at the open here. we'll let you know here. we're still waiting for norwegian on the nasdaq. that will be a little bit of time, though. i'm glad the banks are down. we're now in the earnings season. big multiindustry, multinational industrials. these are the guys you want to
get your hands around. four of them reported, all of them beat -- a couple near 52-week highs. i think rockwell should be at 60.86. i think that's a 52-week high for rockwell as well. they make the stuff you don't see, all the stuff behind the walls of this building, these guys are involved in. they're involved in industries across many different lines. aerospace, industrial uses, heating and air conditioning systems, automotive systems and through different dozens of companies. you get my point. they make all the stuff that runs the world. those are the people that you want to follow. their business is improving, you know things are getting better. we opened at $19 on rockwell, i believe. thank you very much. excuse me, $19 on suncoke energy. the important thing here about them is what they were saying here this morning. so ge emphasized growth in
china. they have been using this for a while now. the cfo was talking about strong orders in aviation over in china. health care, power, water divisions helping their bottom line out in china. what i want to hear about is growth in the second half of the year. we need top line growth from these companies. we're still not seeing it. generally johnson controls came out and said we continue to have confidence in our full year guidance, even though they said at the first half of the year they won't make as much as last year. there's back end assumptions in some of these companies. but the main earnings themes from these four companies, still on cost reduction. that's what they'll be able to control. the ceo said he's increasingly confident he can meet or exceed financial expectations. i'm still looking for top line growth in these companies. big moves in the asian companies overnight. did you see japan's up there. japan, best day in 22 months, folks. china gdp, better. suncoke open for trading. i mentioned that. down 2% right here at $18.57.
japan, again, biggest gains in 22 months. investments there on fire. all the etfs there are getting very large inflows in the last couple of weeks. speaking of inflows, did you see stock mutual funds? inflows for a second week in a row. this is according to lippert here. stock, mutual funds, most since april of 2000. i got excited last week, i'm really interested now, but we've got to keep an eye on that. guys, it looks like there's really some interest in this group. suncoke, $18.67, pricing at $19. back to you. >> thank you. endless search for yields. the partnership has been a great source. rick santelli is in chicago. hi, rick. >> thanks, jim. two-day chart of ten-year gives you the picture. yesterday was a pop in the
equity markets. issues in europe. we touched at the top of the closing yield range around the 190s. here at 180, we're basically down several basis points on the day, but unchanged on the week. you see a boom very similar, pattern yesterday was a little bit different. it accelerated a bit to the downside and the yield in the mid-160s. this is a catch upprocess, so to speak. now, if we move to the foreign exchange side, bob was talking about what a great day japan had. and they did, unless you were long their currency. you can see, hey, we've breached 90. if you open the chart up, 30 months to the summer of 2010, it's been 30 months since we've had any closes with a 90 handle on that cross trade. does it end there? no, i could show you a variety of currencies against the yen. we'll pick the one we've been
talking about for weeks and it's been a home run, the euro/yen. we're not at the best levels of the day, but it is a friday. at least on trading floors, fridays have something in common. usually a little evening up with the markets. maybe look for some of these currency trends to run out of gas at least on a day trading basis. >> thank you, rick. don't forget the lift on china, gdp. sharon? >> the gainer here, leading the gains in the commodity sector based on that data out of china on growth industrial production, also keep your eye on what is happening in terms of the precious metals. we're looking at gold prices that have dipped a little bit here. not able to meet that resistance at the moving average. but silver continues to take off here. silver is actually the gainer for the week. the biggest gainer in the commodities complex for the week. we're looking at silver,
actually silver coins running out of the u.s. there's so much investor demand for them. that's the story a lot of traders are talking about this morning. we're also keeping an eye on the wti oil price after it hit a four-month high. there have been a number of factors traders are talking about that is influencing the oil market. the fact that the market is a bit tight. the saudis cutting production a bit. they're also looking at the fact that the u.n. nuclear inspectors saying the talks with iran failed. that may also continue to lend support to the oil price. we'll keep an eye on the volatility there. there's probably going to be a lot of it. expiration next week as well. >> thanks very much, sharon epperson. we want to direct our viewers' attention to like technology. competes in the same sector as alumina. that market cap growing today after the company came out and said its board has retained
deutsche bank to assist in the annual review. this comes after a story in the national post, the canadian paper, that said that the company was looking at the potential alternatives including an lbo. i'll tell you what i know, because i do have a bit to share here. a couple of months ago, i ran into this rumor as well. tried to run it down. and did get the sense that there was maybe at least a dipping a toe in the water by the company, to see what might be out there. both on a potential lbo, in terms of financing, equity check, price, and maybe strategics. but didn't hear of any specific process or anything else, and actually backed away from doing a report at that time, jim, because i just -- at least based on what i was able to get ahold of, i didn't feel there was enough to warrant doing a story at that point. but the large shareholders here, and i know a couple of them fairly well, are very positive on this company. i know you've had the ceo on a
number of times on "mad money." growing very quickly, they say 65 lbo, forget about it, there's not a chance i would vote in favor of that. that's 12 times, but not nearly enough. i would rather they just increase their turns of lempvere a little bit and buy back stock or pay us something and keep going here, because they believe there's 10% potential organic revenue growth for the future of this company, jim. therefore, they would not sell unless there was a much higher price. as for strategics, ge, danaher, and roesh, all thrown into that bucket. >> david, this is the jewel. if you go to any of the big biotech companies, you'll see, like technologies, equipment, i always thought the alumina would never happen. the most recent iteration is a killer.
this company is, without a doubt, worth a tremendous amount, as an earnings play. far more than you might -- i think you would be cheating the investors if you capped it at 60, 65. i think this company is maybe one of the great technology companies of our time. i think danahur, to the upside, likes testing measurement. this company is doing work with life sciences, with embryo banks, with things that are just so blow away, that people want gene sequencing. this is a real company. it is an american company and it's great. >> amazing what the revolution that's under way. you'll be able to take your dna with you on your ipad. >> that's exactly them. >> keep in mind, if you pencil out the numbers above 65 for an lbo, it's pretty tough. here there is not a large shareholder who is going to roll
everything in with even more money outside. let's keep an eye on it. interesting situation. certainly wanted to point it out. the stock up almost 10%. >> coming up next, apple's recent slide, due to investors being dissatisfied with their own lives. and the ceo of zylinx. the early movers here on wall street.
this is a hot space over the past year. royal caribbean, up 30% in the last year. carnival up 11%. the point cramer was making earlier, it looks like the higher anticipation of norwegian is raising the expectations, maybe the valuation expectations for the others despite the big runs. >> people still taking vacations. one of the things that we try to gauge at hotels, cruises, things are stronger around the world. europeans love cruises, by the way. i continue to think europe is coming back. i know that's contrary to what a lot of people think. >> you've been right more than wrong. >> thank you, sir. >> you're welcome. >> cfo of ge saying we're here to support dreamliner. the big question yesterday was would boeing start to sell the suppliers, we know we want to ramp up production aggressively, given what's happened.
would that change. apparently that is not the case regarding ge. >> you know, at jim cramer on twitter, boeing management pushing boeing engineers before -- i don't know if that's true. i will say this. boeing, the stock, acts as if this thing's going to be fixed rather quickly. >> major reversal in yesterday's session. major reversal. that's a positive sign for investors. >> they're saying how they're dangerous, computer overheated. the faith i have in boeing here is unqualified. >> again, sharon saying boeing has not changed their orders for engines for the 787. the ipo friday, simon hobbs is at the nasdaq this morning. >> we're waiting down here at the nasdaq for first trades on the norwegian cruise lines. al polo rushing it through the ipo process. do i here 15 times over
welcome back to "squawk on the street." we have january reads. 71.3. this is a big miss. this is a big miss. we're coming off of a 72.9 mid, we're coming off of -- excuse me -- 72.9 final read on december. so you can see where this kind of falls into place. remember, if i have to go back and my come ms are all 82.7, 82.6 in october, i have to go quite a ways back to get a weaker number. it looks like we're going all the way back to -- whoa -- december of 2011 to find a lower
number. december of 2011. so remember, why is this important? because when it started jumping in the 80s, it was an essential argument for some of the activity toward the end of the year. will this foretell the activity earlier in the year? i don't know. we'll monitor this throughout the day how it affects the session. >> early look at the beginning of the year, rick, thanks so much. "six in sixty" this morning. >> chatter all over the place maybe this company is going to be a takeover. i totally disagree. it's an earnings play. the best oil company in america. >> capital one. >> a tough conference call. this was a not great quarter. >> web bush takes waste management. >> believe me, this is a construction play. don't forget they have huge, huge facilities in the new york area. >> downgrade for css. >> i don't know when coal will start going down, but they keep taking it down with it. >> schlumberger. >> not a great quarter. blow out the quarter, that's how
you get the stock rolling. >> it's been a big week for herbalife. >> on tuesday they were going to come back in and start buying stock. some of these bigger hedge funds will be with them. one of them actually really liked the quarter yesterday. >> how are you going to close out the week tonight? >> i've got first horizon on. i have to find out why the quarter didn't look as good. maybe this's a side to it. i don't know, the stock is down bad hi. let's see what they have to say. >> play-off picks? >> i feel that it is going to be the falcons. >> wow. >> i think it will be the falcons. and i still -- i know that the ray lewis -- it's so true there's psychological karma factor. you cannot beat brady. belichick, he drives me crazy, the best there is. >> they make it look so easy. have a good weekend. >> thank you, buddy. you, too. norwegian cruise line
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let's get to the road map for the next hour this friday. we'll start with technology. another dose of bad news for pcs. shares of intel taking it on the chin on the back of the earnings miss. negative commentary, a big pop in cap x spending scoops the street. >> full alert today as we await norwegian cruise line's first public trade. we'll be joined by the norwegian ceo on a first on cnbc interview. >> the current president and ceo of cheg, dan rosenweig is here. >> we've got breaking news from the federal government. senior economics reporter steve liesman has the story. >> the fed is supposed to release this morning the transcript from 2007. those are the ones where they tell you who said what during meetings. an unusual amount of attention to these, because this is the first response of the federal
reserve to the crisis which you remember began in the summer of 2007. what are we going to be looking for? what folks were saying in three emergency meetings. three rate cuts totaling 1%. and of course, there was a big debate, inflation versus response to the financial crisis on august #th. putting out a statement saying the main concern was inflation, three days later the federal reserve said it would provide reserves as necessary to combat the financial crisis. here's why this is going to be historically important. the first declines there in 2007, then what we'll do is overlay inflation on this. you can see what the fed was dealing with at the time. you had rising inflation at the time. at the same time you had a financial crisis. carl, we're going to be looking for the response as we begin to really write history for the most important financial times
in our history. >> steve liesman. the cdc is out with the latest data on the flu. bertha coombs has the details on that. >> now 48 states reporting widespread flu activity. the rate of pediatric deaths of children 29, a week ago, up from 20 the prior week. a lot of those deaths coming in the southeast, the middle and in the midwest. as far as the rate of doctors involving the flu, a little sign of hope there. that rate continues to decline. it seems to have peaked in the week that included new year's eve. and it has peaked it appears at 6% for the second week. it remains lower in the 4% range, 4.6% for last week. so perhaps a little bit of a light at the end of the tunnel. back to you. >> that is good news.
by the way, bertha, we'll talk to the president of the new york presbyterian about those trends and the flu season going forward. norwegian cruise line awaiting their trade. simon hobbs live at the nasdaq. >> they're still trying to pair up the initial trades here. i have to say, on the indicative price that we have, remember, it was priced at 19, the indicative opening trade is $25 a share. that would be a 30% leap at the open. we haven't gone through that process in its entirety yet. it is, of course, an important ipo. the third largest cruise market operator here in the united states, after world caribbean and carnival based out of miami. they're raising just under half a billion dollars through this process. a huge amount of stock put on the market in order to pay down debt. big ships arriving in new york. 4,000 passenger ships. big question there, have they actually paid for them yet. more on that with the interview with the ceo as we move through
the show. back to you, guys. as the earnings parade marches on, morgan stanley out with a beat. mary thompson has a read-through on some of the numbers including what ge said in the conference call this morning. >> morgan stanley's investment banking business, upsetting disappointing results in its fixed income unit. reversing a year-ago loss, morgan stanley earned 45 cents a share from continuing operations. renew rose to a higher than expected $11.5 billion. james gorman saying the firm's restructuring efforts are set to pay off. >> i believe we've done it. i feel very comfortable with where we are as an organization. we'll obviously -- if the markets completely collapse, you would revisit that. but from what we expect and what we're seeing, we feel good about the structure we've gotten. that's part of what i'm going to talk about this morning.
>> dporman looking to cut an additional $1.6 billion in expenses over the next two years, after cutting $1.4 billion in the last year and a half. all without additional layoffs. cfo told cnbc she's focused on her current job, said she is cautiously optimistic going forward, citing improved client activity in europe and asia, and a pickup in equity underwriting. fixed income commodities and currency remains a problem child for morgan. revenue missing expectations, weakest performance since 1995, disruptions to the oil and gas units by sandy and weaker than expected performance in credit. right now, carl, i have to send it back to you. >> mary thompson joining us talking ge. again, morgan stanley, the comments from sharon about ge, about margins and industrial growth, and also the dreamliner getting attention today.
>> simon? >> there is a lot of back slapping here. we've got our first trade on the norwegian cruise lines. remember, the indicative price range was $16 to $18 a share, they priced above that at $19. now it's open at $25. so for those that are selling at the open there, it is a relatively small float, a huge initial profit. and this will be real good news for apollo, which is the venture capital part of the ownership structure. they basically rushed this ipo through very, very quickly, within a week, maybe ten days, in order to capture the higher valuations that you have with the likes of royal caribbean or carnival. they didn't even do a european road show. they just kept it focused on the united states. i'm told, the rumor is it was 15 times over subscribed. that strategy has worked exceptionally well for them. they raised just under half a billion dollars. the capitalization here is now 3 1/2, maybe $4 billion as a result of that open.
we're looking for an interview with the ceo imminently, guys. >> look forward to that, simon. turning our attention back to intel shares, dropping this morning. the company posting a loss on q4. let's bring in craig burger managing director with fdr capital markets. great to have you with us. >> good morning. >> the fear about how much they will spend this year, is that a reason for the stock to go down 6%? >> that is a reason for the stock to be down 6 prsz. they're spending $13 billion in capital. even $11 billion for this year, following $11 billion last year, it's a lot. it's going to pressure gross margins in the coming years. it's not a today problem. but with no pc unit growth to spend that much capital, is a little concerning. >> let's delve into the numbers then. you say that based on 2013 guidance, you are expecting some sort of a bounce in pc shipments
in the second half of 2013. will that help at all? >> the macro is baked into their guidance. it will help a little bit. you're still looking at pc unit growth this year between 0% and 5%. 5% being the good case. and so the company's annual depreciation is only $7 billion. now they're having two years in a row at $11 billion and $13 billion. that depreciation is going to go up, pressure gross margins down the road. the real concern is, is there enough pc unit growth to fill that much capacity. investors are skeptical. >> on the other hand, you know, in terms of their mobile strategy and their chip pricing there, some other analysts out there were highlighting the fact that the prices on those chips are actually higher than what some of the competitors out there are charging and the way they interpret that is there is limited penetration in the markets because these markets in particular are very competitively priced. there's a premium essentially for lower priced chip in these
particular devices. is that the way you analyze that? >> well, i mean, there's cellular chips where intel's progress is minimal. they need to do a much better job. qualcomm is winning the cellular battle for smartphones and tablets. in the core pc business, where intel still owns that market, what you're seeing is a lot of the lower end pcs that people would purchase, are now becoming smartphones or tablets. so those purchases are not happening. that's the unit growth that's not occurring. and so the remaining mix of business is a richer mix of business. that's because all the growth units at the low end are going to tablets, ipads and smartphones. >> the other question mark on the stock is who's going to be the ceo. any thoughts there? is it possible that whoever is named ceo eventually will in fact be some sort of a catalyst for the shares? >> that is possible. the ceo departure was a little surprising, when he announced that he's going to be leaving in may. i think he had two or three
years left on his term. i know they're looking at internal candidates like stacy smith and rene james, a couple candidates. i don't know what direction they're going to go yet, because it was a sudden announcement. i'm sure the board is doing a lot of work. no matter who the ceo is, the fact remains they're having challenges in cellular and smartphones and tablets and that's the way the world is continuing to move. >> and your last topic in the space, craig? >> topic in the space, for this year, i'm picking broadcom. they have a broad ip portfolio and still have room for growth. >> craig, great to speak with you. thanks for your time. >> thank you. still ahead, norwegian cruise lines opening for trade. twins. i didn't see them coming.
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vaccine shortages. is it a sign the worst of the epidemic is over? robert kelly is the president of the new york presbyterian hospital. welcome. >> thank you for having me here. >> the data would appear to be somewhat encouraging. so much worry about the number of visits early in the season. does the fact that the visits appear to have peaked for now? does that mean the worst is over? >> we're hopeful that the worst is over. it's clearly a time where there's still a lot of patients coming in with influenza. we've seen in our hospital the last couple days a decline in the number of inpatients with influenza. but we still have a tremendous influx of patients coming into the hospital. it's really sort of taxed the entire hospital system. we have patients in our emergency room, have crowded a lot of patients in the emergency room. we've used a lot of techniques to accommodate the influx of patients we've seen. >> are you seeing at least at press, are other hospitals, those extraordinary measures
that some have taken, are they beginning to pull back a bit? >> we're not pulling back yet. as i said, we've seen a slight decline in the last couple days. but we want to make sure it actually starts falling considerably before we pull back. we've got additional staff on board. we've opened up additional units in order to take care of these patients. we've created new protocols in our emergency room to tri to triage them so make sure they're not mixing with the other patients. those policies will still be in place for the next couple weeks likely. >> in kitchens, and offices around the country, people are still talking about whether to get a vaccination, right? >> yes. >> they can start as early as october. if you haven't gotten a shot yet, is it too late? >> no, it's definitely not too late. the influenza season can actually go for as late as may. so there's still a long, long time to go with this. we're encouraged we're seeing a decline right now. this could take off again in
another couple weeks. so absolutely not. there's still time to get a vaccination. i would strongly urge anyone to get a vaccination. it's the best way to prevent the flu. every year it varies from year to year, we have not had a whole lot of shortages. i think there are more spot shortages than global shortages. but they don't produce enough vaccine for everybody in the country. if everybody does want to line up to get vaccine, they will run out. but right now there's still abundance of vaccines to be given. >> what if you haven't gotten a vaccine yet but think you've already had the flu this season. is it too late? >> no, it's not too late. the flu actually morphs. the flu virus is a clever virus. it will change itself to adapt to the aggressive as possible. so it really changes. getting the vaccine, even if you think you've had the flu is still okay.
>> you've certainly opened the eyes of some certain co-anchors of mine, who have not done their duty. >> i would strongly encourage them to get vaccinated. >> dr. kelly, appreciate it. >> thank you very much. i guess i know what i'm doing this labor day weekend. norwegian cruise lines just opened moments ago. with the spark miles card from capital one, thor gets great rewards for his small business! your boa! [ garth ] thor's small business earns double miles on every purchase, every day! ahh, the new fabrics. put it on my spark card. ow. [ garth ] why settle for less? the spiked heels are working. wait! [ garth ] great businesses deserve great rewards. [ male announcer ] the spark business card from capital one. choose unlimited rewards with double miles or 2% cash back on every purchase, every day! what's in your wallet? [ cheers and applause ] how did i know? well, i didn't really. see, i figured low testosterone would decrease my sex drive...
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welcome back to "squawk on the street." we're live from the nasdaq market site, where we've just watched the creation of over $1 billion in value. norwegian cruise lines ipoed at $19 a share. and opened above $25. taking it with a 30% premium to a market capitalization just shy of $5 billion. joining me now, the ceo of norwegian cruiselines, kevin sheehan. good morning. >> good morning. >> congratulations. >> this is exciting.
>> how do you feel the process here? apollo, your private equity component of the ownership structure, rushed this ipo through. my god, it was like lightning fire, within a week, ten days, you didn't even go to europe to drum up support there. 15 times over -- >> i can't talk about the prescription at this point. >> what is the argument to investors? tes.re the third largest in the what do you say to them? why should they buy this stock? >> it's a great story. we happen to have a very unique proposition. we call it free style, which means freedom and flexibility. it's a resort type vacation, which is why five years in a row norwegian cruise line has won the best cruise line in it's a leading indicator as we did our marketing improvement here, that people here will want to take that kind of experience. >> isn't that like a usp that
could disappear? >> it's a complicated thing. we have two competitors built on a different proposition. we have a -- we're more nimble and we built all of our assets for this proposition. and it means put pl dining venues, multiple entertainment venues. so to redo a ship in this fashion would be very expensive. >> you're bulking up on ships. the biggies for manhattan, you tell me it will be on the west side highway. we're going to get one of the 4,000 new passenger ships, the norwegian breakaway, which is in a german shipyard at the moment. i think you'll bring it over about may. that will be the largest ship to have a home port in new york. >> yes. >> there are other ships coming afr wards. how much do they cost and how do you finance them? >> yes. the ship costs about $850 million. >> almost $1 billion each? >> yeah. >> wow. >> very expensive. luckily you're able to get the
governments and the countries that the ship building takes place to back the financing to enable you to get the financing. in this particular case, the germans have given support, and the banks are able to give more efficient financing. it's a pretty good business model. it keeps the building in that country with all the thousands of people working on it. >> even if you use this $400 million to pay down debt, you're still at $2.6 billion and building because of the new ships. >> actually, our debt profile improves dramatically over the next couple of years. we generate quite a bit of cash flow. so our balance sheet will improve over time as we continue down our journey, with these very efficient ships that are being built that have enormous premium on onboard revenues, as well as the fact as they garner a larger ticket price. >> you need to be congratulated for capturing this ipo, the multiples they're currently at.
the industry is obviously in a relatively distressed state. we're not even at the one-year anniversary of the contra costa disaster. as you go into the first quarter of bookings, what do you see in terms of demand and more importantly in terms of pricing? you're at the upper end. >> yes. i can say we have communicated a little bit of information on the rows. we're feeling confident with the first quarter. >> that was just at the time when that other ship had crashed -- >> so the building before that. so now we should come into easier comps as we anniversary that -- actually that was this past sunday. our pricing is looking very solid for the first quarter. and we don't see that changing as the year progresses. we have the icing on the cake, so to speak, with the norwegian break skrae way coming out with the rich experience. the bookings are very strong here.
new yorkers are a tough group. but if you provide a great asset to them, they come in droves. and they see with three broadway shows and 20 dining venues and entertainment complex, and second city and on and on, there's so much to do on this fantastic ship. >> i'm assuming you're not going to pay a dividend anytime soon? >> well, i think what happens, very quickly, if the business model plays out, we are in a very strong position. and we'll be talking to our shareholders. i would suspect in the second half of next year. >> one final question. you popped back above $25 a share. a 32% premium from last night. does that valuation change the way now in which you run the business? when you run back to the management team, you're going to go, oh, my god, we're worth 30% more than i thought. what's going through your head at the moment? >> i think our track record speaks for itself. since i joined the company back in 2008, it returned a very --
it returned a lot of passion among our employees. we've had 17 or 18 consecutive quarters of growth. and margin improvement. >> does the valuation change in which the way you'll run your business? >> i think the market sees what we're doing and rewarding us for valuation that we deserve coming out of an industry that is based on comps that are very different profiles than what we have in the future with norwegian crews line. >> kevin sheehan, congratulations. >> thank you. >> the ceo of norwegian cruise lines. what a debut. strong float. what a debut. >> thanks so much, simon. still ahead, former yahoo! coo, current president will join us live of how he plans to turn the company into a company for students. let's go. ♪ ♪
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some of the stories we're talking about, the consumer sentiment index falling to a low of 71.3. down from 72.9 in december. shares of amazon rising to new all-time highs. norwegian cruise line, as we just were talking about, is not the only company making its wall street debut this morning. suncoke, a master limited partnership, is trading 2% below its ipo price of $19 a share. >> some investors may be dissatisfied with apple, but is apple's recent performance really a case of these investors being dissatisfied with their own lives? that's what one harvard business contributor said. the writer behind that post, we should add he has a long position on apple. dan, great to have you with us. >> thanks for having me.
>> it is rare that you hear that shareholders were down on a stock, or down because they're d dissatisfied with their own lives. what does that mean? >> short-term expectations for apple are so high, that people are la hugh are hallucinatinhallucinating. they want apple to come out with a happiness machine or time travel machine. apple doesn't have to disrupt that level to thrive. and apple doesn't have to innovate every 20 minutes in order to be the best, you know, one of the best investments on the planet. people are piling on tim cook saying, he hasn't introduced a new disruptive product, hasn't innovated. this is a guy who in a year has taken the company through this horrible process of bereavement and refreshed every single product in the lineup. and people forget that steve jobs didn't innovate every year.
he didn't come up with some disruptive product every year. it was four years from the time he took -- re-took the reins to apple when we came up with the ipod, and everybody said, oh it's too expensive. it was six years between the ipod and the iphone. when he came up with the iphone, everybody said, that's not a disruption. it's going to flop and it's too expensive. four years until he comes up with the ipad. and then when everybody sees that, they're like, that's not a disruption, that's just a bigger iphone. what people don't understand is that apple takes the time to get things right, and that is the disruption. >> right. >> that is the innovation. >> so dan -- >> yeah? >> let me get this straight then. you're saying the problem is not with the stork, it's just that the expectations, whether they be price targets on the stock or estimates, they're too rosy. it's everybody else's fault, and apple is just the innocent bystander here, doing its own
thing, doing what it does. >> the expectations on innovation are ridiculous. they just came out with the ipad mini, which is a huge innovation. >> is it a huge innovation making an ipad smaller? when there are already the tablets out there that are mini ipads? >> when you do it right, when you get it that light, when you get it that thin, when you get the bezel that thin, to get it to operate that well, that's what the naysayers were saying about the ipad. people were underwhelmed when steve jobs introduced the ipad. everybody said it's just a bigger iphone. nobody understood the implications of a bigger iphone. nobody understood the implications of having that much visual real estate to do these things and have it work that well. so i absolutely think the ipad mini is a disruption. and i think apple was right. but to your earlier point, that it's that the expectations are
too high, it's absolutely that. and it's all kinds of inaccuracy in the media. i mean, the "wall street journal," you know, two days ago, three days ago, comes out with this story that is two-month-old news, claiming that iphone 5 demand has weakened when it turns out that they're just probably getting better yields and ramping up for a six-month product cycle and the stock loses $14 billion. apple did $8 billion in profits last quarter. the stock is down. amazon lost $247 million last quarter, and as you just reported, the stock is up 43% for the year. that all has to do with expectations. there used to be some correlation between fundamentals and investor sentiment. i think we need some kind of a new investor sentiment. >> speaking of fundamentals, is there any room in your empirical data, saying margins at the top of the range and will likely come in, or samsung taking a
larger part of the share or galaxy crossing the $100 million mark? business is a zero sum game. share is a zero sum gain. and apple has lost some of it. >> who said business is a zero sum game? >> then address the fact that margins peaked with the release of the iphone 3g, address the fact that it's lost market share. how does it fit into your analysis? it can't be just that the investors set the expectations too high. maybe they haven't delivered on certain things. >> i don't see how you can say the company has not delivered on certain things. the ipad is, what, two years old and they come out with the ipad mini. i just told you the gaps between the other innovations that you're comparing apple against. >> as a long-term shareholder, you don't look at margins and the fact that they're coming in, or maybe there's cannibalization between the ipad mini and ipad? >> well, there was -- apple has
always cannibalized its own products, right? the iphone has cannibalized the ipod. if you're not cannibalizing your own products, somebody else will. i actually think that it might do apple well not to innovate for a while. because maybe if apple doesn't innovate for a while, its competitors won't know what products to come up with. because all they ever do is copy apple. >> dan, we'll leave it there. good to talk to you. >> thanks. from textbook rentals to linked in for college students. we're sitting down with former yahoo! coo. [ male announcer ] it's simple physics...
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income growth making it hard for many u.s. families to keep up with the rising costs of college. just ask our next guest, dan rosenswe rosensweig. a full-service operation for students, matches them with colleges, scholarships and advisers that have ambitions to be the go-to network for college students. what was wrong with just representing textbooks, dan? why this move into a broader context, a platform that you're creating? >> it's a very good question.
it's a much bigger opportunity. i think when we took over the business three years ago, it was clear that print textbooks in the rental model wouldn't be around forever. the world increasingly goes digital and students would be using many more education resources, and using textbooks and new technologies that come out. it's about nobody up to this point has focused on putting the student first. so chegg has taken the position that our goal is to give the students what they need, our mission is to save them time, save them money, get them smarter. the education process is really difficult. it's really fragmented. i have two daughters, rachel and samantha, and one went through the process and the other is going through it now. and it's just really complicated, really expensive, and it's not necessary anymore. >> you know, of course facebook started in a college dorm, conceivably as a social network originally for students who were in college. what's going to differentiate chegg from any other social m
network that is out there, and why as a student i would want to be on it? >> we think of it more as a connective learning platform. it's focused on the students' lifetime while in school, their academic needs, their needs as a student. it's probably more similar to linked-in, who is building the professional graph. and facebook's building the social graph. we're building 9 student graph. we have high school students that come into the network, fill out a profile. we know where they're going to go to college, we know what they're interested in, where they can get accepted, we can match them with scholar ships, help them pick their classes and professors, and bring them learning material, homework help, connect them to institutions and professors. so the student is one of the biggest consumers in our economy of a lot of things, particularly academic information. but also well beyond that. what do they need for their dorm
rooms, clothes they need for jobs, internships. as long as we stay focused on their needs, then they'll continue to use us. but like any good connective network, everybody who joins adds value for everybody else who's already in it. it's really exploded. we have nearly 30% of college students in our network already. >> that's a big audience. at the same time you still have warehouses full of textbooks, don't you? >> we do. >> i would assume that's at the core of your business, you're renting those tex boots who are hard pressed to come up with hundreds of dollars for just one text. >> that's exactly right. we have a warehouse in kentucky that does an outstanding job. in fact, we've set record days for shipments the last couple of days because it's now back in the january semester. we've gotten so pro fishs at it, that we can get millions of books back and turn them around in four hours, because the december season ended and the
january season started. we're close to 20% of our revenue already as something other than a print textbook. three years ago we had one line of business. now we have three lines of business. we have the print textbooks, digital technology and educational services, and then we have advertising businesses. so all three are going quite nicely. >> dan, what are your future plans? five years do you still see yourself as being independent or being another company like amazon? >> we've taken the view of trying to be what they call out here a 100-year company. which is, how can we build something that is scaleable, that is defensible, that is valuable to all of its constituents, starting with the students, our shareholders, our investors today. of course, our employees. and so we think this is one of the biggest markets out there. the u.s. alone there's 20 million college students. so we have the college students, we have high school students trying to get into college now, we have the global
opportunities. we're really at the beginning of our opportunity. and it's already a very big business. >> dan, are you guys getting close to cash flow break-even at this point? >> we actually are. you know, three years ago, one of the issues around chegg was we had to raise so much capital, over $200 million, because we were actually taking a risk on behalf of the students, buying all of the books. now we're able to buy millions of books, frankly, we own millions of books and we're able to generate cash if we want to. it's a really -- the business is at a terrific inflection point right now. it's because we keep picking up market share in all parts of our business. >> are we going to see you down here at the nyse some day celebrating an ipo? >> perhaps. i think now what we're focused on is building the value in the business. and if that makes sense to finance the business, the next stage of the business in growth,
then that will be a good idea. >> dan, we're going to leave it there. as always, appreciate your time. thank you. >> all right, david. thank you. >> dan rosensweig from chegg. netflix bear turns bullish. rick santelli working on something for later on in the show, right, rick? >> absolutely. coming up in probably right after the break, we're going to be discussing how, you know, the house republicans, at this retreat in williamsburg, virginia, seem to have found a strategy. and the gelling of that strategy is what we're going to discuss after the break, on the last rendition of the week.
welcome back to "squawk on the street." this is the friday edition of the santelli exchange. of course at the end of last year we were totally preoccupied and justifiably so with the fiscal cliff. now the issues in front of us are threefold but we're going to concentrate on the first. that of course is bumping against and going through the debt ceiling. you know, when the president had his press conference discussing this i always like a good food analogy. his analogy was of course by not
raising the debt ceiling we're not paying for the food we've eaten. basically at this big dinner we're at. i like it. let me give it a little slant my style. that is, it's not really a restaurant but an all you can eat buffet. there is no bill coming. the senate and house haven't passed a budget together in years. we have a revolving credit, a tab at this all you can eat buffet and nobody wants to get up. it is not like there is a clock where boom. here is your bill. we'll start the next 24 hours like your charting machines. nobody is ever getting up. it's just a meal that never ends. so how do you in essence stop the eating, stop the debt that is created by running up the tab? well, it seems easy enough but of course it gets messy and the politics are different than the principles involved. the house republicans seem to have finally figured that out. let's look at what some of the key players have said and a lot
of this seems to be gelling as this williamsburg, virginia retreat is being attended by many of the key players. let's show it on the screen. representative paul ryan of course the chairman of the house budget committee said this. house republicans may seek a quick, short-term extension of the government's debt limit. now let's go to the other house. let's read, and i'll read for you, what senator john cornyn said. he said, we will raise the debt ceiling. he doesn't say may. he says we will. of course he is in the senate. we're not going to default on our debt. both of these gentlemen are on the right track. i personally think in my emotional state i might not have wanted to increase the debt ceiling but i think politics of course we can't be naive. the president has a very big platform for his strategy. he has the bully pulpit. and i think that some media are calling this a retreat on the debt ceiling. to me the only retreat in the
equation is williamsburg, virginia. but i do think that now we can concentrate on what andy brenner and i were talking about yesterday and that is march 1st the sequester. march 27th the continuing resolution because we haven't seen both houses pass a budget and i think these issues are much easier to extract from the democrats/the white house because the short-term bumps are going to put a lot of pressure and lot of press in my opinion on the main issue and the main issue is whether you're republican or conservative or democrat, it certainly seems like these comments from both the senate and the house on the republican side seem to be working with others. and i think this is great just like the fiscal cliff thing. i personally think we'll make some progress. the real issue is behind closed doors is the president going to admit to somebody that we have a spending problem? melissa lee, back to you. >> thank you, rick santelli. still ahead, whatever happened to loyalty? it is the question hotel ceos
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hotel brands is actually in decline. this morning's big survey the annual survey from deloitte reveals despite all the time and money that goes into making us more loyal to marriott or starwood in fact those efforts are failing to adequately drive business. to tell us more now about the surv survey, the global leader for travel hospitality and leisure, welcome to the program, adam. your clients are these big hotel chains. this is a big shot you're sending across their bows. >> well, i think this is coming from the consumers, from the people who stay at hotels. so what they said to us is really three things. one, there's really been a big erosion in loyalty. if you think about that the amount of information that is available to travelers today is so much more transparent than what it was ten, 15 years ago. you have the internet. you can comparison shop. they're saying with all that information out there, you know, the loyalty programs that they're members of really aren't creating brand loyalty. they're being used as ways to
shop amongst various programs out there. we also found their share of spend with their preferred brand is pretty low. that means they have one brand they like the most but are still spending a significant amount with some of the other brands. >> i hear in one of your focus groups in fact getting a platinum card with one of the loyalty schemes can prompt this loyalty because people go and try and get a platinum card with somebody else. this is really grueling though isn't it for the hotel owners, those that actually own the properties who are paying 12% of their revenue to be run as a starwood or a marriott and then pay $12 for each room each night to pay for the loyalty brand. i mean, the hotel owners, they're not having the business delivered by the brands they are renting. that's the issue. >> i think what this is, you know, this should be the entree' to start a discussion between the owners and the brands to say, okay. what can we do to fix this? we also found out from the people we surveyed, 4,000 people, there are things you can do to make us loyal to your
brands. that is creating personalized experienced, unexpected rewards. doing something on my birthday that i didn't know about. the problem is that most of the programs are very generic right now. so that is why no one really sees the difference between any of them. i think there is the opportunity to create unique, individual experiences but it is going to take money from the owners and the -- >> that is the rub. not just the imagination but the money. hotel owners tend not to be great investors on the whole do they? >> that is one of the challenges. you look kind of at the hotel industry and it typically is very cyclical. if you want to create this long-term sustained customer, you see that with some retail brands, with soda, people very loyal to one brand or over another. to do that in the hospitality industry it takes a long-term investment and that takes money. you got to invest in technology, training, create the customer experience across the board. >> good to see you.
deloitte's adam musenberg joining us on their annual big survey. next tuesday this show will be coming live from the alice lodging conference the biggest lodging investment conference in l.a. something to look forward to. back to you. >> very nice. see you next week. nice work. melissa, we'll see you tonight at 5:00. options, actions, money in motion. thanks a lot. have a great weekend. let's get to it. if you missed earlier this morning here's what you missed. >> welcome to hour three of "squawk on the street." here is what's happening so far. >> clearly the most bullish case for the u.s. economy in 2013 is related to the housing market. >> i feel good about where the world is heading. is it on a bull street? no. a firmer footing? yes. as a long-term investor i care about firm footing. >> maybe this market is powerful enough people say they cut numbers but the second half is going to be good. it would be a different these fris the way this market has been. looking through numbers to get to the other side.
>> what are we missing? there is uniform negativity here. something we'll look back on at the end of the year -- >> see this thing? >> wait a second. >> no one likes this. don't throw it. >> we have january read on university of michigan survey 71.3. this is a big miss. this is a big miss. >> the fear about how much they will spend this year, is that a reason for the stock to be down 6%? >> that is a reason. i mean, they're spending $13 billion in capital. i think the market sees what we've been doing. it is rewarding us for a valuation we deserve coming out of an industry that's based on comps that are very different profiles than what we have in the future with norwegian cruise line.
>> good friday morning. let's check on the markets which haven't been moving a whole lot despite a flurry of news the you to down 11 points. nasdaq off about 12. morgan stanley seeing its biggest gain in seven months after a big beat for the fourth quarter earnings from the brokerage business more than doubled the firm reaching profit margin targets six months ahead of schedule. shares of johnson controls falling sharply after a weak earnings outlook for the first half of the year. the company says the first half earnings in 2013 will be significantly lower than last year due to soft global demand. let's get the road map this morning. netflix back above a hundred a share as analysts on the street starting to get more bullish. we'll talk to one of the bulls who say the deal with disney will make netflix much more aggressive and powerful. plus xilinx beating expectations. we'll talk to the president and ceo. the fed releasing transcripts from 2007 about an hour ago. we'll talk to someone in those
meetings. former st. louis fed president william poole. as we said morgan stanley a blowout, the stock hitting a new one-year high. should you be a buyer? we'll tell you how to play it. we'll start in washington a few days before the president begins his second term. a new nbc news/"wall street journal" poll shows the majority of americans approve of his overall performance and support the president's direction on gun control and immigration. our chief washington correspondent john harwood here with more on what was a pretty stunning set of numbers. interesting in lots of different ways. >> true on both counts. he does have majority public approval at 52% and he does have people in general expressing his support for his view on immigration and gun control. there are significant head winds for him in terms of pessimism and resignation about the state of this economy and also the ways in which washington may be making it worse. let me just run through some numbers. when we asked americans, when you look at 2013 is this going to be a period of economic expansion and opportunity or a
time to pull back because the hard times are ahead? by almost 2-1 they say it is going to be a time to pull back. that is not necessarily a good sign. again, the president's approval rating as we mentioned 52%. slightly higher than it was a year ago but not dramatically. he moves in a pretty narrow range. the president is much more popular than the congress. you see only 14% approve of this congress. 81% disapprove. this is something democrats, republicans, and independents agree on. now you also have a situation where the public agrees that the reason the fights we've been having over fiscal cliff and upcoming fights over the debt limit are making matters worse by almost 3-1. 16% say they're more confident because of what washington is doing. 51% less confident. and finally, if the fiscal cliff talks or the debt limit talks fail to produce agreement the federal government cannot meet its obligations the american public will by a plurality marge
iwamura of 45 to 33 would blame republicans in congress more than democrats and president obama. that is an indication the president enters these negotiations with the upper hand republicans at their retreat this weekend in williamsburg are trying to figure out a strategy and one of the things they've discussed. paul ryan said yesterday is a short-term increase in the debt limit. they're worried about getting the blame if things go sour. please. >> and john cornyn appearing to jump on that band wagon today. there were comments that sort of dovetailed with the poll. here is a quick quote. i think people are too dark about the economy now in part because of the shadow of pessimism, skepticism about our political system today. does that put the numbers that you just gave us into some context? >> exactly. he's been trying to make the argument that the fundamentals of this recovery are solid and in place and we're positioned to take off but for the political dysfunction. the president made that point as far back as the debt limit stand off in june, 2011 or the summer
of 2011, saying our dysfunction is not economic but political. that is the message the president is taking to the public right now and with the recent election results behind him he is hoping to get republicans to bow and get out of the way of that in terms of trying to hold up a debt limit and let the economy take off. republicans are trying to figure out how do we get leverage to change the level of spending long term in the country? that is where the two sides are at odds in a very difficult way. >> right. finally a lot of chatter this morning about the portrait of the president always sort of encapsulates a moment in time. people either commenting on the degree to which he's gotten gray which happens to a lot of chief executives, but also some say, john, looking satisfied with a win in the last election. what is your take? >> i totally agree with that. he is grayer than he was but just as confident, some would say cocky and the picture captures that. this is a president who a lot of people thought because of the
state of the economy wasn't going to win re-election. he did. he faced down the republican campaign and won it and now he is saying, hey. i'm on top and that is behind the confidence with which he's challenging them on the debt limit and saying i'm not going to negotiate with you. the question is going to be is there too much confidence there? hubris is one of the biggest dangers of second-term presidents when they over reach and we'll see whether he is reaching for more than he can get and telling them he is not going to negotiate. >> a lot of chatter behind that picture. john, thanks so much. have a great weekend. >> you bet. >> john harwood. meantime talks in netflix saying long time bear going bullish, upgrading to a buy this morning from a neutral on the cnbc newsline, the analyst behind that call, tony wible. great to have you back. welcome. >> thanks for having me. >> somebody said this morning you going bullish on netflix is the equivalent of hell freezing over. do you see it that way? >> yeah. i've heard a lot that.
it's important to take fresh looks at stuff. >> what was it that did it? you cited a number of catalysts the disney deal but there must have been something that planted the seed for what i am guessing will be a sustained run of enthusiasm or optimism. >> the biggest thing really is the deal, we're seeing studios and the cable companies taking a fresh perspective of the company which leads us to do the same thing. it is still manifesting in the sense that time warner, frankly reluctant with netflix in the past and now hearing about netflix getting these deals with cable companies. i think those things come together to help propel some sub growth. then you wrap that up with the competitive environment on the margin getting better and frankly i think these guys even though they got disney might be able to take sony from stars as well. >> interesting. on competition you point out hulu in your words losing focus. you say google and apple are dormant.
they don't have it all to themselves clearly, right, tony? >> they don't. when you look at netflix' content span and where it is going you probably need 20 million subs to get into this business and have a break even. so i think the guys in this business are the ones that have the best shot. with amazon probably being up there but again netflix gets disney under wraps and gets sony under wraps, it gets to a point where you have to question how committed to this market place are you? frankly that is where i think you're seeing a shift in mentality around netflix where while it is an expensive stock today it probably remains being an expensive stock as incomplve focus more on the long term than the near term. >> with disney behind them you say they can be more aggressive on acquisition. the long-term complaint was how much will they have to spend to acquire content? do they suddenly have carte blanche to spend whatever is necessary? >> you know the irony we see here is that netflix i think is getting more leverage over the content companies because i think it is accountable for the ratings pressure. people are watching less tv.
i think it is because of netflix and ironically i think these guys need to sell more content than netflix to come up with the differential. >> finally, as a share of your call, what percentage is the fact that it is the sixth most shorted stock on the s&p? >> you know, it does weigh in the fact you have only five buys and i think 38 analysts after the initiation today and, you know, we were nonconsensus with the sell back in 2010. we feel more comfortable when the estimate is too heavily in one direction. >> it is always fun to lead the charge as long as you're right. we'll pay close attention to your concurrent calls. >> thank you. >> ge mean time pushing industrials higher. mary thompson here with the latest on that. >> good morning. here is what you need to know about ge. it beat estimates and met margin goals for 2012, repeated they'll expand by another 70 basis
points next year and reported record backlog for industrial orders. last quarter the conglomerate reporting operating earnings of 44 cents a share. for the second straight quart earl units reported improved profitability led by healthy gains in aviation and oil and gas units. profits of its financial unit rising 9%. the ceo saying ge delivered in a mixed global environment and forecasts in china and other resource rich countries will help the company while noting the uncertain fiscal environment in developed economies. carl? >> all right. mary, a lot for you to do today. talk to you later. semis having a good run over the last couple months but will that contin continue? the president and ceo of xilinx will join us to talk about the state of the industry, earnings and a lot more. first rick santelli working on something for later in the hour. >> absolutely. coming up in about ten to 12 minutes we'll be talking to texas comptroller susan combs. why is she so important?
why am i so important? we're going to talk about which state exports the most in the u.s. and talk about which unemployment rate you'd rather have, 6.2 or 9.8. all that and more with comptroller of one of the successful economic reversals over the last ten years, texas. tune in. [ 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 doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade. [ construction sounds ] ♪ [ watch ticking ] [ engine revs ]
trading higher today up more than 7% since the beginning of the year. then we got intel's quarterly results and they are weighing on the sector today. for more on intel we go over to the market flash desk. >> 348 cents a share beat the street by three cents but that is profit down 27% from the same quarter last year. the latest casualty from the shift away from pcs but what worried investors and the reason why the stock is the third biggest loser on the s&p 500 today they're spending even more money in 2013 than they expected and had previously forecasted even as demand is dwindling. >> xilinx beating estimates yesterday after the bell. revenue in below expectations as well as the outlook for the fourth quarter. what does the future hold? joining us foran exclusive for cnbc the president and ceo of xilinx, just celebrated five years in that role. good to see you and welcome
back. >> good morning. great to be back, carl. >> we've been watching the space for a while and where we are now is a far cry from say a year ago where it was all about over capacity and disasters in southern asia. why the change and do you think sentiment has appropriately caught up with where the overall business is? >> well, generally speaking we think that now this passport was a trough and things are going to improve now onward for us. we do see the amount coming back. it was weaker last year in 2012 but 2013 we fundamentally are convinced it is going to be a growth year for us. >> can you walk us through some sectors where it appears strongest? is it an industrial machinery, about autos? >> well, it's actually we're a very broad player. we have 20,000 customers and over a hundred application areas
and we're seeing them recover at different rates. fundamentally communications was the weakest part. but that we expect to grow as there needs to be a huge upgrade in all of the infrastructure as more cell phones, smart cell phones get sold and we sell to all of these applications, which benefit from this growth in band width which is very, very broad. >> what is the production capacity environment like right now for you guys? >> we have just introduced and started a new generation of products and we're not having any issues. it grew from ten to 20 this quarter we expect to ship over 30 million dollars worth of revenue and we're off to the races with regards to growth for the rest of the year. we believe that our relationship with our vendors enables us to
address that. we don't see capacity shortfall at all. investments in capacity have been made and suffice for our needs. >> we're watching your stock of course up 3% today. it has fared pretty well against the overall semi index. in terms of a global recovery is there an area of the world that appears to be leading or lagging? we pay so much close attention to what the broad economy is doing in europe, in china, in this country. where is it strongest and where is it weakest? >> we see it strongest in north america and asia and weakest in europe and i think that is in line with the trends that you're hearing from other companies. it appears to be the way it is. >> yeah. finally you mentioned the number of applications the chips go into. i'm looking at a list. everything from professional broadcast equipment. we probably have some on this set. 3-d televisions. the mars rover mission. just out of curiosity what did you send into space?
>> we have devices that are used as the controllers for all of those space products so it is actually a growing part of our business. it's still small but it requires ve specialized capabilities and that's what we're all about, differentiation and specialization. that is what xilinx enables our customers to do. >> we're always looking for bellwethers on the global economy. you certainly are one of them. thanks very much for your time. come back soon. >> thank you. >> by the way the federal reserve just releasing transcripts of its meetings back in 2007. of course this was leading up to the financial crisis. we've got someone who was in those meetings. former st. louis fed president william poole to talk about what happened those many years ago. "squawk on the street" back after a quick break. it's a new day.
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>> man is she working hard over at headquarters. >> long time no see. we're watching state street still the stock up nearly 6% after announcing earnings that beat the street. profit rose 26%. also a rise in revenue and rise in assets under management that were better than state street's biggest competitor bank of new york mellon. that is not what is moving the stock this morning. it is also job cuts. 2% of the work force is going to be cut and investors see that as a sign of state street finally managing its expenses. >> a common theme for all of them. the state of texas has led the nation in export revenue for ten consecutive years. let's get to rick santelli in chicago with a special guest. >> thank you, carl. i like to welcome the controller to the great state of texas susan combs. welcome. i guess my first -- >> good morning.
>> -- good morning. my first question to you is, you know, california has gone through an election where basically the democratic party is ruling the roost and there has been, you know, some changes, retroactive tax changes. can you tell me your interpretation of what is going on in california and why it is important to you in texas? >> i think what they're doing is sort of the best advertisement for coming to texas because we do things right. i am happy california keeps doing things wrong. we lay out the welcome mat with national tax policies, rational regulatory policies and the weather is great. >> the latest read on unemployment by state was toward the middle of december and my numbers were california scored 9.8 on unemployment and texas 6.1. some say 6.2. but i think you get the picture. can that dynamic continue? that is spread only going to
widen? is it going to widen in your opinion by california's unemployment going up based on their policies or yours moving lower quicker? any thoughts? >> i think it is going to help both ways. i was in new york the other day and people there are talking about how sort of depressing it is to be in california and how much fun it is to be in texas. so our economy is robust. the oil and gas sector has been doing great. car sales have been doing great. we never had a sub prime problem. so housing starts are back up again to about 75,000 single family permits issued. the main thing is capital will flee a hostile environment. if i were a risk taking entrepreneur in california i would be thinking about heading east to texas. >> i feel a bit dumb because i had no idea of the export power of texas. i probably would have picked california. we'll show a table and what this table says is texas 2011
exports, $251 billion in second place california at $159 billion. that is very impressive. hears what i like the most. go to the next table. it is easy. when i first heard it i said it's obvious because california doesn't maximize natural resources because of the green component. has such a large lobby and presence in california. even if you extract all the exports petroleum and coal products that still leaves you around 200 billion. you're still blowing the competition away. >> yep. isn't that nice? we also have great trading partners in mexico and canada and we send a lot of parts to the factories which are tremendous engine of growth for mexico. so our number one trading partner is mexico followed by canada and then you get to china, brazil, and the netherlands is interesting about 8.8 billion. what i think is important is we are not in the eurozone which i think is good for our economic
outlook. we are in strong economies and so they make great trading partners. >> when it comes to energy i am a huge fan of natural gas and being energy independent. i know that texas has a decent amount of oil and coal, some of the numbers depicted as well. but i guess my question to you is a simple one. california needs to do something. this one-time burst in revenues on higher taxes is going to run the course. we all know the art lafford curve. is california ever going to see the light on energy and are there even better days ahead with regard to energy though the president and many lobbyists are not very happy about exporting energy? >> that is an interesting question. there are five or six applications with the federal agency which regulates exporting energy off of this country and they want to take energy from texas and north dakota in particular, take them into canada for further refining and
the projection is that if those permits to export are allowed then texas will in fact be a global game changer on the price of energy. california has been at the mercy of the green lobby for so long they actually had significant reserves. if they would ever use them. >> susan, i have to cut you off. we've run out of time. i do apologize. i am going to have you back and i'd like the topic specifically to be what your outlook is for energy and the export possibilities for 2013 and beyond. thank you for being our guest today. >> thank you. >> carl? >> thanks a lot, rick. the fed releasing transcripts of its meetings in 2007. of course that was leading up to the financial crisis. when we come back we'll talk to someone who was in those meetings. former st. louis fed president william poole. and just a few minutes left in europe's trading day, their trading week. we'll get the impact on the u.s. when we come right back. with the spark miles card from capital one,
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the european markets are closing now. >> take a look at the markets. a mixed session as investors digested stronger than expected gdp data out of china and a number of earnings reports obviously. the major european markets closed a day like this. have a look at london, paris, germany, italy, and spain. the ftse the only one to curl out of the session with the positive gain of about 30 points. the upbeat china gdp numbers giving a lift to minors like rio tinto one of the big winners in
london today the stock rebounding after the ceo stepped down following the $14 billion writedown. and renault also rallying today the french automaker pledging to return to sales growth this year after the global vehicle sales fell 6.3% in 2012. one more look at the euro as well versus the dollar. been quite a week for them. we were over $1.33 yesterday. currently just a shade below at $1.32.96. want to update you on the hostage crisis at a natural gas plant in algeria. conflicting reports about the number of hostages released. we've been working that story back at headquarters. >> hey, carl. thank you so much. it's clear that the hostage rescue operation is ongoing. it is a very fluid situation. british prime minister david cameron telling parliament this morning that algerian forces are still pursuing terrorists and trying to bring hostages to safety. he also offered new information on the attack. >> it appears to have been a large, well coordinated, and heavily armed assault and it is
probable that it had been preplanned. >> now, details of the rescue operation remain unclear but we are seeing the first images of some freed hostages arriving at a hospital in algeria. the total number of people dead or injured remains in question due mainly to the fact that the gas plant is located in such a remote area making it really hard to get information out. meantime, u.s. sources tell nbc news that a u.s. air force medevac plane arrived overnight in algeria and is standing by prepared to evacuate any civilians regardless of nationality who may be wounded in the hostage rescue effort. [ bleep ] i bp issued a new statement saying they began the process of bringing nonessential workes out of algeria. some left last night. the hostages on the ground are still the central focus. the statement from bp said there are a small number of bp employees at amenace whose current location and situation remain uncertain. bp is working with the algerian
government and authorities to confirm their status. meantime u.s. defense secretary leon panetta is vowing to pursue the hostage takers saying that terrorists should be on notice that they will find no sanctuary, no refuge, not in algeria, not in north america, not anywhere. carl? >> a tough story to watch. thank you so much for that. want to bring in bob pisani with a look at what is moving at the big board. narrow range today. your point has been the earnings so far this week. haven't told us enough. that changed today. >> i'm looking for some directional commentary and the financials are too narrow. frankly it's obscure for us to figure out what is going on. i love this part of the earnings cycle because it is big, multi national, industrial companies start reporting and that is what is really good news for me because those are the ones that make all of us in some of the heating and air conditioning areas for example so we had ge reporting today.
parker, collins reported. johnson controls. all of those companies did well. they beat on the top and bottom line. some are selling off today. they're selling off because some are at new highs. for example parker hanafin and collins at a new high overall. maybe that is not surprising with what is going on. the surface of johnson controls looked good but johnson controls is really big in a lot of different areas but particularly big in automotive, particularly in the interior area. heating and air conditioning systems. guided lower on the current quarter. that is why the stock is down 4%. they specifically cited weaker european business. they do a lot of work in the european automotive area, the interiors, and they're trying to scale it down. costs are very high so they're in efforts to control costs overall. they did maintain the full-year guidance so what they are trying to say and i think this is going to happen with a lot of companies they're back ending growth. this is an old story but we're
seeing it for the first time right here. i want to talk about earnings so far. some companies are not financials reporting here. so far earnings here up 4%. that is better than it was just a couple weeks ago at 3.2%. this is for the s&p 500. revenues 3.6%. all right. still kind of ah but better than 3.1 where we started. the point is still moving up and a trend we've seen many times and happening again. lowered expectations and starting to beat them. finally i don't know why the world is so obsessed with the vix. i get e-mails, calls, good heavens, people. here is what's happening. we hit 13. if we go below that i'll get even more e-mails. we're back to where we were in 2007 and 2006. why then rather than saying gee, bob, why isn't the vix higher on all the worries let me point out what conditions the vix stays very, very low. back in 2006-2007 we had much fewer macro shocks. we have an improving global economy and corporate profit
margins were strong. that is what keeps the vix low. these are conditions we have now. some people, carl, will argue corporate profit margins are deteriorating somewhat. but we also have another factor that we didn't have in 2006 and 2007 and that is the fed was behind us. that is a major factor as well. >> funny you mention that. thanks, bob. the fed is releasing transcripts from 2007 in the last hour. our steve liesman has been digging through the pages for us. like a treasure trove here steve. >> yeah. the significance here, carl, is this is the beginning of the crisis the federal reserve making the transition from normal operating procedure to essentially crisis operating procedure which it would be in. for at least five years. you see the federal reserve struggling with its prior forecast as the banking system begins to melt down, begins to start reputational issues. should the federal reserve become involved in these sorts of things of, quote-unquote, bailing out the banks. a lack of understanding of the
potential fallout coming to them. it is a bit like you're in the audience and watching the main character and there is a guy behind them with a ham bert to hit their head but the main character doesn't see it. and they're defining you know a new and unprecedented role for the federal reserve. they struggled with the issue of creating panic in the markets and finally with the notion even that the adjustments that were taking place were good. let me show you some of the quotes here. ben bernanke in i believe this is the second of two emergency -- sorry -- bill dudley first. where do you want to go guys? either place is fine with me. they're all interesting. let's talk about maybe the ben bernanke quote. he says, my own feeling is we should try to resist a rate cut until it is really very clear from economic data and other information that it is needed. i really prefer to avoid giving any impression of a bailout or a put if we can. this is from a fed chairman who is concerned about there being a bernanke put out there. of course this is with the rated 5.5% or so. it would eventually go down to
zero. moving on to another -- >> let's have him stick around. >> another meeting, bill dudley saying we've done quite a bit of work trying to identify some of the funding questions surrounding bear stearns and countrywide and some of the commercial paper programs. there is some strain but so far it looks as though nothing is really imminent in those areas. of course problems at those two financial institutions would create and blossom within the next several months. timothy geithner doesn't look too bad toward the middle of the year. he goes on to say the balance of risk has changed since our last meeting significantly. in my view there is a much longer negative tail in terms of the range of potential outcomes and those risks are going to be harder for us to manage partly because they depend on confidence. this was in august. guys, i know we have to wrap but i can't not give you this next one here. dave stockton the chief economist for the fed in december 11 saying despite all the financial turmoil the economy avoids recession and we achieve some modest edging off of inflation. i can assure you however that
the staff is not going to fall back on the increasingly popular celebrity excuse we were under the influence of mind altering chemicals and thus should not be held responsible for this forecast. no. we came up with this projection unimpaired and on nothing stronger than many late nights of diet pepsi and vending machine twinkies. carl? >> what a view into how this institution works. steve, can you stick around for the next one? don't go anywhere. >> sure. >> let's tune in to someone who informs those meetings william poole the president of the st. louis federal reserve. welcome. >> good to be with you. steve also. >> hey, bill. >> i'm sure you heard steve go through some of those and you heard steve's characterization. here is the times. they're going through these as we speak right now. they call it a sign of an institution finally lurking into action. is that how you recall it? >> no. i don't think that characterization is fair or
accurate. what we did not know but i don't think many others did either, what we did not know is that there were so many banks that had a large, huge portfolios of sub prime paper, long-term, long maturity, sub prime, financed with very short-term commercial paper, a few weeks, and practically no capital. we should have understood that better and we didn't. >> august meeting. you are the first to push for a discount rate cut and liquidity measure. some people calling you prescient today. what were you thinking at the time and how difficult was it to get others to think that way with you? >> well, as i remember, the -- i think the august meeting you have in front of you, i think it was august 7 is what i remember. >> yes. >> that was just before the markets started to really break apart. and august 7 was a tuesday and the thursday right after that the markets were already under distress and we had a st. louis fed board meeting and st. louis
i think was the first of the reserve banks to propose a discount rate cut u and it was a consequence of my feeling very strong feeling that we had a lot of problems with the stresses in the commercial paper market that were becoming very visible by that thursday, wednesday and thursday. >> bill? >> yeah. >> you know, it is interesting and i'm fascinated to go back and read all this stuff, but i think it is important to read history for what it tells you about the present. i wonder if we go back now and look and had the things that you said been true, for example had the fed known more about the banks and the pervasive sub prime, had it reacted earlier than it did and not been as concerned about inflation do you think the outcome would have been different? wel well. >> well the out come would have been different only if the fed and others had reacted back in
2004, 2005, 2006. but the problem was it was the official policy of the united states government both president bush and the congress to encourage sub prime expansion. that was the problem. even if we had known, if congress would not have cooperated, then the problem would not have been avoided. >> the other thing i think is going to be important for the current debate is the fed doesn't really see it coming all that well. raising the question of right now would the fed see coming the opposite side say stronger than expected growth or inflation? should this make us cautious about how much we rely on fed forecasting here? >> i have consistently year after year while i was in office and before and since emphasized the importance of forecast errors. you cannot build policy on the
basis of points alone and therefore we have to be prepared for the economy and inflation rate to come in either above or below the point estimate. and the failure to be so well prepared for those outcomes is where we get into problems. and where we did then and where we could now. >> william, you said we haven't had a fiscal policy coinciding really since the end of world war ii. how do you envision those two factors comingling this year? the issue is how fast things might become unwravld if there is no fiscal plan in place by the end of the year. at the moment it does not appear we are on a road to putting our long-term fiscal policy into
balance and if that remains true, by the end of this year that we are essentially where we are now then the risks accumulate and the federal reserve has been printing money to finance the government deficit, buying a lot of government bonds and at some point that is going to come apart and it might come apart, might come apart in a fashion that is rather like august of 2007 where things seem to be going smoothly and then all of a sudden it all falls apart and the question is do we have adequate contingency plans in place should that happen? >> right. >> i fear we do not. >> before we let you go, when these transcripts come out do they evoke any memories for you good or bad about these meetings? >> oh, well they evoke lots of
memories. i haven't seen the transcripts of course. i look forward to reviewing it because that was my last full year in office. it was a wonderful experience to be there. i learned an awful lot. and certainly one of the things i reflect on is the various points that we missed that i missed and my colleagues missed. >> william poole, former st. louis fed president, thank you so much for your time. steve, thanks to you for sticking around. >> my pleasure. >> meantime morgan stanley trading sharply higher after reporting results this morning. how do you play this stock now? it is up 7%. best day in seven months. we'll be right back. [ male announcer ] you are a business pro. omnipotent of opportunity.
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shares of morgan stanley a 52-week high this morning after strong earnings. fresh off the conference call, an equal rating on morgan stanley price target of 25. roger, good morning. >> hi. >> your note this morning said be prepared for some softness in the shares. that didn't happen. why? >> it didn't. you know, they put up strong results but i think they did a good job on the call of walking through a path to sustainably higher roes and what looked like kind of a conservative outlook i think they made clear where the lefrs are to move higher than 10%. investors are looking for something i think closer to 15%
return on equity. but there are definitely levers from stock buybacks down the road to better market conditions that can drive it up there. i think that is what you're seeing. >> so when they promise 9% in 2013 that is reasonably guess in your view? >> yeah, it's reasonable. obviously market conditions need to be at least at what they were last year but our view is they'll be stronger. i think there's, you know, the outlook is decent for the year. >> you even write it is not clear why it was such a problem in the quarter. have you figured that out yet? >> yeah. it was mostly commodities. you know, there were some issues around the hurricane. it impacted the business which we knew about. i think just more than we built in. they were disproportionately strong in the third quarter so made it sort of tough forecasting. there really weren't any huge standouts beside that in the quarter. >> obviously they've made a lot of news not of their own making regarding compensation.
you say they've been steadily chipping away at areas of investor concern and are actually showing evidence of that progress, something not every financial this week has been able to do. >> yeah. i mean, i think it's kind of been our point on morgan stanley. there have been areas whether it was, you know, how the j.b. with smith barney would eventually unfold. legacy assets on the book sovereign and otherwise, cost structure, and they've been working on all of those things and they are showing progress. there's still more to go. the roe is still at levels that need to improve. but the valuation has been for today it was still at levels that were, you know, they had been at at points in the past when there were a lot more concerns about the company. we thought that didn't quite make sense. >> yeah. interesting quarter. interesting day. thanks again for your time. see you next time. >> absolutely. take care. >> roger freeman over at barclay's. have you ever wanted to own the batmobile? now is your chance. it is up for auction this
weekend. we'll tell you how it can be yours. robert frank is up after the break. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card
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robert frank has some of the details on that. let's go. >> yeah, carl. scottsdale like you mentioned is the auto plooza for wealthy car collectors. this year is set to break an all-time sales record. more than 2,000 cars expected to bring in more than $200 million. shattering last year's record of $183 million. you can see in this chart the car collector market has not only recovered from its recession. it's blowing past the good old days of 2007. jackson is the company at the center of the event this week. the ceo craig jackson told me confidence is back among the big car collectors and he said bidders have $1 billion in credit lines on the sidelines. that is a lot of cash ready to buy. the stars of the show? they include clark gable's 1955 gullwing mercedes. beautiful car. and another one a 1960 ferrari 250 gt. it could sell for up to $8