>> then we have tim geithner. >> tim geithner tomorrow, too. >> a lot of important people. >> today we also want to thank steven roach. it's been great having you here for the two hours. >> always great to be with you guys. >> all right. that does it for us today. make sure you join us tomorrow for the big show. right now it's time for "squawk on the street." good thursday morn ing. welcome to "squawk on the street." i'm melissa lee with jim cramer live from the new york stock exchange. david faber's at headquarters. carl quintanilla is on assignment this morning. u.s. futures are setting up bouncing on the jobless claims number coming in unchanged. but the four-week average dropped sharply. in fact, the lowest we've seen since march of '08. on the dow looks like we'll add about 20 points. taking a look at the action across europe here as we await the ltro next week, mixed bag there across europe which is fractions of a percent moves. let's hit the road map for this thursday. target posting its best full year sales growth in about four

years. sears holding surprises with plans to spin off 1,250 stores and sell 11. vivus rocking a premarket trade. more than a double at this point. an fda panel backing their weight loss drug paving the way for potentially final approval. hewlett-packard disappoints, sets the bar even lower for the current quarter. is this the inflection point for the company or is there more trouble ahead? an exclusive with ceo meg whitman in just a few moments. apple meeting with shareholders this afternoon. could it finally announce a dividend? we should note the stock is higher right now. we did want to start off with our pair of retailers in the spotlight this morn ing. target reporting better than expected fourth quarter profits helped by rising sales during the holiday season. discount chain also sees full year earnings exceeding wall street estimates as for sears, the parent of sears and k mart posting a wider than expected fourth quarter loss but plan to spin off 1,250 stores and sell

11 others in an effort to boost liquidity. both stocks are trading sharply higher. particularly sears which may be the subject of a short squeeze this morning. >> one of the things that happens, eddie lampart, old friend from when i worked at goldman sachs has decided, i think, to be able to start taking offensive action after being with defense for a long time. he's showing you there's great value to the leases of the stores. also i want to point out one of the things that sears had -- the big issue had been is there liquidity. i think he's taking it off the table. right? he's got a lot of money coming in. saying we're alive, we're well. we're going to keep the good stores. maybe we get rid of the bad stores. listen, this is a positive story for sears. target, i think, is a zero sum game to some degree with walmart. walmart was very disappointing. looks like people are going back to target. a lot of people felt target had lost its way. this morning it looks like it's kohl's that lost its way. there is not enough room for everybody here. when one does well, the others

seem to do badly. >> what was striking about what macy's said in its earnings report this week it was gaining market share. you wonder if it's gaining it from kol's at this point. when kohl's is losing. i'm curious in terms of sears holdings, the ceo made it clea they wanted to separate the earnings issues, short-term earnings issues with liquidity problems, strength of assets and liquidity. >> listening to the conference call, sears has rarely if ever held a conference call. eddie lampart the 61% holder of sears controls the company not on the call. the new ceo leading it with a number of other participants as well. they did go into cost reductions. into unlocking the value of the portfolio as they refer to it. and to jim's point, this rights offering. you see the stock is up sharply. as we've said so many times, melissa, it was a heavily shorted stock although almost impossible to short at this point given how expensive the borrow is if you can even find shares to borrow.

but that being said, the rights offering when you have the 61% shareholder who says i'm in, it's going to happen. that's going to raise them another $400 million to $500 million. they're trying to separate liquidity issues from operations issues. jim, when i come back to operations in sears i would add one thing. if sales keep going down it's not a good thing. at some point you've got to have a comp that's actually up. don't you? >> yes. one of the things i'm very intrigued to hear, we've got a ceo here, eddie had been running the company. a lot of people thought he was running it in his back pact. a new ceo. the company has been challenged from leadership. i have to believe, never been broken down, there are some stores making money. we've been waiting for the rationalizati rationalization. david, what i think this says is those rumors about cit cutting off credit, the idea that maybe there's not going to be enough money to buy inventory, off the

table. bad short. maybe not a good long. >> and the rumors of their demice or at least imminent demise greatly exaggerated. certainly ease city to say when you watch the strok approaching $60 that was half that not that long ago or close to it at the end of last year pm we'll have to wait and see what this management team is capable of actually delivering when it comes to sales. >> right. >> and increasing sales. you can do all the machinations in terms of the balance sheets and orchestrate short squeezes. but you've got to put up some numbers that make sense at some point in terms of why you buy the stock. >> it is the old story if you're in advertising. there's a famous story which is you can advertise the heck out offing to food. in the end if the dogs don't eat it, it doesn't matter. there's something that happened this morning that i think is devastating to the bears on the higher price of gasoline. darden. red lobster. okay? olive garden, one of my absolute favorite places.

love the unlimited salad bowl. they're saying 2.5% to 3% comp growth in the face of gasoline growing higher. clarence otis said $4 gasoline can hurt his business. not anymore. i'm struck, one of the central issues of this market is how can we be going up when we're paying $4.17 for gasoline as i did on saturday. >> i was talking to a retail analyst the other day. she said it doesn't matter. $4 gasoline, right here right now. as long as it's not the summertime when it's peak driving season people are willing to put up with it. >> it is an amazing story. >> it is amazing. especially on a day when brent crude is reaching a nine-month high. $124 a barrel. >> there is a disconnect to a certain extent. one has to wonder when it's going to matter if it doesn't now. if it's not affecting darden, jim, there's something going on perhaps we're not taking account of. maybe more people are working. >> how about the fact we got claims this morning that are great? growth does not conquer all. but it conquers a lot. if the economy is going up as opposed to down in 2008 when oil was going higher, you may have

a -- lest just say a stasis here. >> when walmart reported the other day, people got concerned, of course, given the margin depression there, price competition. you've got target coming out. that question of the strength of the economy, especially the lower end or the middle, let's call it. the huge middle that tends towards -- and gas prices being a key part of that. which is it? you wonder, as you watch walmart which was weak yesterday, looks like it may be a bit weak today. target comes out with nice numbers. >> in january, target meaningfully took down its forecast. >> that's true. >> you fwot to wonder, what happened when they took it down so severely. they cut it to the bone. remember the reaction in target shares that day? we were wondering what was going on with target. then all of the sudden we come out with a beat and a raise? >> how about limited? we did the opposite of limited. raised and then fail. >> in the month after they took down the forecast, did things pick up that greatly or were they sandbagging in january? i don't know what the answer is.

what is management telling us at this point. >> all over the map. i will tell you retail is all over the map. every time i try to draw a conclusion like walmart, maybe the low end not doing well, kohl's medium to low end. happen to like kohl's price points when i go there. akin to jc penney. trying to draw a conclusion in retail reminds me in 2012 we don't trade as a unit. atf of retail seems to be breaking out. i would point out without a doubt it has never been more of a stock picker's market in retail than i have ever seen. limited down. tjx didn't rally after the great quarter. could pick up steam. yesterday ross stores which didn't even report is the home run name. tough cross current. let's talk vivus. fda advisory panel packing the weight loss drug. if the fda agrees qnexa would be the first prescription diet drug in more than a decade.

z zenical back in '99 the last approved. this is a staggering move. also related moves. arena pharmaceuticals. a couple other ones. >> i remember when american home products was almost destroyed by fen. phen. it looks like this epidemic is so bad we're going to overlook, literally just let people have this drug. we've got to stop the fat epidemic and they're doing it. and i think one of the reasons why the stock is up so much is people felt in the end after fen-phen, zenical, not that successful, the fda is not going to bless a pill that makes you thin. wrong. fda's not worried about obesity. big change of focus for them. >> the short interest on vivus has been very high. what we are witnessing is partly a short squeeze, perhaps, of the shorts getting shaken out. >> i remember vivus from the old viagra wars, too. wasn't that their original -- one of their original products?

>> i think you're right. that could be the key to the market, david. >> i think they have an injectable erectile dysfunction. >> which is worse? injectable erectile dysfunction or injectable eyeball. >> i can't speak for the former. the latter sounds pretty nasty. meantime, we got to hit hewlett-packard. weakness in pc and printer sales causing hue let's reported 44% drop in fiscal first quarter earnings. ceo meg whitman who's been on the job since september says it could take years to turn things around at hewlett-packard. david will be chatting with her in just a few moments. but, david, i'm curious what your initial assessment of the quarter was. >> we'll talk to meg momentarily and obviously many questions there. i think she -- she may have startled some people in terms of talking about a turnaround taking as long as it will. there was some key questions about what one analyst called a wise spread lack of

competitiveness and concerns there. streamlining is something meg mentioned many times on the call. we'll get into all of those things momentarily with her. i think the analysts who sort of looked at it, well, kind of a mixed picture this morning. why don't we get started if we can with meg whitman? and -- there she is, in fact. as you said, melissa, hewlett-packard delivered earnings after the bell. there were above the expectations of analysts who called the companies. revenues were a bit below. after five months on the job at ceo meg whitman made it clear to those analysts any turnaround is going to take time, perhaps lots of it. she joins us now from hewlett-packard's headquarters in palo alto. i want to start off with that turnaround. you may have startled some people. you said in answering the questions as frankly as you did, saying turnarounds sometimes can take two years but sometimes four to five. is there something you've seen over the last five months that has given you, perhaps, pause in

terms of telling people this is going to be anything but a long, slow slog? >> as you know, hewlett-packard is an enormous company with five major business units. we operate in 166 countries. and given the kind of fundamental change that needs to take place, this is going to take some time. if you look at ibm, it took them ten years. we're obviously going to make progress along the way. you won't have to wait five years to see any progress. but we've got a lot of work to do. i know we can do it. i'm excited about it. i think we've got the right set of assets. we' we've got great people. we understand the challenges. we've got a plan. this things typically take some time. it took us a while to get into this, it's going to take a while to get out. >> when you say we've got a lot to do, give me some specifics. you mentioned streamline ing. you mentioned a lack of systems on the call. give us some sense as to what you're talking about when you say we've got to do these things and they take time. >> yeah. well, we have really three buckets of challenges.

the first set of challenges is what i would call basic company execution. we have not made the investments in systems and processes that we must to run this company more efficiently and effectively. by the way, to make it easier to work here and to make it easier to do business with hp. we, for example, our systems that allow us to take an order from a customer, make changes to that order, get it into the system, get it to the factory, out of the factory and to customers takes longer than many of our competitors. we need to fix that. our customer relationship management tools that the sales force uses are not up to date and we are making a change there. hp.com is not up to date and we're making some changes there. our supply chain, while i think we buy component parts very well, we don't think about our supply chain wholistically from designing in a way to limit the cost of the supply chain in terms of buying kpoenlts over time. do we build to a small number of

chassises. how many skus do we have. we do a good job there. i think we can do a lot better. that's bucket number one. bucket number two is each of our businesses have unique challenges. strategic challenges, operational challenges. i've charged those very experienced bu heads with, you know, shaping up their individual businesses. and then last but not least, there's some big changes going on in our industry. some existing profit pools are in jeopardy. new profit pools are forming. we're going to go after those new profit pools. >> is there too much bureaucracy at hewlett-packard? >> you know, there is too much bureaucracy. as i said, it's a big company. it's not unlike other big companies that over time the bureaucracy gets in place, well meaning policies get put in place. by the way, no policies ever get taken out at these big companies. so we're going to zero base the bureaucracy and we're just going to try to make it easier, as i said, to do business with hewlett-packard. if you're an employee, we want it to be a lot easier to get things done here. >> when you have revenues down

7% and expenses up 6%, that wouldn't seem to be something sustainable, certainly not if you want to turn around the company. how do you address that? you talk about streamlining. are you also talking about having to lower your head count, fire some people? >> you're right. a decrease of revenues of 7% and an increase of cost of 6% is not something we aspire to. we did meet street guidance because we set those expectations. because i knew what we were in for here. but we have to do better. so we've got to look at everything. we've got to look at, you know, how we run every single business. we've got to look at how we run the functional areas and how we do things better in things like supply chain. and -- but we're going to have to look at everything. because we have a cost structure that is not going to allow us to make the necessary investments in innovation, which is required to actually turn revenue growth around. so i like to call it we are going to save so that we can invest. so we've got to streamline

operations so we can make sustainable investments in the product lines that are growing, in the really fantastic parts of our portfolio in r & d. that will then, in turn, get revenue growing. and we will continue to increase returns to our shareholders. but we've got to make these investments on a sustainable basis. >> what do you do first? save first and invest later? is it possible to really do both? you did generate some free cash this quarter and $1.2 billion in cash flow. that's not an enormous amount for a company of your size. >> well, of course, this all has to flow through the p & l. what we've got to do is we've got to save on expenses. and then make a decision about how much we invest back into business versus how much we bring to the bottom line. we will continue to, you know, march up our earnings per share over time. we must make those necessary investments. so we do what business leaders who are successful do is they do both. they run things more efficiently and effectively. they make smart investments. those investments pay off. that's how you create the turnaround story we hope to

create at hp. >> i want to get jim cramer in in a minute. i want to come back to something as well that the analyst at bernstein asked you about on the call which was simply his question about widespread lack of competitiveness at hewlett-packard. you are losing share. particularly in printers. there's a question here as to whether it's simply about hp not competing as effectively against its competitors. >> yeah. well, i wouldn't characterize it as a widespread lack of competitiveness. there are certainly pockets of our business where we can do a lot better. we can have a one hp go to market much more effective than we do today. we've run this company as siloed divisions. which worked pretty well. those days are over. we have to compete more effectively with a broad and excellent set of assets. then each individual business unit does have to be more competitive, be more cost competitive, bring out our next generation of products. we're starting to see some movement in that.

our server business just introduced a new pro lion gen 8 line of servers. this is fantastic. things are going very well there. our pc division introduced the spector, a new ultra thin, ultra book. and won best of show at ces. we're getting our groove back here in product. but in the end product is everything. if you don't bring the right product at the right cost to the market, then you aren't doing your job and you're not going to win. >> i want to follow up. it's jim cramer here. on this competitive issue david faber just mentioned. we had a report from dell earlier this week. they've got corporations going up 3% on pcs. consumer down three. stunning declines in pcs for your company. you've got new iteration. that's terrific. corporate down big. consumer down big. how much do you have to undo what was done previously? because your company, previous management, made a statement that you're getting out of pcs. did that not confuse customers greatly? >> sure, it did. listen, our announcement last summer confused the marketplace.

people were -- are you going to be in the pc business? are you going to be out of the pc business? many customers said are you actually going to still be in the hardware business. we are in the pc business. we are in the hardware business. it's the dna of this company. we're very proud to be the leader in those businesses. with regard to pcs, the challenge in this quarter, of course, was the hard disk drive situation. a good chunk of that revenue decline is we didn't have the hard disks to make the pcs that we had orders for. so we'll see some relief on that in the pc business in the second quarter. but it was a tough quarter. there was some demand weakness. then the demand we had we couldn't fulfill. >> meg, you're saying that part of it was consumer and customer confusion. the other part was a shortage. the shortage is going to go away. the confusion presumably is no longer going to be there either in the second quarter and that will abate as well. what kind of a balance are you forecasting for the second quarter as both of these key issues, which you say are behind the big declines that we saw, are gone? >> well, remember, that's behind the big declines in psg.

listen, i think psg's going to have a better quarter in q2. we've still got some rebuilding to do. we are not where we want to be in china which is a very important market. so we still have some challenges in that business. but i think you'll see a better quarter in q2 for our pc division. our other challenge, of course, is in servers where we will not be through the hard disk drive challenge in q2. we've got more work to do there. we've got to match demand and supply. we've got to sell servers that we have disk drives for. that's going to be an industry wide issue i think continuing through q2. we've got to battle through that. then our other businesses have challenges that don't obviously relate to the hard disk drive. they've got their own set of challenges around price competitiveness, channel invento inventory, that i think will be better in q2. we've still got some -- a lot of work to do here. >> on the printing business, meg, quoting one analyst from goldman sachs he said in a note this morning management noted printing segment facing pockets of secular weakness. this commentary in stark contrast to management's prior

contention this division was merely facing temporary cyclical head winds. is that a comment you agree with? >> well, there's certainly pockets of this market that i think we are seeing secular decline in. for example, consumers print foeg ting photos at home. that has come in focus to me over the last three months in terms of that part of the business being in secular decline. i will say broadly there is an enormous transition from analog printing to digital printing. think about the old heidelberg presses. those are giving way to big web printing. that is going to benefit us. some commentators say there will be 200 billion pages a year that migrate from analog to digital. we want to be there to take advantage of that. but, of course, we do see some secular declines in some segments. now, i'll also say ink we still believe is very correlated with consumer confidence and gdp growth. by the way, the macroeconomic

environment in europe and in the united states still is not robust. we're seeing pockets of strength in europe in a couple of the big countries. things do seem to be somewhat better in the united states. >> yeah. >> but i wouldn't say the economy in either of those two big markets is on fire by any stretch of the imagination. >> last time you were with us you gave us the sort of ink supply indicator. again, in terms of sell through. you noted then, of course, how weak it had been in europe. what a good indicator it has been over the last 30 years in terms of what consumers are feeling and in terms of gdp. give it to us again, both europe and the u.s. >> historically over the last 30 years ink sell through, largely consumer and small office, home office is a very good predictor of gdp recovery, gdp growth, consumer confidence. >> has it gotten better? >> we don't see a lot of strength in ink sell through. ink sell through is weaker than we'd like to see it. that tells me that the economies aren't turning as fast as, of course, everyone would like to see. >> on the call you mentioned under investment a number of

times. did mark hurd simply not invest enough in the company to make the numbers quarter to quarter. >> mark did a number of very good things for this company in terms of integrating the compaq acquisition and getting costs out. created a shared services model on ip, finance, hr, legal that i think is state of the art. now what i'm trying to lead is go into each of the individual businesses, revamp our business processes. the way you need to run a company in the 21st century is you have the optimal business processes that allow you to run the company effectively for customers. that's work we still have to do. and then we've got to make investments in r & d. i personally think we cut r & d too hard here over the past four or five years. we're below r & d levels in many of the businesses. it's a credit to hp that we are still able to bring out terrific products that meet customer needs. imagine what we could do if we invested at industry levels. i think we'd be cutting edge in terms of the products we bring to market. >> two years, four years, five years for a turnaround.

when are you going to know that you're successful? >> listen, i think we'll -- we'll noe a lot by the end of 2012. we'll see how things have gotten -- if they've gotten better over these four quarters or if we're still in some of the main challenges. and then i hope in 2013 you'll start to see some revenue acceleration. but, you know, i've been on the job five months. there's still a lot i don't know. you know, if i learn as much as in the next five months as i did in the first five, i'll have a much collier view. but i feel very optimistic about our ability to turn this ship. it is a great company with a great set of assets with very committed people who want hp to win. with customers who depend on us. with partners who have staked their livelihood on this company. so i feel great about our prospects. as i said, it took us a while to get here. it's going to take us a while to fwet out. >> an executive management team that apparently is now in cubicles, no longer offices, right? >> yes. we moved from our offices into cubicles. it's actually been fantastic.

the amount of conversation that takes place over the cubicle walls. the amount of shares of information on an ad hoc basis. it's made a big difference already. you know what? the executives, they're getting used to it and i think they like it. >> okay. you think they do. all right. meg whitman -- sfwl i'll tell you a funny story. i was talking to one of my executives. i said, what do you think? the executive said, i'm open minded. >> open minded and open walled now as well. meg whitman, as always, thank you for joining us. appreciate it. >> thank you very much. >> meg whitman, ceo of hewlett-packard. melissa, back to you. coming up, another "squawk on the street" exclusive. we'll be talking to teva pharmaceuticals ceo william mart. back in two. intuitive trading platform that thinks like a trader. fine-tune technical analysis with the integrated chart tools sidebar. to seize an opportunity, i have to see it. with this, there's no more hide and seek.

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♪ we are live from the financial capital of the world. the opening bell set to ring in just about 1 minute, 40 seconds or so. what was your initial reaction to meg whitman's interview. >> that's a monumental job that she has. i love the fact -- she's a diplomat. i'm not. mark hurd gutted the company. there's not much there. the last guy between that also gutted the company. it's been two terrible ceos. good luck to meg. it's going to be a four to five

year program. i liked her analogy. >> if you had fresh dollars to put to work today, in ibm, a stone's throw near a 52-week high or microsoft which hit a new 52-week high in jyesterday' session or hewlett-packard? >> not hewlett. ibm transition that's seamless. two management transitions at hewlett-packard that are horrendous. hewlett-packard, no. >> just no. just say no to hpq. >> nancy reagan philosophy. >> within technology also watching a level three morgan stanley upgrading the stock this morning. >> there used to be axes all the time. guys who knew something versus the other guys. simon flannery at morgan stanley has had the edge in telecommunication. this upgrade is astounding to me. one of the most hated companies. people left it for ted. jim crow, ceo -- i have to point that out. people think, cramer, come on.

he's delivering. i like him. i always liked him. he's surfacing. lblt is a buy. >> here we are with the opening bells on this thursday morning. take a look at the cnbc realtime exchange. here at big board, the united states commodity funds chief investment officer john hyland. at the nasdaq star of bravo's million dollar listing new york, brian surant along with eddie shapiro. >> i've got to mention this. eddie lampert. i'm going to draw a larger conclusions from sears. eddie lampert might not like this. real estate lending. commercial real estate. you could not do that deal without the banks opening spigot. one of the largest areas that's hampered the banks, commercial lending with they haven't liked it. the take away from the sears deal is two-fold. banks are going to lend again. buy the banks. secondly, unemployment extension, payroll tax deal, they're working for retail. because we were searching earlier for why retail might be doing better. what a positive scenario versus

gasoline. always got to put that in. >> gasoline, do you buy the notion that unless tit's summer driving season americans don't care about $4 a gallon gasoline? >> i think there's not so much sticker shock as sticker revulsion. if you have a job you're not going to be stopped by the pryer price of gasoline. we get to $5, melissa, i'm seeing some unbelievable reporting by michel in israel. i keep thinking, listen, there's going to be a war. i mean, that's the tenner of her reporting. you should continue to hoard oil if you're a commodity player. fill these tankers with oil. i want to play. that story can't go away. >> do you believe that darden restaurants right now, have we seen the worst for darden? >> yes. >> yes, we have? >> i thought it was a value trap. but they're able to reinvigorate two of the -- it's been -- olive garden's good, red lobster's bad, vice versa. looks lake they're all on track.

clarence otis, i salute you. i should have endorsed you. i was gun shy. >> why do you like this? i'm asking you why you like this number because it seems like there are a couple one off factors. first of all, the shift in lent. the shift in lent apparently helped boost u.s. same store sales as well as warmer weather. if those two things don't necessarily continue, these sort of artificial unseasonal, unusual boosts? >> i guess what i'm more focused on is the fact that otis had been so bearish when gasoline gets high. and he isn't this time. >> you don't think he was kitchen sinking it back then? >> you know, i think he's too honest a guy. i love him. i'm just thrilled for him. i'm thrilled for the company. i think this is a company that people -- it represents where people go when they've got a couple of bucks in their pocket. i like the numbers. i'm not going to look through them even though counter shift does matter. 2.5%, 3% consistent would be amazing. >> i feel like next earnings season we're going to hear about higher gasoline prices, higher oil prices. that's going to be the number one thing to be thrown into the

sink. >> everybody who's reported so far this year who is levered and has a higher cost, food stocks, they're all talking at this florida conference. their numbers have to go down. it takes a tremendous amount of gasoline to ship product from the factory to the store. >> all right. let's bring in bob pisani standing right here off to the wings awaiting his turn. >> i know you guys have been eagerly talking about sears and limited and hewlett which opened down 6% now. very weak open. i have been reading the earnings from the european banks. you would think this greek thing is bloodless. you should see what they've been saying. credit agricole, dexia. all reported huge losses. credit agricole ceo says we're in the worst economic crisis since 1929. a little over the top there, my friend. but heavens. give you an example. 3 billion euros, they lost. that's the loss they had in the quarter. they took a 220 million euro charge. this is one bank.

credit agricole. just to write down the present value of the greek debt. they have been writing it down in previous quarters as well. this didn't just happen out of nowhere. my point of bringing this all up, this is not a bloodless cost. they are getting hit badly. that's why a lot of people think this big ltro next week from the european central bank is going to be close to a trillion dollars, not -- trillion euros, not 400 billion euros. because the banks are going to need all the money they can to get through this crisis. >> is this why jpmorgan is expanding rapidly in europe? is this why morgan stanley is saying this is the opportunity for us, not the chaos? >> let's put it this way. it's very interesting that a lot of people, a lot of he think fund traders are trying to buy up all of this bank debt right now. there's an awful lot of negotiation. there's a lot of little -- let's not call it shenanigans. >> u.s. hedge funds or european hedge funds? >> both. >> both. >> they're looking all over the place. there's big money definitely to be made somewhere if you get it right here. meantime the eu came out.

european union came out and said they're expecting a recession in 2012. i don't know if you've noticed. looking at the european stock markets, portugal, italy, spain, the southern markets, they're all topped out. they've all been moving sideways for the last -- they've been down notably the last two days. it's looking a little toppy right now. i have to say, in the united states have you seen the transports started rolling over about two weeks ago? that, to me, is very noticeable. >> oil, oil, oil. >> cereals looking toppy. home building stocks have looked toppy. bank stocks have gone nowhere. >> are you getting more bearish than markets, bob? >> i watch what the traders watch. when the market leadership, when you have -- >> declining number of 52-week highs as we reach higher highs? declining volume as we go up? >> even the fundamental guys will say, by the way, we love the fundamentals. the chart looks great. >> i have a question for you in terms of volumes on new york stock exchange. we were having this debate on "fast money" last night.

there's a lot of volume on options exchanges. derivative volumes have been going up as we hit on these highs and here in stocks volumes have been going down. >> i talked to options guys. they don't have titanic volumes. the only place i'm seeing a lot of volume is currency traders. l >> that market is red hot. >> i don't see it in options or stocks right now. >> what do you think about shapiro. tax on the high posting traders. wouldn't that eliminate their game? >> she's talking about a transactional tax. putting a tax on that would damp down trading. you can say it's good or bad. sort of depends on what you're talking about. for sure right now volume trading, retailers down, institutions down and high frequency trading is down because the volatility is so low

they can't make any money in that kind of environment. i just want to make a quick comment. you were talking about kohl's here. jc penney is sucking the traffic away from them. as far as i can tell. that's the single biggest problem they've got right now. they're losing share. >> already? this has only been going on for a couple weeks. have they actually gone through every store and remade them? >> no. in general. this has been going on for a few quarters now. i think that's the biggest problem. limited, i'll tell you what i think about limited. that company is going to explode in south america, in europe as well as in asia. i think 10% of their sales are outside the united states right now. of course, this is body works and victoria's secret. they're going to ramp up tremendously in the next few years. >> it's been a buy every time it got hit. i reiterate, one of the great unsung retailers. it's out there columbus. >> company's going to be big.

three, four years you're going to see 40%, i'll bet you, of their sales will be outside the united states. >> bob, good to see you as always. meantime, let's check in with rick santelli at the cme group in chicago. bonds and the dollar, rick, what's the latest there? >> melissa lee, it's interesting. because we've all been cognizant of the fact that some of the positives regarding our economy, some of the positives you're left with after greek bailout do -- have improved conditions and rates have come up. as you look at a 2-day chart of tens we're seeing the pac man effect the other way. we're eating through this 2%. we bounced off it yesterday. we're hovering just above it today. really need to pay attention. the bund's pattern is similar. that's a 10-year overseas. everybody's watching the euro. it has made fresh highs going back to december. if you look at the dollar/yen, also fascinating. flirting with the highest level since july. not many down days for the dollar. as a matter of fact, not including today, we've had seven sessions in a row of a higher

dollar. today could break that string. we want to monitor it closely. back to you. >> thank you very much, rick santelli. we are watching oil. >> wow. these oil service stocks. this morning -- transocean might be out of the liability for macondo. where the oil is, when you have oil -- when you have brent over 120, people are putting money to work. that's why national oil avarko is taking out its high of 2008. a group to watch. people are piling into it. >> in terms of companies on the hook for civil liabilities as a result of a court ruling which said eventually that bp and an darko would both still be on the hook for civil liabilities, there could be lawsuits on a civil basis. does that make them a difficult investment story? >> a lot of people were feeling there was going to be liability there. anadarko was breaking down ahead

of this. bp was at a 52-week high. i hate bp as a stock. why? all the others have given you a fabulous run. they're not. anadarko has fantastic prospects of mozambique. great ceo retiring. hackett was one of the fore mast oil men of our time. vivus's weight loss drug qnexa getting approval by an fda panel. they don't necessarily have to follow the advice of an advisory panel. it certainly paves the way for an approval there. we are seeing the stock up. this is a double. >> the obesity epidemic is something so many people have tried to tackle. it has not been successful. obesity is, perhaps, sadly the largest market in the world. so this stock -- if this pill works, hey, you know what?

get me to the doctor. >> you haven't got an ounce of body fat on you. what are you talking about? >> i can go have a couple of steaks at capital grill. >> you can eat more? david, save us. >> you both look great. i'm sorry i'm not down there with you. talk about a double, by the way. sears holdings is an official double from the lows at this point. those lows were not long ago. really amazing. stock up 14%. of course, after a conference call, earnings that were -- not even earnings. a rights offering that includes a spin and liquidity measures that are being taken, i mean, quite a move there. yeah, we can keep saying short squeeze, short squeeze all we want, jim. at the end of the day perhaps your words are well regarded in terms of no longer a short candidate. although, i don't know. each point up you've got to wonder if people don't get a little itchy here. >> david, look. the fact it's able to do a transaction at all. six weeks ago i had to deal with

endless rumors that cit was cutting off credit. this is really one of those stories. i think people at home have to understand this. when you get a battleground where there's a lot of shorts, you're going to get a lot of rumors that are negative. what eddie lampert did in the call, you rumor mongers, short sellers, move on to another stock. >> yeah. it helps when you control 61% of the company. finally -- there is mr. lampert who was not on the conference call, by the way. perhaps he's giving a little more reign to his ceo. hasn't worked out in terms of his day-to-day trying to manage this thing from his chairman's spot. in the brief time we have, hewlett-packard down rather sharply. just curious. meg whitman seems to be walking a fine line here in terms of trying to instill confidence in her employees and her customers, but also sort of telling people, things aren't so good. it's going to take me a long time to fix them. >> i heard the following. don't buy my stock. i'm not ready. >> that's what i heard, too. >> versus her first talk which

was buy my stock, i'm ready. i actually like the fact that the expectations are now very reduced here. however, i can't -- david, you know that when you gut your business the way it was before, ibm went from 100 to 50 before lou came in. it was terminal. or it seemed terminal. david, do they have enough cash to make this so it's not terminal? >> well, i mean, i think if they cut costs effectively, she wouldn't go there in terms of layoffs. one has to imagine that will be part of it. if they can cut costs effectively, they are still generating cash. >> but printers, david. >> they don't have a lot of cash. >> printers! your questions on printers made me feel like, hold it, head for the hills. >> yeah. good margins there, too. i know. particularly on the ink side. we'll see. it's going to be very interesting to watch. and to judge. when did she say? the end of this year, perhaps. i think she'll be with us perhaps each quarter so we can check in. all right. coming up next, turning patent expirations into profits.

a live "squawk on the street" exclusive with the ceo of teva pharmaceuticals americas, william marth. and find out how the giant is looking to ward off competition. as we head to break, this morning's early movers on wall street. sears holding up 13%.

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generic drug makers taking aim at the branded drugs. teva pharmaceutical doing a joint venture with procter & gamble to expand its horizons. joining me exclusively, bill marth. president of the teva pharmaceuticals america. been a frequent guest on "mad money." good to see you. >> good to see yo, jim. >> let's get to an issue that's near and dear to a lot of people, particularly parents. there's been a shortage of a lot of key drugs in this country. drugs for childhood leukemia. you've got a plant in southern california that has had manufacturing problems. if that makes a key colon cancer drug in short supply. what is teva doing to be able to eliminate a third world problem

in a first world country. >> we've been working hard with our irvine facility to bring that back online. we have -- right now one of our lines running full time, 24 hours a day. we have a second line coming on in just a few days. and then two lines thereafter later in the year so that we'll have all four lines back up in production sometime around mid-year. it's been a really difficult time. >> but that's terrific news. because colon cancer, we actually had a good survey come out today saying how important the colonsoscopy is. i want to know what made teva change to go into a dividend which has apparently put a floor on the stock. what kind of major decision did you make from capital allocation from the company. >> that's a board decision. i believe the board's philosophy here was really returning capital to shareholders. you can return capital to shareholders in a variety of manners. you can do that, of course, with

buy back, which we have done. now increasing the dividend has just been another way to increase that yield to your shareholders. i would say we have a history of our dividend being raised over the years. and i think that's appropriate time for us to do so. >> i'm very worried about the copaxon problems in terms of generic court challenges. what is sef lon doing, a company you made in acquisition? >> two great points i would make. with coaxone we feel really good about the case itself. we believe very strongly in the complexity of this product. we believe our exclusivity will be maintained probably through 2013. that said, the sef lon acquisition was about diversifying our platform on the specialty pharma side. being able to tap into more expertise here in the u.s. as well as a better pipeline.

a number of products that we think will be important for the u.s. market over time. >> bill, a huge issue for pharma companies in general has been this patent cliff which they've been facing. the flip side for you is that's good for your business. at the same time, they've been working on getting drugs in the pipeline. does look like in 2013 the number of drugs going off patent will drop by half. seeing 2013 could be a light year in terms of generic drugs, what do you anticipate doing in order to stave that off. >> i see a couple of things happening here. number one, the opportunities for us, we don't believe, are really fading. you think about the broader u.s. market as a whole. it's about a $300 billion market. about $50 billion of that say tributed to generics. the other is a mixture of buy logics which we're chasing through our biologics initiatives as well as generics. we're after both. we still see a lot of value here in the u.s. market because there's a lot of innovation and that's a good thing. products just aren't as large as they once were. they're oftentimes more complex.

we still see a lot of volume in front of us, a lot of opportunity. you know, i would say, as we see the change in health care with the patient affordability act of 2010 that's coming in, that's going to bring in another wave of volume. that wave of volume means more generics. because over 75% of the time generics are dispensed. >> bill, i know you're the americas teva. but in europe we're seeing all these crises with all these governments. i was talking to bob pisani about how strapped the governments are. we saw first solar, solar stocks get hit because of cutbacks in solar subsidies in germany. these countries are really putting the screws to a lot of health care companies, a lot of drug companies. what are you seeing in europe? >> jim, i would say two things about europe that i think are really important. number one, we're not a singular european player. when you think of other players in this space, you think of singular markets. we are the largest player across western europe which puts us in many markets.

and when something is tough in one market, something is helping us out in another market. that's really important. and i think the other issue to think about is generics in total are underutilized in europe. this is an opportunity where austerity may be giving us a boost on the generic side to push more of the savings that's necessary for governments to be able to meet their current crises. i think it's a positive thing for generics as you move forward. although i'd hate to see it going through this particular manner with austerity, it's good for generics. >> excellent. bill marth is americas teva's e ceo. thank you, sir. the trading day is young. much more "squawk on the street" straight ahead. coming up, we love numbers. so does cramer. his six stocks in 60 seconds is next. count down to all the fun. we'll be right back.

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time for six in 60. six stocks, 60 seconds. kellogg getting upgrade from buy to hold at deutsche. >> brilliant acquisition of pringles. going to work. >> amazon.com price target

lowered to 180 from 190 at barclays. >> apple versus am zon. kindle sales look like a short fall. >> sales force.com out with earnings tonight. expectations for revenue as well as eps very high. >> total cross current stock market. is this the turnaround quarter or not? >> juniper networks downgraded. >> old news. >> metro pcs beating first quarter estimates. >> shocking number. both leap and metro pcs often mentioned as a takeover target for at&t. >> you are watching procter & gamble. tide. >> single serve tide. can they do k-cups? it's expensive. people may like this product. >> single serve tide. >> they need a win. they've been hurting. >> i don't like how when you pour it out it leaks. it leaks all over the place when you're doing laundry. for more on the stocks go to sots.cnbc.com. you've got mark ben benioff on

tonight. meantime, coming up, apple ceo tim cook getting ready to meet with shareholders of the world's most valuable company. perspective from a shareholder and an analyst who covers the stock. meantime, stay tuned. more "squawk on the street" straight ahead.

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welcome back to "squawk on the street." 30 minutes into trade. this is where we are. it's a negative bias to the market as you can see. both the dow, the nasdaq and the s&p falling within that first 30 minutes or so. on the commodities, of course, we're very conscious of where we're going on oil at the moment. certainly we have brent higher earlier today. let's move on to some mid-tier -- other stories, mid-tier department store chain kohl's hurt by disappointing holiday sales season. this being the first revenue te klein for kohl's in nearly three years. kohl's shares getting hit today, down over 4%. casino hancho steve wynn calling

for an emergency meeting. district judge saying anadarko and bp are liable for civil damages. today's meeting taking place just days after apple shares soared to new all-time highs. what should we expect? will the company finally do something with that big pile of cash it's got. joining us on the phone, mark mckeckny. nice to speak with you. in terms of a dividend, certainly they have telegraphed the notion that the board is actively discussing what to do with their cash pile. do you think now is the time to do something? do you think they are going to do something? >> i think it's likely. they actually on their website, they've got a schedule of past dividends they put up probably a few months ago.

last dividend was paid in october of 1995. 12 cents. but, you know, we welcome a dividend. they could buy back shares. hard to guess what they're going to do. i think it makes sense. >> do you think the dividend -- there's a lot of -- i don't want to say conspiracy theories. with apple there's so many people delving into the details of this thing to try and back out what kind of dividend they can pay. do you think it would have to do with the amount of cash they generate here in the united states? >> yeah, it's interesting. because of the repatriation laws. i think that would be a factor. also how much of their existing balance sheet is in the u.s. >> what other things do you expect from this meeting where they actually discuss the launch of the ipad 3 or the itv? >> yeah. this will be the first shareholder meeting i guess without steve jobs at the helm. i'd like for a generally positive tone. review of last year. hard to say -- you usually don't get many hints on new products from apple. but maybe you get some

discussion on itv. they've talked about their apple tv as being a hobby. they don't want it to be a hobby forever. maybe some more hints from tim cook on that front. >> mark, while we have you here and the luxury of the analysis, where are you on the forces that are certainly on the phone front that are lining up against apple? rather than just talk about samsung, let's talk about nokia. those two launches we believe in barcelona monday. one of which could be a lower price offering. do you think they're secure in the sort of projections we've got for the iphone at the moment or do you believe there's trouble down the line? >> i think apple is still pretty strong. i mean, you have these bear cases that the android community comes out with lower priced phones. samsung is really the only major competitor out there. rim, you know, the windows phones from nokia i think are much more challenged. you know, we're hoping to see mid-year from apple the iphone 5. i think they do need to keep innovating and, you know, maintaining their leadership.

you'll see a lot of competitive phones out of mobile world congress next week. probably nothing that dents apple. >> mark, it's interesting that apple's price action if you take a look at when it hit its all-time high which was 526, it's now at 514, there are a lot of conspiracy theorists at that time. i use that word and i mean it, saying the wall street analysts out there were maintaining their price targets on the stock, so therefore people were taking profits because they thought the stock would run into a wall essentially because the trajectory of the move was so steep and so quickly. your price target's at $550. is it your view the stock simply ran too quickly or perhaps is the street not factoring in the power of the new products that it will launch out later on? >> you've definitely had an outside move in apple here. i think i look at it a different way. the stock was probably depressed around, you know, jobs' unfortunate departure and some disappoint that the 4s wasn't an

iphone 5. still reasonably attractive here. trades at about 11 times my fiscal year '13 number. i think there's room to go despite the big move. >> mark, good to speak with you. >> let's stick with apple and bring in a shareholder to get his opinion on today's big meeting. ryan jacob is a portfolio manager of the jacob internet fund. apple is his largest holding. he's been a shareholder since 2003 and owns, i believe, sir, about 6,000 shares as things stand at the moment. good morning. >> good morning. >> what would you like to hear today? >> well, it would be wonderful to hear more information about what their intentions are with the cash pile. we do think that a dividend is likely in the near term. probably a modest one. one that they can raise incrementally over time. and then also, you know, there is an outside chance we hear news in terms of whether it's a stock buyback or a share split later in the year. i think -- i think the board --

tim cook has been pretty clear in saying that everything's on the table and they're looking at it very closely. >> why do you want them to pay a dividend? how would you play that? because the classic thing to say is that other big investors will be drawn in, institutional shareholders would buy apple stock. would you be tempted to harvest your holding, some of those profits, if that were to happen and the price ramped up further? >> as growth investors with our mutual fund, we don't necessarily have -- have a strong opinion one way or another in regards to a dividend. apple is such a unique case. not that they already have about $100 billion in their balance sheet, but they're generating so much cash every quarter, every year. so it's very hard to justify in today's environment not to at least pay a modest dividend. of course, that would open up the company shares to a lot of other institutional investors. >> as a growth stock, is apple less powerful if it doesn't have $100 billion in the bank? is there a trade-off between buybacks and dividends and

actually the ability to cushion it through product launches and to have real authority when it does come out with a new product? >> well, in the past, you know, if they had bought stock over the last several years, it would have been very positive for shareholders. and they would have been good purchases. even paying a dividend, even if they did a special dividend, apple would still have a tremendous amount of cash on their balance sheet. leaving them plenty of flexibility for acquisitions. they haven't been very quiztive in the past. the acquisitions they've made have been relatively small. i think wall street would be very negative on a large acquisition. you know, tens of billions of dollars. is it possible? sure. but given their track record, very unlikely. >> even tens of billions of dollars, while it might be sizable considering apple's past acquisitions, it's not sizable in light of the amount of cash they actually have, ryan. i'm curious what your view would be of an apple acquisition and what sort of company you would like to see the company -- apple

acquire. >> you know, one company that does stand out probably would have been netflix. i think that given their push into television later this year or next year, bolstering their subscription service and video, that one stands out as being an obvious choice for them. you know, apple is in a position where they can look strategically with an acquisition, not necessarily financially, because they have so much cash. there are a host of others. but i would caution to say i think it's unlikely. apple has tended in their big product initiatives or service initiatives to do everything internally. i don't really foresee that changing. >> i see that -- i read that actually they could afford to buy amazon, netflix and coinstar and still have about $9 billion in the bank. >> and continue to generate more. on top. >> yes, indeed. >> that's all very unlikely. i do think, though, it is very likely that we'll see a dividend. and a little bit more use of the

cash that they keep generating at a pretty predy jous rate at this point. >> we'll watch on your behalf. thank you very much. >> thank you. >> have a great day. breaking news on nat gas inventories and sears posting a large fourth quarter loss, revealing plan to try and boost liquidity. is this too little too late? we'll talk sears' attempt to regain the consumer in just a few moments. line dating servicet kind of expensive. so to save-money, i found a new way to get my profile out there. check me out. everybody says i've got a friendly disposition and they love my spinach dip. 5 foot ten. still doing a little exploring... on it.

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♪ welcome back to "squawk on the street." want to direct our viewers' attention to shares of hewlett-packard which are getting hit fairly hard this morning. down 6.5%. the stock had been down as much as over 7% after reporting earnings after the bell yesterday. it wasn't the earnings per share number or even the fact that the revenue number was light. many would argue it is simply, perhaps, the tone of ceo meg whitman on both the conference call and an interview she did with us a little more than one hour ago in which she's simply making it very clear that the turnaround of this company is going to take quite a bit of time. take a listen. >> given the kind of fundamental change that needs to take place, this is going to take some time. if you look at ibm, it took them ten years.

we're obviously going to make progress along the way. you won't have to wait five years to see any progress. but we've got a lot of work to do. >> a lot of work to do, said ms. whitman in a wide ranging interview, again, that we conducted at the top of our show. and the tone, well, it's an interesting one. she has to impart confidence to both the employees and the customers of the company. but at the same time, she does seem to be at least issuing some caution to those shareholders who would rush in and say, hey, the turnaround is at hand. clearly, that not the case. on yesterday's conference call and again this morning, we talked about competition in a number of areas. and came back to this idea that meg whitman has raised a number of times of a lack of investment over time in both r&d and in systems at the company that she needs to change. >> now what i'm trying to lead is to go into each of the individual businesses, revamp our business processes. the way you need to run a company in the 21st century is you have the optimal business

processes that allow you to run the company effectively for customers. and that's work we still have to do. and then we've got to make investments in r & d. i personally think we cut r & d too hard here in the past four or five year. we're below r and d levels in many of the businesses. >> some investors concerned there is simply a lack of competitiveness on the part of hewlett-packard in some key areas where it seems to be losing share. whitman addressed those concerns. >> there are certainly pockets of our business where we can do a lot better. we can have a, one, hp go to market much more effective than we do today. we've run this company as siloed divisions. we have to compete with a broad and excellent set of assets. then each individual business unit does have to be more competitive, be more cost competitive, bring out our next generation of products. >> it does seem that after five months in the ceo position whitman has gotten her arms

around a number of big issues at the company. but perhaps didn't appreciate just how big those issues were, even as little as a few months back. >> david, i wanted to point out to viewers out there, it's interesting meg whitman specifically said take a look at ibm and how long that turnaround took. ibm just hitting a fresh 52-week high. a tale of two technology companies. the price action, ibm is actually very strong for a basically flat day on the market. >> you can't take a printer division, though, on a laptop division and make it into ibm, can you, david? those are old style industries. >> there are. you're talking about an enormous company with global reach in so many different areas. yeah, you can make an argument that any number there of businesses may not be something you can transform immediately, simon. but there's a lot of room there as well in terms of storage, in terms of software. even in terms of the dijtization

of printing as whitman pointed out in our interview. not impossible to see. but she certainly put a lot of caution out there, i think. that's reflected in the share price today after what were numbers that ultimately really didn't -- didn't make anybody wince. it's more the tone and all the things she's saying that go along with the hard road ahead. >> all right, david, thank you very much. the ibm game is one reason why the dow has now turned positive for the session. thank you very much. stocks watch, 47 minutes into trade so far this morn ing. principal financial upgraded to buy from neutral at stern agee. rilen group downgraded from neutral to buy at ubs. they're citing evaluation there. the stock slightly lower. lumber liquidators upgraded from overweight to neutral at piper jafry. the firm raising the price target to $26 from 18 tlrs. coming up next, a tail of two retailers. breaking down the numbers on sears and target. we'll also take how target's faring in the face of dollar store competition and if sears can regain its consumer following. back in two minutes. ♪

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♪ we've got two big retail trades for you now. first off we're going to talk about target.

the second largest u.s. discount retailer beating importantly on both the top and the bottom line today. while projecting full-year earnings that far exceed the street's estimates. target shares for now are trading in negative territory. joining us now on the cnbc newsline is collin mcgranham. a senior analyst at bernstein where he covers target. good morning, thanks for joining us. >> thanks for having me. >> i don't understand this. this is a beat of, what, 5 cents on what we thought earnings per share could be or what the market consensus was at and still looking forward they're saying 25 cents to 50 cents higher than you thought it would be for the full year. yet the stock goes nowhere. >> well, the fourth quarter numbers, there are a couple of moving parts in there. an income tax benefit, interest expense. tad ju the adjusted number was $1.43 versus the $1.40. some of the upside was due to lower losses in canada where they're starting up a business. a little better margins. going forward the guidance for

the coming year was actually a little bit below consensus. they guided gap eps 405 to 425. that includes the canadian losses. that's comparable to where the consensus numbers were at 425. they're guiding 405 to 4.25. >> the conference call starts in eight minutes. what do you want to hear? >> well, you know, clearly there's a lot of moving parts. firstly, we want to understand the opportunity for -- for margin improvement in the u.s. if the comps come in in the 3% to 4% range. secondly, we'll be listening for how progress is going in canada. they are making significant investments to begin to open stores there next year. they're getting to the critical point where they're putting a lot of people in place and a lot of systems in place. it'll be important to get an update. >> i know it was a very messy quarter, but in the fourth quarter just a couple months ago target actually took those numbers sharply lower. we had a strong reaction in the stock. i'm just wondering if you have any sense of whether or not -- was it just the messiness of the quarter that made the beat look so good?

did business actually materially improve in the month or so since they took their forecast down? >> no, no. it didn't. january is obviously the smallest month of the quarter. january comp was 4.3%. it was better than expected. that's not really enough to move the needle in a quarter that's november, december and january. margins were only a little bit better in the retail business. i'd say the actual results in the fourth quarter, they'd already lowered the guidance in early january on disappointing november, december sales. not a lot of new news. guidance i think is realistic. again, not any different than what people were expecting. >> are you happy with the $60 price target you've got? would you look to review that? do you think it's 12% higher from here? >> well, we look at the business over the course of the next year. as you look at 2013, canada losses. so all the start-up costs this year begin to turn into some profits as the stores grow. it'll be a very profitable business as you look into 2014 and beyond.

we're looking out a year when we talk about the $60 target price and saying there's not going to be a lot of earnings growth in 2012 because the incremental losses from starting up canada. the earnings growth will accelerate strongly as you look into 2013. >> thanks for the analysis. >> thank you. next up in our retail block, we're looking at sears on the back of the company's first conference call since eddie lampert took the reins. shares of sears surging this morn ing. fourth quarter results fell way short of estimates but the company announced plans to sell 11 stores. also a spin-off of 1,250 stores. mary ross gilbert is a retail analyst at imperial capital. she just got off the sears conference call. she's got an underperform rating on sears and a $6 price target. mary, always good to see you sfwl thank you. thank you for having me this morning. >> in terms of these efforts, these efforts are great efforts in order to really separate the assets and the liquidity. but they still have a short-term earnings problem. have you heard anything on the conference call that would make

us believe that in addition to the spin-offs, in addition to the sales of the stores that they've actually got a plan in place to just boost sales? >> well, actually, they did talk about a plan to boost sales. but frankly i think the highlights from the call really focused on the asset sales. giving them enough liquidity and convincing the vendors that they should be fine this year. actually, that should give them a runway going into 2013. so we think while they talked a lot about opportunities to improve operations, it really wasn't quantified. so i don't think that was really the focus. and we think the stock reaction is an overreaction. so we do think there is significant asset value here, but after you deduct debt, pension and other liabilities, the value left to the shareholders is materially lower. that's what's reflected in our $6 price target. >> david, i know you've been on the kpaucall. you've got a question for mary? >> i have to start with the $6 price target, mary. didn't look perhaps that far

when the stock was in the high 20s. we've doubled from here. many people might not have anticipated that. are you revisiting that target or do you feel that still is justified given the fundamentals of this company? >> you know, our $6 price target is based on the sum of the parts valuation. so what we did was we took their disparate businesses. we're valuing land's end at $1.2 billion. that assuming that under sears' stewardship that that business has actually grown and that the profitability was the same as it was at the time they acquired it. so that meant that they had to meet the da margin closer to 10%. and we used a 7.5 times valuation multiple. if you look at abercrombie, american eagle outfitters, urban outfitters, and aeropostale. then sears canada. if you look at best buy, best buy as ebida --

>> mary, your fundamental assumption is that they have a cash crunch. that a lot of their suppliers say we're not willing to afford you the credit we have in the past. doesn't the announcement of the stores sale today as they said give them enough cash to get them through the next holiday season? doesn't that fundamentally undermine your case that you have to do a parts valuation and you have a sudden need for them to sell off assets? that situation may simply not arise. >> we think the asset sales is really just buying them more time. as a matter of fact, if you look at the spin-off of hometown outlet and hardware stores, which is a profitable business, that just means that what you have left is a very unprofitable core sears business. as a matter of fact, the company today reported that they had over $700 million in cash. half was at the domestic entity. and that just goes to show that that cash is used to support operations. they're revolver borrowings were $838 million when they ended the

year. remember that on december 23rd, their revolver borrowings were $483 million. >> mary, thanks for your time. we appreciate it. >> thank you. still ahead on the program, china bulls proceed with caution. economists estimating that chinese public debt was nearly 82% of gdp in 2010. so is the bubble about to burst in china? we'll explain in just a few. we're so excited. and we just can't hide it. "squawk on the street" is getting a brand-new set. we'll be moving in next week. and you're our first guest.

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welcome back. i'm sharon epperson at the nymex with breaking news from the energy department about natural gas. natural gas storage levels fell by 166 billion cubic feet. that was within the range of analyst expectations. but there were some expecting we might see a drop as much as 177 billion cubic feet. we are looking at natural gas fauchs coming off right now. keep in mind that at nearly 2.6 trillion bcf of natural gas, trillion cubic feet of natural gas we have about 40% more natural gas than we did a year or even five years ago, melissa. the demand, of course, likely very weak as we have temperatures going into the 60s in some parts of the east coast

this week. here are stories we're squawking about 7:33 on the west coast, 10:33 on wall street. ibm hitting all-time highs. courts out of china say a court has ruled apple can sell ipads in shanghai. chinese company proview technology sought a sales ban after accusing apple of trademark infringement. freddie mac says the average rate on a 30-year fixed mortgage has risen to 3.95%. that's up from a record low of 3.87% last week. jobless news looks good this morn ing. holding at a four-year low for unemployment claims. however, the market hasn't been able to rally on that. one of the main reasons the dow has held back, of course, is that near 6% fall on hewlett-packard although the majority of the dow members are rising. ibm at the mhelm of that. clearly a bias toward the advance line. at the nasdaq this morning, interested to see what's happening there. yeah. again, a bias towards the advance line. >> all right.

iran's ayatollah last night vowing the islamic republic will not vow to sanctions designed to stop its nuclear program. israeli business and investment finds itself in a tough position. cnbc's chief foreign correspondent michelle caruso-cabrera has got the story. >> reporter: israel is famous for its cool, scrappy, high-tech start-ups. we spent a lot of time with those companies over the last several days since we've been here. and they consistently tell us that regardless of the threat from iran, they are conducting business as usual. there's also a big financial services industry here, though. and there we're seeing a lot more direct evidence that the situation with iran is having some kind of impact. we spent time at a company called sagot. starts with a "p" even though it sounds like it starts with an. "s." he brew tra hebrew translation, peaks, as in mountain peaks. they have seen a big change in

how the money is being managed. >> local asset management has come to a conclusion by and large that given recent stagnation, more or less, in the united states economy, this is an attractive entry point. so it's our feeling that a lot of funds have been divested from the local market and invested into u.s. equities. >> reporter: what he told us also, as well, it's not just because it looks like a good entry point for the united states, but also because it feels like it might be a good exit point from israel right now while these tensions are ongoing. home bias shift. the pension funds in israel used to invest nearly exclusively 90% of their money here in israel. that has fallen to 50%. that has a really big impact on a country that's known as start-up nation. because they require or rely on a lot of local money to do all of these start-ups. so it's known for, we've already told you, a lot of high-tech stuff. biotech, small pharma companies as well have also become really big global leaders when it comes to treatments for specific

diseases. we spent time with brainstorm cell therapeutics. that's one of those companies. they're working on a way to fight als. that's lou gehrig's disease. they have evidence that they're on the right track. >> we did not encounter any unexceptional side effect, even a minor one, except some mild fever for some hours. and no serious or adverse event in those subjected patients. >> up to date over 700 patients begging to be put on the trial. it comes to the level of -- people knock at my door. >> at your house? the office? >> at my house, even. at my house. even though i'm not part of the committee that decides which patients come, the committee works blindly. they don't know names of patients. they just look at the files. it's professors and others that sit at this committee.

>> reporter: where in the world are they asking you from? >> from all over. you name the country. as i told you before, iran, pakistan. the u.s., many. >> reporter: from iran? >> yes. >> reporter: he felt it was very bullish that even folks from iran were trying to get ahold of this drug that in some way pharma can actually be a bridge across cultures. even in the situation that we face right now. back to you, simon. >> interesting, michelle. thank you very much for that. all week, of course, we're assessing the iran threat. oil just trading below $106 a barrel. michelle, for the moment, thank you very much. still to come on the program, coca-cola enterprises looking to launch a new bottle on the market shortly. we'll talk the effect of packaging on consumer interest with the ceo of coke enterprises, next. coming up, yelp is hitting the road before taking on wall street. what can we expect from their upcoming ipo? first, we've written a

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darden restaurants providing a rather bullish first quarter earnings. matt difrisco, great to speak with you. interesting. clarence otis had -- the ceo of darden had said in the past $4 gasoline was a problem for its core consumers. at this point we're approaching $4. it doesn't seem to be much of a problem. why this change, you think? >> well, i think there's a couple of things to consider. for one, we're not in a very heavy driving season right now. and also it's only been a couple of weeks now that we've sort of reached on a national basis north of $4 a gallon of gas. weather has been unbelievable this winter. that's helped people go out to

the restaurants and also relieve them as far as their heating bills. i think that's -- it's still a very big concern, gasoline. i think it's a bigger concern when you get into the spring and summertime. >> i'm glad you mentioned the warmer weather. that was one of the sort of unusual items that certainly helped their quarter. that along with the shift in lent. how confident are you that this had marked some sort of a turn for darden, that the results weren't simply made better because of these one off events? >> well, i think the underlying trends still show a modest amount of improvement. you're certainly right as far as they got a significant lift from about 2% or so, a sales lift, from a favorable weather comparison. but they're going to have an analyst day tomorrow. i think people want to see just how are they driving that positive traffic at olive garden? even when you wash it away, you're still not negative anymore at olive garden which is important for them. as long as they're not discounting and hurting margins i think that should be improved to be the catalyst for the stock going forward. >> i think they also said the

shift in lent provided them .7 points to their sales. is that correct? >> that would help the red lobster brand a little bit more because the red lobster brand parallels their lobster fest with the start of lent. >> and in terms of the margins, what would you like them to say about margins in terms of their progress in expanding them and keeping them healthy? >> sure. i think we interpret from their guidance, the early release here, it looks like they're doing 16%. which implies margin expansion from last year. we'd like to see that shared across all three of their big brands. olive garden is doing a $12.99 special right now for three portions of meals. that's where you'd like to see them be able to do that and execute that at a positive margin at that brand as well. >> all right. matt, thanks for your time. appreciate it. let's stick with making money out of the consumer. coca-cola enterprises is the sole license producer marketer

and distributor of coca-cola products in europe. you'll remember they actually sold their north american interest a couple of years ago for $15 billion. the company's stock closing in on a 52-week high, up about 11%, just about 10% so far this year. joining us on a first on cnbc interview from the consumer analyst group conference in florida is the ceo of coca-cola enterprises, john brock. good morning, mr. brock. thank you for joining us on the program. >> good morning. great to be here. >> you live in very interesting times given that you actually sell your products across europe, not just with the stuff that we report about every day and the risk of recession, but with a soda tax that came through in france at the beginning of the year. how is that affecting your business? >> we've got a very robust business model in europe to begin with. we've got the world's most beloved brand, coca-cola. we have excellent customer relationships. and we've got an incredibly dedicated team of people.

we certainly did not support the idea of a tax in france. but it's in the market now. and we're moving forward. frankly, we think it's regressive and discriminatory and it hurts the people who can least afford it. >> yep. >> but as i said, it's there and we're moving ahead. we'll see a modest impact on volumes in the first quarter. but frankly we remain confident for the year. >> a lot of people will be very interested as to whether you're actually going to buy the german operation from coke. of course, you have the right to do that. the window opened in august. are you going to do it? if so, do you have an idea of what the price would be? >> well, we have an opportunity here. we and coca-cola have agreed that we have about a two-year period which goes through may of 2013 to discuss germany. and clearly discussions are in progress. when we have something suitable to report, we'll do so. but, frankly, until we get to that point in time, i think it'd be prematurely commented on. >> john, i have to ask you about the new contour packaging that's

going to roll out in the uk. certainly we've seen that with great success here in north america. i remember when i was doing that documentary and i talked to you last, john, we did some -- we pored through some of the coke research saying essentially that consumers walk down the aisle and within ten seconds they make a decision of whether or not to buy. do you find the european consumer is the same and so, therefore, do you think that contour packaging will have the same sort of uplifting effect on sales? >> packaging innovation has been a hallmark of this t soft drink business, and particularly coca-cola, for many, many years. if you think about it, frankly, packaging innovation, having the right package available at the right position at the right price for the right consumer at the right time is critical. we're introducing a new 375 milliliter package in great britain which is a great entry level package. it's also going to be a terrific package to go with meals, with food. we think it's one more move and it's obviously a contour package, one more move which

really caters to consumers' desires to have the right package at the right time. >> john, i've got to ask you about the london olympics which clearly is going to be a major, major event for you. i know you're doing a lot of preparation for it. you've linked that event with your carbon footprint quite explicitly. does it cost you more? are your profits lower operating in europe where there is a greater focus on global warming and the desire to take down co 2 emissions? and they pin that on you specifically. >> let me just say first of all, the olympics are going to be an unbelievable moment for coca-cola. coca-cola as a brand and as a company is the longest running e li olympic sponsor, since 1928. these are going to be the most sustainable games in history. every product that is produced is going to be recycled. every cooler that's on the ground at the olympics will be an hfc-free cooler. so it's going to be a really sustainable olympics.

all of the coke uniforms, the torch bearers' uniforms, will be made of recycled p.e.t. it fits beautifully with coca-cola enterprise's view about sustainability. we think sustainability is absolutely at the heart of everything we do. we're on a journey to reduce -- reduce energy consumption, to achieve water neutrality, and to ultimately recycle or reuse 100% of our packages. it's the right thing to do. >> yep. >> for the business. and it's the right thing to do for the environment. >> and how much does it affect your bottom line, sir? >> generally speaking, projects that are sustainable projects in nature frankly save money. because you reduce water consumption. you reduce energy consumption. in the end, you save money. as a company, we do invest in some projects that don't have quite the same rate of return. but, frankly, sustainability is so important, it is right at the

top of those levers that affect employee engagement. our employees are passionate. they're intense. they're committed. again, it generally pays off at the bottom line. >> mr. brock, i hope you and the staff enjoy the games. i imagine that you get some pretty good seats. thank you very much for joining us. >> thank you very much. straight ahead on the program this morning, online reviewers site yelp getting ready for its ipo road show. we've got the latest in just a moment. but first, rick santelli on what she's preparing for the third hour of "squawk on the street." morning to you, rick. >> good morn ing, simon. we're going to have a lot of fun today. an interesting article today in the "wall street journal" about mary shapiro maybe tackling high frequency traders. boy, there's a lot of issues here. remember, it's going to be two years in may since the flash crash. are markets more fun without fundamentals? come back at the top of the hour and we'll parse through some of the key issues on those speedy traders.

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yelp is taking to the street for the ipo road show this most likely being the last of the big ipos before the big one facebook. we go back to hq for more. good morning. >> reporter: good morning, simon. i'm here at the st. regis in new

york city. we're expecting a little more than 100 investors to turn out for the road show as yelp tries to sell. it's looking to raise up to $100 million which would value the company around $1 billion and is seeking to start trading on the new york stock exchange on march 2nd. here's what investors are going to want to know today. first, they're going to want to know about yelp's relationship with google. google accounts for at least 50% of yelp's traffic. yelp's ceo has even said it accounts for as much as 75% so what he told congress last year, even though it accounts for the huge amount of traffic it's also a big competitor especially with the acquisition of zagat. second, competition. some of the big power houses like google, groupon, living social and even possibly facebook are actually able to capitalize on this local trend the fact that yelp is trying to be the number one location for local business reviews. competitors like angie's list,

travelocity and some of the big power houses could encroach into that area. yelp has yet to turn a prove it. investors will want to know where growth is for the company, how it can create sustainable earnings and return the cash to investors. those are the concerns. as far as two things that could help yelp number one is the fact there haven't been that many ipos this year. 19 year to date a 21% drop from last year. people are looking to put money to work in ipos and also returning more this year. ipo's priced in 2012 are up 16% on average whereas last year ipos were down 10%. those are some things to keep in mind today. but of course everyone is going to be trying to figure out how this compares to facebook. that's the big thing. >> i see facebook, i read the facebook is trading in the secondary market at $44 a share and therefore may already be up to that hundred billion valuation. you have to question whether they'll get the pop of the ipo. we have to leave it there but we'll come back later on. thank you. >> it is tweet time.

struggling department store sears reporting a big loss in the fourth quarter announcing a plan to sell 11 store locations. general growth properties. as a struggle weighs on perhaps a new marketing strategy is in need. we're leaving it up to you guys. come up with a new slogan for sears. tweet us our handle at cnbc squawk st. we have the responses straight ahead. but we couldn't simply repeat history. we had to create it. introducing the 2013 lexus gs, with leading-edge safety technology, like available blind spot monitor... [ tires screech ] ...night view... and heads-up display. [ engine revving ] the all-new 2013 lexus gs. there's no going back. weight loss programs can be expensive. so to save some money, i just got the popular girls from the local middle school to follow me around. ew. seriously? so gross.

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okay. time to squawk on the tweet. shares holding, posting of course a wider than expected fourth quarter loss overnight due in part to weaker sales in the same period with the struggle to get shoppers into the stores perhaps a new marketing strategy we thought is in order. we're asking you to come up with a few new ideas, new slogan for sears. tyler tweets, sears, shedding some weight to be fit for the future. down 600 tweets, come and see the new and improved softer side of sears. our own jane wells on the west coast tweets, sears, where america used to shop. thanks, jane. >> we'll talk to the ceo of jd systems. they do 3-d printing systems.

we'll break down hp versus ibm. hp engaged they say in a turn-around. why things may be different this time around. so a big hour at 5:00 tonight. we'll see you then. mean time, third hour of "squawk on the street" starts right now. welcome to hour three of "squawk on the street." here's what's happening so far. >> the term has been glacial. the improvement has been minimal. it's better than it has been but we're far cry from a standard, vigorous recovery. >> jobless claims are unchanged from a slightly revised, 348 moved up to 351 and that's where it stands this week, 351,000. >> given the improvement in the data we've seen, things are better not worse. i don't see any need personally

for a qe 3. >> very disappointing. people are going back to target. a lot of people felt target has lost its weight. this morning it looks like it's kohl's that has lost its way. there are battles among kohl's, target, walmart. there isn't enough room for everybody here. when one does well the other -- >> we'll obviously make progress along the way. you won't have to wait five years to see any progress. we have a lot of work to do. i'm excited about it. we have the right assets, great people, we understand the challenges, we've got a plan. >> with the opening bells on this thursday morning, here at the big board. >> i'm with a patient affordability act of 2010 that's coming in and will bring in another wave of volume. that means more general e. because over 75% of the time generics are dispensed. >> still reasonably attracted. my fiscal year 13 number, trades about 11 times. there is room to go despite the

big move. we begin with breaking news. sharon epperson live with breaking news. oil sits above $106. >> we're looking at a little question for oil prices after the energy department has reported that supplies rose in the last week by 1.6 million barrels. now this is less than supply increase than what was reported by the american petroleum institute last night. they reported an increase of 3.6 million barrels. keep in mind rise in supplies definitely pressuring the wti price a bit. we are also looking at gasoline supplies that rose by about 650,000 barrels and distallate fuel supplies that were actually down by 200,000 barrels. i should say gasoline supplies were actually lower by 650,000 barrels. we are looking at prices right now right around the $106 barrel mark but the key number that many traders are watching is the price of brent crude which remains above $122 a barrel. keep in mind, there we are

looking at tight supplies globally whether talking about iran or other middle eastern countries and also looking at what is happening in the north sea as contributing to the brent price. back to you. >> all right. thank you very much. want to check markets on this thursday? dow is in positive territory up almost 48 points to 12,986. nasdaq up 15. the s&p 500 up about 2 1/2 to 1,360. shares of hp falling today after the company's fourth quarter revenue did miss expectations and the pc business continues to lag. the ceo meg whitman on the show earlier today talking about how she plans to turn things around. >> we are going to save so we can invest. we've got to streamline operations so we can make investments in the product lines growing in the fantastic parts of our portfolio in r&d. that will get revenue growing. >> meantime pharma stocks spiking on the news of the

obesity drug getting support from an fda panel. arena and dendreon seeing big gains. one of romney's biggest supporters is with us to talk about the new corporate tax plan and expectations for michigan. then sears holding its first earnings conference call since it was acquired by eddie lamb pert. stocks up about 20% today. we'll get all the highlights with a call in a few minutes. plus why the world's biggest tax haven might be right here at home. and greece might be out of the woods but your next cause for stress could be coming from china. all that and more in the next hour of "squawk on the street." we'll begin with squawk on the beat. apple shareholders gathering in cupertino, california today to get an update on the company. good morning, john. >> reporter: good morning, carl. in just about two hours exactly

tim cook will have his first turn at running the shareholder meeting as ceo here. he is likely to face a friendly crowd with apple stock up about 20% year to date. but some people wondering, will tim cook make his mark on this company as ceo? what they don't know is he already has in just about four months. let's count the ways. social responsibility. apple is already matching employee donations to 501 c 3s up to $10,000. they weren't doing that before cook took over. the employee discount has gotten a little sweeter. $250 off ipads. 500 more off macs when employees buy them. the dividend looks more likely than ever by my calculations, apple probably already has $100 billion in cash and long-term marketable securities labor. there's been a swift response to the flap over what's happening in fox conallowing tv cruise in there and also if they're going

to release more information about labor conditions more often and of course we had the holiday quarter earnings, which just blew out. that was a logistical triumph. and tim cook's main thing is logistics. now back to that labor issue expect that to come up. there's nothing specific on the agenda about that. shareholders will probably bring some questions about what apple plans to do about that going forward, carl. >> all right. we got the labor issue, john. obviously cash will be a key point, the dividend as you mentioned. business itself. but how about ipad 3? and whether or not some of these events they're holding in early march might in fact introduce a new product for the year? >> well, apple is very good about not saying anything about unannounced products at shareholder meetings. there are a few items on the agenda to watch. some things about shareholders wanting apple to give more information about political donations, some things about -- things apple doesn't want to happen. but even if the vote goes

against apple on these they're relatively minor. >> sell no product before its time is how apple plays the game. thanks, john ford in cupertino. hop over to the cme and check in with our own rick san tell foir this morning's santelli exchange. good morning, rick. >> good morning, carl. hey, you excited about the studio on monday? >> oh, yeah. you going to be watching? you can come any time and hang out with us. >> you know what? be careful. i'm that relative. once you invite me i might strap myself to the new set. you know, this morning, i love to peruse all the papers. the fcc versus high frequency trading. on may 6, 2010, when we had our flash crash, and i remember going on the air minutes after the movement occurred, and the first thing i said was and it was kind of one of those knee jerk responses, hft. in many ways it is still being studied. but what i find fascinating is let's look at the actual facts

here before we get into whether it's good or bad or indifferent. first of all, exchanges make some serious coin on high frequency trading. we need to keep that cognizant. the other issue is back in the old days, you know, when fins ruled the automotive world the accountants and research analysts studied company xyz and their trades and recommendations and their customer movement if they were with a fund was in many ways predicated on that research. mary shapiro head of the s.e.c. brings up the point that she is worried that the ultimate price discovery that happens when it's all about speed isn't really about fundamentals. does that mean when i look at the price of stock xyz that i'm not seeing a reality? i'm only seeing a high speed compilation of a lot of movement in the price? this is a big issue. the other aspects are should the exchanges in the s.e.c. penalize what seems to be just another

extension of computerized trading? in other words you'll never put the genie in the bottle. how are you going to control it? should it be controlled? the last issue is of course supply. today is the third leg of our supply streak this week. we had 2s, 5s yesterday. today we'll have 29 billion 7s. we don't suspect an issue but remember there is corporate supply, there are going to be issues with purchases next week with the ltro. this will be a very interesting auction. we'll be grading it at 1:00 eastern. back to you. >> all right. rick, talk to you soon. busy week in the bond market this week. meantime, presidential hopeful mitt romney out with his tax plan pledging to lower the corporate tax rate from 35% to 25% in today's op-ed in "the wall street journal" he writes these steps will unleash significant domestic investment, attract more foreign investments, and make the u.s. economy competitive with others around the globe. joining us today, tom stenberg founder of staples, long-time friend and supporter of mitt romney. he joins us from florida. always good to talk to you.

good morning. >> thanks for having me, carl. >> romney also writes in the paper today that the tax code as we have it in this country looks like it was devised by our own worst enemy to tie us in knots. i have to imagine that is a sentiment you'd go along with. >> totally. we need a pro growth agenda like the one governor romney is proposing. our system is nuts. we're one of the very few countries in the world that attempts to tax global income, making our companies less competitive on the world market because they get double taxed. furthermore, as when they bring this money back, they pay that tax, so the result is many large companies have literally billions of dollars overseas that could be brought back here to create jobs but it's not because of both our territorial tax -- our worldwide tax system and the fact that our tax rate at 35% is simply not competitive in world markets, which is why the governor proposes lowering

that to 25% to make us competitive. similarly he's taken a lot of initiative on our domestic tax code for individuals as well, lowering overall tax rates and getting rid of some of the deductions that benefit rich folks like me. >> yes, and there's a number of fronts on this. across the board, 20% reductions in marginal rates making the r&d tax credit permanent, keeping 15% on cap gains, dividends, eliminating that tax for those who make less than 200 grand. abolishing the death tax. repealing amt. is there expectation, tom, that this would actually become law? i mean, tax has not ban clear sailing dynamic by any stretch over the past few administrations. >> you know, carl, what needs to get done here is to have somebody who can lead. we've had a president who for the last three years has given us wonderful campaign rhetoric but no accomplishments. once again, he's got a tax plan

but that's not a tax plan. it's a campaign platform. mitt romney in every place he's been whether the olympics, as governor of massachusetts, has been able to get things done. in the case of massachusetts, here as legislature that was more than 80% democratic yet he was still able to pass meaningful reforms to take what was a $2 billion, $3 billion deficit and turn it into a $2 billion surplus. that's the kind of person we need to lead this country. >> why have you embraced his candidacy as aggressively as you have? maybe you can also comment on the degree to which he's earned this reputation deservedly or not as some sort of corporate raider or someone who invests in companies for profit and not the long-term well being of american business? >> well, gosh, you know, i knew mitt romney as the initial investor in staples when it was just a business plan. and he wasn't one of the cut and run venture capitalists. he stayed on our board of

directors for close to 15 years. i've had the privilege of serving on great corporate boards. i have never seen a more effective corporate director than mitt romney. mitt romney can be inspirational and having observed mitt in job after job whether it was turning around bain consulting, turning around what could have been a disaster at salt lake city in the olympics, and taking the nightmare he inherited in massachusetts and turning that around, time and time again he succeeded. i'm frankly deeply worried about our country that we might become the next greece unless somebody comes out and balances the budget which is something one absolutely has to do as the governor pointed out so effectively at the debate in arizona. >> i'd love your take, tom, before we go on this study that harvard business school did asking about 10,000 business leaders, where they thought u.s. policy fell short relative to other advanced economies. tax complexity, which we all agree is important, actually came in close to last.

i'm wondering if you think that is really the holdup in this economy, whether you think that's where the focus needs to be right now. >> i think our biggest single challenge is psychological. people don't believe the politicians in washington today can solve our problems, can solve our debt problem, can solve our deficits, and can lead this country forward with a growth agenda which is why we need somebody like mitt romney in office who has done it time and time again in his career and i think will succeed as president as well. >> tom, appreciate your time today. always good to see you. >> thank you very much, carl. >> tom stenberg backing the romney campaign of course the founder of staples. when we come back sears stocks spiking 20% today after their quarterly results. the company holding its first conference call in about six years. we'll see what the struggling retail chain said to investors when we come back in two minutes. [ male announcer ] we know you don't wait

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sears today speaking to analysts on an earnings

conference call for the first time since the chain was acquired. courtney reagan is live at hq with the highlights. >> good morning. it was just yesterday that sears announced it would hold this earnings conference call and like you said the first time since eddie lambert took majority ownership in 2005. many on wall street expected serious developments for the struggling retailer. sears earnings missed eps expectations by 24 cents ex-items. revenue fell nearly 4% for the fifth quarterly decline in a row. gross margins also contracted even further. on the conference call the ceo of sears holdings acknowledged immediately the earnings were unacceptable and that the retailer is taking immediate and extraordinary actions to right the wrongs. actions he said that probably should have been taken earlier. what are they doing? sears is spinning off a total of 1250 of its outlets, hometown stores in the hardware store businesses hoping to raise $400 million to $500 million. also selling 11 stores for $270

million and significantly reducing inventory to net $350 million. the cost cuts announced in december including store closings, undisclosed number of head hunt cuts will be at the higher end of estimates to around $200 million they said in the conference call. now jim continued to reiterate the takeaway for investors should be the earnings results reflect a short-term issue rather than asset or liquidity problems and the actions the company is taking are to unlock the value in the sears portfolio. that's what he said exactly. sears shares are spiking on the announcement up about 20%. but extreme volatility for the shares isn't rare because only about a quarter of the shares are available to the public to trade. the hedge fund controls about 75% of them. the short interest as a percentage afloat is 34% for shares including today sears shares have had 12 intraday swings of greater than 8% this year. that's a third of all trading sessions so far in 2012. so i want to put that spike in a

little bit of context. >> yeah. i think a lot of investors will be doing just that. good stuff. thank you very much. courtney reagan back at hq. we'll count you down to the close in europe today. about ten minutes to go to that. 11 or so. we'll see what it means for your money in the u.s. a lot of interesting nuggets of news out of europe both economic and from big banks. first though we'll take a trip to chicago where rick santelli is in the middle of all the action at the cme. we'll see what he is watching in two minutes. ♪ [ male announcer ] aggressive new styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the new c-class with over 2,000 refinements.

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this monday squawk live in omaha with warren buffet. e-mail your questions right now to ask warren@cnbc.com. >> questions, all coming up monday on squawk box. >> rick santelli over at the cme talking about the controversy surrounding high frequency trading. there's a lot of it, rick. >> there really is. my guest today is jeff carter, good friend. writes points and figures.com the blog. jeff, flash crash two-year anniversary in may. one item is liquidity. if it's founded in picking off other traders, i contend, is it good liquidity or could there be bad liquidity?

>> i think it really doesn't, you know, it's semantics, right? so we used to talk about even when it was all open, is it market takers or market makers, right? i think the problem with the article and the approach the s.e.c. is taking is what we see, old-time traders like me, the marginal move in a market is totally -- it doesn't make sense to us right? so you have these gaps. i think the theory is right that all information comes into the price so over time the settlement price is correct. intraday, though, even sometimes the settlement price from day to day on the marginal range is not correct. and we see it all the time. so you'll see moves in markets that just happen out of the blue. you'll see front running take place. a lot of stuff happens as we talked before about dark pools and internalization of overflow. >> when you talk about liquidity

many times i look at the volume on the nyse and bob pisani has talked about this a lot. it is a lot smaller than it was. >> absolutely. >> ranges are a lot smaller. what percentage does the new york stock exchange have in the total volume picture now? you bring up dark pools. if you're going to look at high frequency trading shouldn't it all be put together? if this isn't good for the general public how can things like dark pools that hide things like volume or aren't as transparent, isn't it all kind of the same issue? >> it is and the structure of the market place. the exchanges and the s.e.c. are never going to have the technological fire power to keep up with high frequency traders because they have different economic incentives. and so you have to get the market structure competitive. maybe one central order book where everybody competes. a good friend of mine on the board of directors has said why

not go to five cent ticks? does it make a difference between five cents and a penny when you do market executions? it's things like that they need to look at not finding, taxing, you know, they got to get rid of -- >> bringing it to the crux of the matter let's boil it down to something we can all understand. in the 80s it was like shooting fish in the barrel. >> yes it was. >> i know high frequency trading entities in this city that three or four years ago the minute they went from regular trading high frequency haven't had a losing quarter. >> right. >> if you are a trader and not taking risks because you're not losing money it doesn't seem fair. >> it's not a question of fairness but of risk reward. i've never seen a trader ever go an extended period of time and never lose money. >> we have to pick this up. hot issue. back to you. >> thank you very much.

a few minutes left in europe's trading day. markets haven't looked good there lately. off the lowest level since the beginning of february. we'll take thru live and bring you the details of the close right after this. [ male announcer ] technology accelerates at a relentless pace. anything not moving forward... is moving backward. [ tires screech ] [ engine turns over, tires squeal ] introducing the 2013 gs, with the lexus enform app suite -- the most connected information and communication technology available in an automobile. [ engine revs ] the all-new 2013 lexus gs. there's no going back. see your lexus dealer.

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an eventful day for news out of europe. got earnings out of commerce bank and credit agrical and also the eu expecting a recession in 2012 though a moderate one. simon, a lot to talk about. >> a decline predicted to be 0.03. certain companies were downgraded more heavily. italy, now the expect is a 1.3% loss of gdp. greece 4.4. so you saw the pressure across europe today. it is interesting with the german market in particular coming under pressure and there it was the automotive companies, daimler chrysler, that export across europe and arguably might have excess capacity. they were hit quite badly. then of course the banks as you mentioned, credit agrical today taking those losses. commerce bank so close on its call that it was hit

disproportionately with a 6% fall. don't forget rbc also taking writedowns called in the uk. >> greece, we're beginning to see the effects even though business confidence in germany at a seven-month high. a bunch of different cross currents. here is the bell. >> european markets are closing now. >> in fact, that survey of confidence in germany is one reason why the euro is having a good day again today. this is where we are then as we close you out. you just have to see switzerland, see spain and portugal down at the left-hand side in the south. they've been hit more adversely perhaps than the rest of europe. the other thing we should mention we are keeping a very close eye on what is happening in greece and a couple hours ago there. they actually voted through the debt swap when we got more details of that. i mean, they didn't even have to have a vote because the two parties in the coalition put it through on the nod. the legislation says investors get ten days to consider the transaction and then you have the collective action clauses which will force all bond

holders to proceed with the swap once it's won a specified level. and it says that swap will go ahead once the 50% core have responded to the offer and the tax will be activated once two-thirds within that quorum have voted in favor of the swap. we're keeping a close eye on what happens there. we have of course eight days in which they have to go through with the preconditions and do a lot of things in those eight days in greece in order to win the approval of the international committee and to get that money by march 20. but obviously as soon as we get movement we'll bring it to everybody. >> we're not done watching that race. it's going to continue. simon, bob pisani joins us talking about how we're beginning to see some splits between how the u.s. and europe trade. >> i got calls from traders and e-mails. can you explain why we were rallied an hour and a half ago. the dow is positive, up 44 points.

there seems to be what traders call an underlying bid to the u.s. market. and the u.s. stock market has been out performing and did last year. recently it has been out performing europe again. you'll notice germany, portugal, italy, spain down three days in a row now. it closed as you saw simon telling you and the u.s. markets basically moving sideways to slightly up in those few days. there have been some signs of weakness. transports, materials. some signs of toppyness. we're doing better over all than europe and our economy is showing better signs of improvement. i want to show you what the analysts anticipate. the estimates, we anticipate a better year. the s&p 500 right now, the current estimates were $105. we made about $95 last year. and if you add a 15 times earnings multiple which is about an average multiple for an average year, you get to s&p. that's s&p 15.75. carl, we're at 13.61. i'm not trying to say the analysts are always right.

they're not. the numbers get revised. there is a reason why the market has a bid to it. there are expectations things will get a little better at least in the united states later this year. it doesn't explain everything but does explain the underlying -- >> there are some strategists with 1500 targets for the year. >> yes, there are. and again you can argue 15 times is too rich. you can make all sorts of arguments here but there is an underlying rationale about what's going on. i want to -- can we bring in rick santelli? he had very good points about high frequency trading, a subject very near and dear to my heart, rick. here's the story on high frequency trading at the new york stock exchange. we give 2 billion shares a day. five, six, seven years ago. we, last year we're doing close to 5 billion. we went from 2 billion to 5 billion. all that 3 billion was high frequency trading. that's why people say quite accurately that almost two-thirds of all trading is high frequency. it is right now. so the interesting question, rick, is, and i'm, on either side of this, is any liquidity

good liquidity? i tend to vote for more liquidity over less. that's for sure. i presume you would like to see that as well. the question is, is all liquidity created equal? is it all equally valuable to the market one or the other? i think that's probably where we're debating right now. >> you think it is. >> i look at this in a weird way, bob. here's my problem. yes, you know, price discovery needs liquidity. okay? the theory is the more liquidity the more accurate price you're discovering. my problem is if the process of that doesn't have risk associated with it, if the liquidity isn't risk associated in my opinion it isn't necessarily good liquidity. these hft entities like the old investment banks in the '80s just don't lose very much. i have a problem with that, bob. >> that is an interesting point. they don't lose very much. is it because they have a

superior way of trading things? i mean, theoretically there is risk there. theoretically they don't have a license to print money. theoretically, they can lose money. and in periods of very low volatility, we know for sure they -- if they don't lose money they make very, very little money. so i'm not sure what the argument is. i can argue both sides of this. i think it is a very interesting point. by the way, i think this will happen. if they institute some kind of tax around churning they do, bids and oofffers they put in, e amount of trading will drop dramatically. maybe instead of 4 billion shares we'll go down to 3 billion. will that make any difference in the market, the amount of percentage of trading by the nyse would make a difference. >> here is the real question. if you've seen any studies, how much of the revenue of exchanges and i know in futures markets it's rather significant, comes from hft related activity? i'd like to know that. >> well, yes. i can tell you this. the amount of money they get through rebates and things like that which is associated with a

lot of this is very high these days. that is a different topic. >> and there is a whole other discussion about whether stocks themselves, individual names are distorted like a b of a by the sheer amount of trading that happens. >> different topic for a different day. >> thanks, bob. thanks, rick. straight ahead there is no need to search the globe. the best tax haven in the world could be a lot closer than you think. be right back. [ tom ] we invented the turbine business right here in schenectady.

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shares of viva spiking almost 90% on fda advisory support for its new diet drug. scott wapner talking to the company ceo right now and will have a full debrief on the halftime report plus more on sears soaring and apples stock holders meeting all on a the halftime at noon eastern time. when you say tax haven most people think of far away places like the caymans. it turns out the best place in the world to hide money could be right here at home. our senior correspondent xon kohn back at hq with more. >> the u.s. is one of a handful of countries around the world where you can set up a shell company in most states without saying who is behind it. critics say that makes this one of the easiest places in the world to launder money. forming companies is big business in a number of states like nevada where we found robert harris a former bartender who does this for a living. he has 2400 companies registered at his home outside reno and

will front yours, too, pretty much no questions asked. >> i don't do investigative work on the people. if they want to send money i take their business. >> if a terrorist wanted to launder money, set up a shell corporation in nevada -- >> i would report him in a heart beat. >> how would you know. >> if i knew. that's the thing. if i know. >> and i was reading on your website that says corporation wise there is no better way to cloak your assets from public view other than to remove them from the country. what do you mean? >> remove them from the country? doesn't say that. >> it does say that. reading right off the website. no better way to cloak your assets from the public view. >> can i have a minute? >> sure. >> that's a typo. >> it's a typo. >> i don't really mean remove them from the country. remove them from the public view is what i meant. >> well, we have no idea if harris is hiding anyone's dirty money and as we said his business is perfectly legal but

some do want to change that and we'll tell you about tonight in our new documentary "filthy rich." >> scott, i didn't know how he was going to get out of that but typo was not the excuse i was expecting. that is a great television moment. look forward to it. thanks a lot. up next if it isn't one thing it's another. now that greece is seemingly out of danger what is the next crisis we'll be talking about? some experts think it could be china. we'll explain after this break. . right. but... home security systems can be really expensive. so to save money, we actually just adopted a rescue panther.

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now that greece's debt crisis seems closer to being solved we're asking where will markets turn their collective anxieties next? donald strasheim joins us to talk about whether or not, don, china is really the next nightmare. we've been having china bears for years tell us this property boom is going to go bust and a hard landing is in store. what do you think? >> no hard landing. i think it is going to be the order where there is the greatest anxiety.

but that doesn't mean it will go bust. the reason it is going to be the greatest anxiety is america looks like it's doing well right now. we have some sort of solution at least temporary for greece and perhaps other parts of europe. china is a big, important economy. it used to be interesting and now is important and it has a different system, people are comfortable with it. they've been worried about a bust for 15 years and i think it will continue to be a worry but i don't think the worry will materialize. >> shanghai at a new high for 2012. >> right. >> but it seems like every time shanghai is up heavy it's due to enthusiasm over a potential cut in reserve requirements or some central bank planning move that will make the economy inflated, continue to be inflated. is that a reasonable reason for a market to go higher? >> well, i don't think in some sense, carl, it's materially

different than the way it is here. we hear the phrase don't fight the fed. china had an economy that was too hot. inflation too high. so they tightened policy in 2011 first half, got it settled down. now inflation is coming down and so they see weakness ahead. europe is weak. america is so-so. their exports are weaker. they are easing policy and so they've cut reserve requirements in december. they cut them again just last week effective on the 24th. and there are more cuts. so when inflation has gone down and monetary policy is easing this is a menu for a bullish stock market. that's exactly what's happening. >> would you lump it into the category, you talk about anxiety producers, quote-unquote, kind of like iran is, right, or nuclear concerns. the middle east in general. is it that kind of thing? or do you think of it as a market? >> well, the anxiety that i

think is going to arise from iran and nuclear and oil and all of this is not really a market. it is a geo political kind of a risk. in china there are those, i know one of them, there are those -- i am not one of them -- but there are those who think the economy is a house of cards about to collapse and so forth and that directly relates to a market. we sell a good bit of stuff there and would like to sell more. they buy stuff from everybody. if china's economy gets hurt, that is going to hurt markets and economies all over the world. >> we're bringing in dennis burrman of the "wall street journal" who among this possibility introduced new possibilities as to whether china is the new greece. i can think of many reasons why it is different than greece. right? >> i think china might be the new greece in the fact that it eventually might maintain the position in investors' heads about this is the flashpoint we

need to be focused on. you know, it is so amazing how the markets internalize the greece problems, carl, amazing how it's internalized even in an iran nuclear situation. and the next crisis is, at least in investors' minds, has to be china because that is where all the incremental growth in the world's economy is. >> that all pivots around whether or not you believe as don was just saying in a hard landing. if you don't then it's not a problem or is it? >> i think it is a little bit more than a hard landing. i think what we've seen over the last year, is real questions about fundamentals inside china. you've been great at covering some of these stocks. people are losing faith in the ability of chinese companies to report accurate numbers. we are losing faith in the ability to report accurate real estate numbers. yes there is a lot of momentum going on in the chinese economy. when i think of china as the next greece i think more of a crisis of confidence and the way it extends itself to the world

at large. >> that is a good point. i think a facebook and some of their recent comments about their willingness to hold back from entering china even though it is a lot of potential growth, the wild west in so many ways, and they're just not willing to go there yet. >> absolutely. the reverses are as dennis mentioned a horror story. there is a real disequilibrium in housing that is going to be complicated over the next couple years and be very damaging to the property developers but i don't see the kind of -- and we're confused about how they operate their system and there is this new world bank report coming out, highly critical no doubt, but these are not the inherent ingredients i don't believe necessarily of a hard landing. >> right. but maybe to move the conversation a bit there, it's not so much about a hard landing per se. as i mentioned, it's about do

people feel confidence that china is doing what china says it is doing? don, do you feel that's really happening? do we have a clear picture? or are we getting sort of a gauzy, beautiful postcard of china when it's something far different? >> well weerks have -- we have always gotten a gauzy beautiful view and the data is a nightmare. there are 500 million people in china, count them, that have made 8% a year income gains for 25 years in this strange system that they have. 1.08 to the 25th power is a pretty good career. and they've done great and in china it's all about, let's make money not i wish i could vote. >> one last question. romney just had an op-ed recently talking about how on day one he would name them a currency manipulator.

i wonder if fears about china to some degree might be self-inflicted, right? might be driven by u.s. policy decisions? >> well, there is a great line that simpson and bowles have the guys who want to reform the u.s. budget. they say look, the u.s. is selling treasury bills to china to finance taiwan's protection out there in the asian waters. so i view romney's view of currency manipulation as purely for a political consumption. >> no. >> and from the real perspective china obviously will eventually let its currency float more freely. but where it stands right now, it's i think in some ways the weakness of the chinese economy. we don't need it to grow 8% for there be to be quote a crisis. if that level went down to 4% or 5% it would be net growth but a real strain on the world economy. >> you could have at least given us a week to enjoy greece before you wrote this piece, dennis. appreciate your time.

>> sure. >> guys, thanks. >> you bet. meantime viva's weight loss drug getting overwhelming support from the fda advisory panel that news sending vivus stock sharply higher almost 90%. we go live to orlando at the generic pharma conference with more. good morning. >> reporter: good morning, carl. biotech investors salivate over the thought of an instant double. that is certainly a topic of discussion here at the 2012 annual meeting for international drug, generic drug makers. the lure of the biotech sector, the overnight riches some of the investors make, the fda has the power in terms of driving a stock higher and lower. the news that came out on vivus' q next is driving shares on other companies. take a look at arena, the street making the assumption that the fda may be lightning up on other obesity fighters. not to be a debby downer you got to keep in mind qnexa doesn't

mean the fda will agree. all the supporting data can be there and even then the fda can still ask for additional data or for further clinical trials. so, carl, that's what makes this sector so volatile, so exciting, is the fact that you just never know what you're going to get. it's kind of like watching a bad hollywood romance. you never know what you're going to get. >> in so many ways. this is definitely getting not just wall street's attention but middle america's attention. it was the talk on all the morning shows this morning on the networks. first time we've seen a drug like this in about ten years. enjoy orlando. >> thank you so much. >> say hi to disney for us. don't forget to tweet us. sears reporting a fourth quarter loss. says it will spin-off some of its stores. the retailer might be in need of some rebranding so we're asking you what should sears' new slogan be? our handle is at cnbc squawk st. get some of your answers right after this break. ldn't simply repeat history.

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i was worried. i worried about my wife, and my family. bill has the most common type of atrial fibrillation, or afib. it's not caused by a heart valve problem. he was taking warfarin, but i've put him on pradaxa instead. in a clinical trial, pradaxa 150 mgs reduced stroke risk 35% more than warfarin without the need for regular blood tests. i sure was glad to hear that. pradaxa can cause serious, sometimes fatal, bleeding. don't take pradaxa if you have abnormal bleeding, and seek immediate medical care for unexpected signs of bleeding, like unusual bruising. pradaxa may increase your bleeding risk if you're 75 or older, have a bleeding condition like stomach ulcers, or take aspirin, nsaids, or bloodthinners, or if you have kidney problems, especially if you take certain medicines. tell your doctor about all medicines you take, any planned medical or dental procedures, and don't stop taking pradaxa without your doctor's approval, as stopping may increase your stroke risk. other side effects include indigestion, stomach pain, upset, or burning.

pradaxa is progress. if you have afib not caused by a heart valve problem, ask your doctor if you can reduce your risk of stroke with pradaxa. but my nose is still runny. [ male announcer ] truth is, dayquil doesn't treat that. really? [ male announcer ] alka-seltzer plus fights your worst cold symptoms, plus it relieves your runny nose. [ deep breath ] awesome. [ male announcer ] yes, it is. that's the cold truth! we're talking about sears holdings posting this wider than expected loss due in part to weaker same store sales. with the retail chain struggling

to get shoppers into the stores we ask you to come up with a new slogan for sears. as you know for a long time it was the softer side. jason tweets, sears, where your grandmother shopped. and cooler and softer just like the other side of the pillow. yeah, we used to shop here too. man, you guys are rough. rick santelli, the company you know well. headquartered just outside chicago. >> all i can say is less frills leads to lower prices. i like shopping at sears but i have to tell you it was kind of like walking through a house after the owners put it on the market and took all their furniture out. >> yeah. >> but i hope they do better. i miss coming through the catalogs. i'm older than you, carl, but there used to be something fun about actually thumbing through a catalog. it's not the same running through pages online. >> i remember as a kid picking out or making your christmas wish list by looking through that book. that's a long time ago.

>> i use today sell hou-- they y sell houses. there are houses in my neighborhood that are sears houses. >> incredible. we talked about high frequency trading. i'd love you to touch on the data out of europe today. not only the commerce bank and credit agrical stuff but the notion that the eurozone is only expecting a moderate recession for the year. how likely is that? >> you know how i feel about forecasting, truly. whether it's the imf, world bank, federal reserve, or the commission that did that report you're referencing, you know, forecasting, there is a forecaster born every minute. okay? and many times they don't see the promised land. i will tell you this. it's very difficult for me not to look at a litany of data. today may be an exception with the business confidence in germany up but it is hard for me to believe there isn't going to be a bit of a hiccup regarding growth. negative gdps. the real question is how will

that affect the u.s.? you know there's not a lot of export activity but a lot of capital activity and i think you've been talking about china today. you know, there's a think tank that supposedly put out a piece, another piece about china. there's a lot of them. i tell you what. if you think we get the sniffles because europe or greece or portugal is going to catch a cold, wow. if we get a fever or some type of flu in china, i can't even imagine how much more we get impacted. we're in the global market place now and i liked when america was like mike ditka. we were first and second and third. we're miles behind us. >> another great chicago name. rick, state side here the jobless claims numbers, four-week average down to the lowest since march of '08. you couple that with what triple-a said about gas prices up three cents yesterday, the biggest one day jump since january. and now up 40 cents from december. >> you know, i am one of e