where do the fish go? they don't go in plastic bags, do they? >> you know there's some environmentalists -- >> is that -- isn't that organic? >> i think that's organic. anyway, on the economic agenda this morning, weekly jobless claims are set to hit the tape at 8:30 a.m. eastern. as they do every week, every thursday. polled economists see initial filings rising by 6,000 to 360,000. fewer homes started on the path to foreclosure last month. the number of properties entering the market lowered. and the average employee 401k accounts glue 12% in 2012.

among the catalysts, the stock manag market is higher. the passengers said if it's moving forward at a normal speed, you still feel the water, obviously, but when it's just floating, i guess every wave in the ocean. >> oh, my god. i can't imagine a worse scenario. >> i guess they're sitting there listing. >> plus the boat is listing, too. part of the problem was when the fire occurred, it knocked out some sort of a stabilization thing. >> and they're not saying it's not material, either, at this point. >> with the coverage of this and hearing about this, if you were on the fence thinking you might go ahead and book a cruise -- >> is that what's going to hurt the earnings or is it just the government of the pop? >> disney -- >> i don't know if they own them

or -- >> nbc universal doesn't. how does anyone book -- who walks across the plank and gets on that? >> literally, if you were thinking about it and -- >> in the last five years, can't you go back? how about the one over in the mediterranean? it's upside down, isn't it? right off italy, yeah. >> still there. >> "60 minutes" just did another takeoff, you and two other couples? >> my grandmother went on the alaskan cruise and she liked that one. >>. >> chooe is driving. >> guys, let me tell you about a number of other stocks on the move in after hours trading. shares of angie's list were sharply high er after the online

website swung to a profit in the first quarter. sketcher s shares got a price pop, as well. women's shoes have done particularly quell. also, value clicks werings beat the street's expectations. the internet advertising company's revenue strengthened and real estate information provider zillow posted better-than-expected earnings. shares were up pretty sharply. you can see up by about 7.8% with that last tick. also, apply materials reported a drop in quarterly profit but the results still beat the street. but there were some big losers in the after hours trading. weight watchers, you think about losing and normally that's a good thing for this stock. but after the bell yesterday, the company warned fewer people are signing up for its weight-loss program in 2013 and that stock was down sharply after hours.

whole foods took a mitt. that stock, i believe, was down by about 8%. finally, mondolize, that stock was under a little bit of pressure, as well. >> you saw maria's interview? i watched that yesterday with chambers. and i spent a lot of time with him at the at and with t. one thing he said over and over yesterday was that we're going to have a lot of growth and we're going to be adding a lot of employees, eventually, and we're either going to add the employees here or if we don't get our territorial -- we're going to grow here or overseas, depending on what they do. >> we're growing no matter what. >> we're growing no matter what, but we're either going to add employees over there and we're

waiting to see where we're going to do the growing. he didn't even blink. it was just that matter-of-factly as the ceo running a great company, which he has over the last 22 years. >> and this guy is no stranger to washington. he knows his way in and out. he's dealt with a lot of the people, the sector of state who go back and forth. >> very matter-of-factly. we're going to do what we need to do for our company and our shareholders. >> big golfer. >> yeah. really wants to be good. i think his wife plays pretty good. he's a great -- nice man. anyway, let's check on the markets this morning. we do see the dow down about 68 points or so. and that is after a weak session yesterday, which actually by the end of the day, it was only down 35 points or so. but it just didn't feel that great watching it yesterday. >> but the nasdaq finally broke

out. it hit 12-year highs. people had been watching the technology for a while. >> we do need the industrials to match that new high on the transports the. >> remember that guy we were talking to about the dow theory? he said it has to be the other way around. you can't confirm with the industrial pes >> like i said, i do think we asked debbie watson what she was buying and i do think she thought the transports were overbought, headed to dc. melissa, check tout oil board this morning. 9688, down about 13 cents, not a whole lot happening there. on the ten-year note, we are at 2.031. not a lot has -- you know, we're watching that is like watching grass grow. >> although yesterday, the one-year treasury auction was a little weak and, in fact, they came off at a higher yield than expected. it was about 2% just for the one year. >> the dollar -- >> he cares. >> yeah. did you see the journal piece? >> which journal? >> about the yen.

people have made a lot of money. >> a lot of money. >> kelly evans, we'll be talking to her. >> she loves talking about the yen. she got a yen for the yen. she does. and we're going to have to -- is today valentine's day over there? >> they do have that. >> what do they not have? no thanksgiving. >> no. because they're mad that we broke away. >> july fourth? >> no. >> they all go to a chinese restaurant or a movie that day, right? >> like what i do on christmas. >> yes, you do. and you have a tree and everything. i love you for that. finally, let's check out gold. 1644, down about 80 cents or so. >> the dow and the s&p 500 trading near all-time highs. our guest hosts this hour are chris sheldon and dean kurnan. guys, let me just slow this out to you.

we've been waiting to whaer what's going to happen with those shares. what's the next step? >> i think it's rest in the hands of policymakers. we have a washington sent rick led market at this point. we have the sequester coming. you know, you want to be optimistic. there's certainly a healthier risk appetite than we've seen in quite some time. you're get ago more bernankesque policy adopted by jap he's policy and with mark carney coming over to the boe, it seems like it's stimulating at this point. >> is it a race to the bottom at this point? >> there's something to that. now we talked about japan and the yep. that was a big deal back in november and i think initially the market didn't recognize how big of a deal that was. so, yeah, it's pedal to the metal. and that's something that the fed themselves have used the term. that has big im mrications for the lid quiddity of the market.

on tech, it's certainly a story about one name over the last year, but you're beginning to see that broaden out. .i think that's a very good thing, but it's going to be a stock by stock story. i think that's exciting for investors. >> dean, what do you think about that, that whole idea with the race to the bottom with the central bank? is that something to worry about now or another year or two down the road? >> yeah. we spent a lot of time looking at volatility and currencies has been one place where even as the vix sags to 12, you've had this very, very healthy volatility specifically in the yen and then you have the central bank starting to talk about currency wars and korea has said something. of course, in europe, for all the talk of draghi's whatever it takes language, that riegz euro is not exactly great for them from a trade standpoint. you've seen the euro/yen collapse from a pricing standpoint. if you look at the vision and you look at the volatility in the markets right now, and then you listen to ceos who say there is so much uncertainty, how do you match those up?

>> it's a great and fascinating question. if you look at the vix at 12, even at 12, the folks that are holding options because they cost money and they decay down markets, that's not enough. that is the biggest move of year, down six points. >> there are two factors. number one, this huge amount of liquidity has overwhelmed the central tilt. it's every central bank. 3300 central polls in the last year, on top of that, maybe complacency towards the risks that are out there. risks will come down. but we're still in an environment where you need to focus on the risks out there.

>> i don't think that's anytime soon. >> and that will be very important. >> i think investors need to focus on that down the road. for now, it's not going to be a factor pore probably most of the year, we would think. >> and i guess a little surprising is the economy feels like it's starting to turn. if you look at housing, if you look at what we hear from a lot of ceos about what's happening at this very moment, they feel okay with that. it's just when you ask them to give you guidance for the next quarter or the next year, they say they can't see that far. >> and i think it comes down to having things like the ee quester. certainly a reconciliation after the fact that the u.s. is spending so much more than it brings in. i think one of the interesting things, just around rates, bullard yesterday, for example, said that he expects 3% real growth this year. so 3% real growth and 2% inflation, that gets me to march like a 5% ten-year. we're nowhere close to that.

lloyd blankfein was on ur yo showing saying investors, if there is some sort of ex oh dus into stocks, and that's becoming a story -- >> and lloyd has been talking about just the potential for a stock market boom, too. >> dean, the name of your firm is macro, right? >> yes. >> so you're used to looking macro? >> yes. >> but typically, three were four, five years ago, isn't your first thing that you talk about, you mentioned washington, the sequester, the debt ceiling, every single thing you mentioned was policymakers. has it always been like that or is this a different period for your firm? >> this is i think pretty new. >> so it's hard to avoid talking about those things, right? >> that you have to pay attention to central banks, of course, and this philosophy of becoming more like bernanke. and then, of course, you have to watch what happens in washington. >> we never used to, though, did

we? >> no. it's certainly -- >> how much more time did you spend in washington? >> it's forget, just looking at the years with it it all along. >> do you agree with that? >> i do. i think policy making has become the macro. these bright spots that people are talking about today have unfolded over much of the last year. so our case could be -- it's not that they ignored it. they were so amass by the focus on the fiscal cliff and on europe that has those things waned a little bit, these things now come to the forefront. but they've been going on really for some time. >> chris and dean will be with us for the rest of the hour. >> well, maybe. >> guys, thank you. we appreciate it. coming up, we've got reports this morning that time warner is in talk toes sell some of its "time" magazine division. i've got more information on that. plus, the other talking of the morning, why new york city mayor michael bloomberg, he wants to

ban styrofoam. no more styrofoam. >> you know what i've seen, the new york city psa is about how you shouldn't drink sugar. there's a guy sitting there drinking 16 packs of sugar a day. >> you say that to a man my age, psa, and it's prostate -- >> the guy is drinking 16 backs of sugar and going, while they're drinking their soda. >> take a look at this. us airways ceo doug parker arriving at the airport in dallas just a few minutes ago. we're expecting an official announcement from amr on the usair merger. that's coming, we think, very, very toon soon. we're going to have that and a lot more when squawk returns. this is america.

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welcome back to squawk this morning. t let's take a look at futures. among the headlines we're following this morning, lots of headlines across the board around time warner, considering spinning off some of its magazines. just a couple of details on what's happening here. there's been a number of reports over the past 24 hours that suggested time warper is planning to sell its magazine business to meredith. that is not what's happening here. it's a very different transaction. >> good. i'm glad to hear that.

i write for "fortune." >> here is what's happening. the magazines that are not part of the news division of time, inc, which is "time magazine," "fortune." >> where does people fall? >> "people" is not part of the news magazine. "us weekly" is part of a different group. >> that is your favorite, right? >> it is my favorite. >> those magazines will stay at time. >> the news ones? >> the news ones. >> "entertainment," "us weekly" is going to get spun off into a different company and meredith is going to take all of its magazines and spin them off to a new company. >> meredith? >> who is she? >> meredith owns better homes & gard gardens, ladies home journal.

>> does she know what she's doing? >> i hope so. >> if you're a shareholder of "time" or a shareholder of meredith, you will get a new share in this new company. two-thirds of the company will be owned by time shareholders, one-third meredith. meredith will become a tv broadcasting company. time warner will for the most part be part of this company. the magazines will have a service contract back to this new company so that the back office and stuff will be done by the new company. i know it's very complicated. >> why don't they put it altogether? >> they think that "sports illustrated" and "time" have a brand iconic thing that they want to have with krn and all of that. >> and "fortune." >> and "fortune." finally, if you're a shareholder of time, you'll get shares in this new company, they're going to lever up this new company and then they will issue a special $1.75 billion dividend back to

time warner. that is the transaction according to sources who are involved in it. it is probably two weeks away from happening, if it happens at all. i should say that it's still up in the air. they're not there, but i just wanted to put it all out there. that's the exact deal. there's been a lot of speculation about what is happening. that is the transition. >> and if you had to just sum up the external forces that are pushing on this, and causing this to happen, what is this an answer to? >> it was an answer to the secular problems. >> and how does it address that, do you think? >> it takes it off of time warner's books. >> so they're saying -- >> they're saying -- >> they're says it's a lousy business. we'll put it over here. if you're a time shareholders, you could own it. >> or you can sell it later. >> they're going to get a little bit of cash off of it by levering it up and paying a dividend back. meredith gets rid of it. they have the same issue. >> some day, you would figure,

it doesn't matter where you get the content, you still want the content from all the writers that do this, right? >> that's why they're saving all the dues. >> but there's no way to make as much money, is there? >> it's hard because people will read stuff online instead of reading the publications. and for glossy magazines, it cost a lot of money to -- you have that cool app where you can read all of them online. >> right. but if you have an entity that decides to charnlg for its come tent around an aggregator of news, i can find it, right? >> yeah. >> digital, yeah. >> nicklitys. >> nickels. trying to make a dime, so that he would be doubling. do you have details on amr and -- that may happen today, right? >> i believe that may happen. >> but you know the details i'm

talking about. mary duffy asked me, the first thing we need to find out about these things, sky miles. we have to find out what happens here. >> because they're not on american express miles. they're on citigroup. >> what happens when these two go together? >> you will probably have to have the citigroup. we will ask. >> i told her that would be andrew's first -- because this is stuff people need to know. >> or one path. what are they called? >> i don't know what they're called. >> well, no one has ever paid for a first class seat in the history of the world, have they? they have always gone with mileage upgrades, right? have you ever paid full growth for -- >> i have. >> you have? >> coming up, we're going to turn to an analyst who covers cisco, get his reaction to last night's report and comments from ceo john chambers. plus, a deal meant for valentine's day. a merger in the skies, a tie up between amr and us airways. expected to be officially announced at some point this

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good morning and welcome back to "squawk box" here on cnbc. i am joe kernen along with becky quick and andrew ross sorkin. among the stocks we're watching today, cisco. and amr. >> american heair. >> and now merged as we it is officially done. after months and months of waiting, we are here and the big news, us airways group and

american air merged. american air shareholders -- critters, rather, are going to own 72% of the final company. that's actually very, very important. the implied xwient equity value for the company is going to be $11 billion. the reason i mentioned the 72%, when they first started trying to negotiate this deal almost six months ago, usair was offering american air 49% of the company. doug parker ultimately having to give in and give up much more of the company. in this case, doug parker is going to run the final company as the ceo. the chairman of -- rather the current ceo of american air is going to become the chairman of the xwand company through -- sometime in mid 2014. let me pick up the rest of this release as we're -- >> why don't we bring phil lebeau in. he is standing by at the airport in ka dallas. phil, wa can you tell us? this is something we've been waiting for for quite a while. we have been.

and a lot of they details have been out for quite some time. american, the previous american, the old american, if you will, is still going through chapter 11 restructuring. and once they file those papers in court, we're get a better sense in terms of timing for when that bankruptcy will wrap up. but andrew hit on the key points. this is an $11 billion company, an all-stock deal. 72% will be going to the amr critters. 22% will be going to the shareholders. doug parker, we showed you the video a few minutes ago as we were walking through security here at the dfw airport. he will be the ceo. if you think about this, guys, go back eight years, doug parker was ceo of american west. at that time he was saying we need console dag in the industry. this is the way to the future. he tried to engineer a merger with united airlines. that didn't happen a few years ago. but now, he will be ceo of the world's largest airline combining number three, american, with number five, us airways.

it's the new american will be larger than both united and delta. guys. >> that is something. >> and if you look back at doug parker's record, there were some lean years in 2008, but he has consistently gotten high marks across the board on wall street because he has a provtdble company, consistently profitable. and now he has an airline that really only has one weakness globally and that's the asia pacific relative tota a united. otherwise, you look at the strength in the united states and europe, these guys will be powerful.

>> a quarter goes to us airways, but he becomes the ceo. it was always going to be that way, probably. >> yeah. as andrew mentioned, i think originally the original offer was 49%. the critters eventually said if we're going to make this happen, it will be knocked down to 28%. >> they just had a press release saying they will hold a press conference at 11:00 a.m. eastern time. but whiff the ceos here at 7:40 eastern time. >> yes. a and, andrew, you're going to have to bone up on that. i think you were almost like the investment banker. but you remember discussing this possibility in your columns. >> although i have a lot of questions from the consumer's perspective. >> when you visit your hometown, of which you have like 14, there

are all these one horse -- >> and nobody flies direct to it. >> okay. and you're going to ask about the sky miles, too. another company to watch today was cisco. one thing that struck me was how frank john chambers was about how he's going to do more acquisition and he's going to grow this company and he's moved it from a server company -- he's switching, he's into the cloud, he's into all these things. but if he doesn't get the type of policies he wants, they're going to move it offshore. >> cisco has $46 billion in cash, but they only have $7 billion in the u.s. >> 39 billion, did it do that right? 39 billion is overseas. >> exactly.

>> at what rate would he be happy to bring it back? >> it's unclear, but i would say, you know, something under 15%, i think, would be attractive. >> would have to be under 15%. >> i think that would be attractive. >> you don't think microsoft would do it? a lot of these companies are start to go lever up in the u.s. for example, apple has been recommended with a bigger stock buyback. >> does he know when he said it's going to start slow and get -- the business with his customers, start slow and get better as the year goes on? does he know? or is that sort of what you see you say u you say in the beginning of the year?

>> i think he has a good handle on trend. usually very early. he talked about public spending falling off a cliff three to four quarters before everyone else. so i -- the way he described it is cautious optimism. europe is in the tank. >> so overused. >> right. >> i would just switch it now to optimistic caution. just to change it. i don't know, is that the same thing? >> it's the same thing. >> i think what he's seeing is europe is in the tank but he's starting to see signs of life in germany and the uk, southern europe is still challenged. public is very challenged. state and local is good. federal is in the tank and china has been an issue for cisco which i think will pick up in the second half of the year. the u.s. did very well this quarter. >> hmmm. sometimes it doesn't help that much to look at the last quarter. but what did you see there in term of trends that can tell us about the future? margins, other port metrics in that. any surprises there? >> very good margin performance.

so the tech environment right now is horrible. especially i.t. spending. >> it is. >> yes. >> horrible. >> it's horrible. most of the companies saw much weaker than normal december quarters. i think we cut numbers in 60% of our companies for the march quarter. now, cisco guided to 4% to 6% growth for the april quarter. that's slightly ahead of what we were modeling. so we raised our numbers this morning, raised our price target to 26 from 23. and, you know, stock trades at about just over seven times cash, 2-6 dividend yield. >> have you ever seen chambers miss after he's guided somewhere or does he always -- usually we hear from him that things aren't going great before it actually happens so we know it's coming, don't we? >> he comes on cnbc a lot. >> he does. and we appreciate that. but i remember times when there may have been some disappointing rhetoric from john chambers, but it's not usually explaining a quarter that he missed. it's usually setting up the next report that comes up.

he forecast what they were going to do and hit on every single metric he talked about. >> he's been very consistent in meeting the quarter. and the outlook he has little control of. they're such a big company. the company grows probably 5% to 7% top line and very sensitive to the economy. >> okay. they're going to be back on the acquisition trail, obviously. >> more acquisition. >> and if they got 39 billion abroad, it's buying abroad inspect. >> and that's exactly what he said. so when i think of cisco, this is a networking company becoming a broader itm company. in the server business, they grew. that is a market that just started two years ago. when we kol back, we're going to make a pit stop in chicago and see what traders are buzzing about this morning. but first, michael bloomberg is going to be proposing a ban of

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welcome back to squawk. michael gurka join uses now. good morning. >> good morning. >> we have a lot of red arrows across the board. >> we do.

the two most bullish is the s&p where it looks like it's still poised to try and is test that 1562 level and eventually the all-time highs up at 76. the other is the complete bull channel that we've been seeing in the platinum. it's on fire and could test 1800. if you watch platinum on the chart, it hasn't pulled back whatsoever. the next one is crude oil as it's been poised and looking like it's getting heavy as we approach 100 and a lot of people are anticipating that pullback. the last two are the bearish indicators. it could eventually come back to 128. and lastly, it's the green market here in wheat and that's a little perplexing because it's been pulling back for almost 2 1/2 months and we are almost in winter in a drought condition and i'm going to anticipate you'll see a complete rally back to these levels and in particular wheat. >> michael, we're going to leave tlit. thank you for helping us understand what may be coming today. >> thank you.

and coming up, cupid has become a billionaire. we're going to talk about the big business of online dating and, of course, chocolate on this valentine's day. and then in the next hour, a squawk love connection. this is -- i think this is unique and i'm talking about stanley black and decker coe john lungren and schnitzre steel ceo tamara lundgre this. they are married. how do two people have a marriage and run companies as ceos? they're going to be on set with us. >> yep. >> and usairwayes and american announcing a merger, top executives from both companies are live at 7:40 eastern. what if you didn't know that weeping willows have invasive roots? what if you didn't know that a trampoline... could affect your liability? and what if you didn't know that most cars... get broken into when the weather warms up? here, buddy.

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it's valentine's day and the business of love is booming from online dating sites to godiva chocolate. joining us on set is dan slater and from new york, jim goldman, president and ceo of godiva. jim, we have your chocolate owes set in heart shapes. dan, first, on dating, this is

now a $2 billion business, the dating industry? >> in the u.s. and another two abroad. big bucks. who'ed have thunk? >> in your book, you quote a industry >> psychiatry, the weapons trade, weight loss, as becky was saying earlier. actually a lot of industries. but this is particularly interesting because they obviously want to be successful for you. >> right. >> but when they are, that almost by definition means that they're losing you -- >> so we know about like match.com. those are the biggies. you talk about something called urbancougar.com? >> there are many cougar sites. >> or dateginger.com. >> for redheads, yeah. >> and ashleymadison.com which i didn't realize, their tag line is, life is short, have an affair. >> what? >> that guy makes something like $8 million a year.

it's -- he makes a lot of money. runs it out of toronto. >> so when you do that online then we're going to go to jim, this is how i'm going to try to segue this together, you have to come with chocolates? chocolate matters. do you think, to the relationship? >> well -- >> for online dating -- or just to jim? >> well, jim -- >> jim seems like a chocolate guy. >> jim is a chocolate guy. >> jim, how big is your business on val tain's day, if the dating business is $2 billion, what's the chocolate business? >> this is our super bowl, our single biggest day of the year. people want to acknowledge those that they care about. those that they love. their friends. their family. >> how much money is today worth to you? >> it's our biggest day of the year. people are running to our stores. and buying godiva chocolate. >> can i tell you i was in the time warner center last night and there was a line out the door. i'd never seen this, they'd actually set up a, you know, a whole ropes and everything, people are actually -- it was crazy.

>> you were putting to the the whole magazine spinoff? >> i was at the time warner center putting that deal together. >> it's amazing. >> how do you think this happened? >> it's christian edible. >> i'm in rockefeller center today and downstairs is a store and they're already dipping strawberries. today we'll be selling -- we'll be dipping fresh saw berries. 15,000 an hour and people come in and buy that. and you know, if you're going on a date, there's nothing better than our classic satin heart. it's a wonderful gift. it's a tradition. and it's filled with amazing godiva chocolates. >> i believe you're in comcast center, jim. but -- >> no, i am right above our store at rockefeller center. >> we'll see. we'll talk about that. >> naming rights on that. >> we'll talk about that. >> are there people who are looking for dates, literally tonight, for valentine's day online? is there a valentine's day online -- >> i don't know if there's a special site for valentine's day. >> are there any men on those sites? >> are there any men? >> i think women want a date

tonight but men probably don't. >> i think there's a lot of pressure for first dates around valentine's day. >> yeah. >> i mean it's like, you just met. what are the expectations? do you bring godiva? do you not? >> bring a -- >> always bring godiva. >> of course. >> how good, though, are the matchmaking sites themselves in terms of being able to predict dating success these days? >> it depends who you talk to. it depends if you're talking to the ceo of eharmony or academics? the ceo of emarmny -- >> how about the people who use the sites? >> anecdotally you hear sites are being very good at predicting compatibility on a first did it. >> okay. >> long-term it's a bit sketchier. >> and why? >> as we know, can you hit it off on a first date, it's a big leap from there to, you know, a 50-year marriage. >> yeah. and are most people going online dates to find marriage or are they going for a date? >> to hook up, go ahead. go ahead.

just say -- >> say it like the kids do? >> we already talked about an affair site. did you bring chocolates to the affair? does that work, too? >> you got to arrange it on the site. you have to know what the expectations are. but what i heard, i saw a stat that approximately one-third of the people in online dating sites are married. >> already? >> are you kidding? >> yeah. >> wow. and they're either open about that but most likely they're not. unless they're on ashley madi n madison. which is a good thing because it kind of quarantines the cheaters in one spot. you know what you're get being on that site. >> are there people going on these sites to see if their husband or wife is on the site? is there a whole sort of like, catch me if you can thing going on? >> that could be a great idea for a company. >> jim came on and talk -- >> you could get a slice of that $2 billion. >> talking about online -- awful. >> jim, should we talk real quick about chocolate? what's -- last time you were on about a year ago, the cocoa price was a real problem.

still a problem? >> it's down a little bit. it fluctuates but it's down this year so we're happy about that. so we're focused on valentine's day. which is a romantic time. but it's also a time of giving to others. i'm going to show you something new this year. >> what's that? >> this is what my daughter gave all her friends. it's filled with godiva chocolate but it's designed by a renowned spanish designer jamie hyam because val tain's day is about giving godiva for dates and those you love but also about acknowledging your mom, acknowledging your friends, and those that you really care about. >> have you ever thought about starting an online dating? >> no. but we have an online business, godiva.com is up and running and people connect and we're very plugged in. the social media. this year we did a share the love event that we had 50,000 people, but the most we've ever had participate, and they uploaded pictures of themselves with those that they love.

and it was a terrific way to connect in the internet space. >> jim we're going to pish you a happy valentine's day, too. >> enjoy that chocolate. >> the book, "love in the time of algorithms." i'm scared to be -- >> that's a clever title. i do like that. and i like saying algorithm. >> thank you. >> again we want to thank our guest host for this hour, chris sheldon, thank you very much for coming in. we hope to talk to boat of you again soon. coming up in the next hour, we have more of the day's top story. us airways and amr officially announcing a merger just about 30 minutes ago. we're going to be talking to the executives behind the deal, doug parker and tom horton. plus, famed corporate leader jack welch. he's going to join us for the next two hours. and pepsico cfo will talk earnings and outlook. busy two hours still ahead. "squawk" will be right back. ♪

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love is in the air. a mega airline merger moving forward to create the world's largest airline. details of the deal and what it says about business conditions. love is in. meet the lundgrens. they're happily married and running two fortune 500 companies. >> and "squawk" loves jack. author and founder of jack welch management institute shares his thoughts on the market's big run and what executives need to do to keep their businesses growing. >> "squawk box" loves business. >> "squawk box" loves money. >> and "squawk box" loves you on this valentine's day 2013.

>> good morning, welcome to "squawk box" here on cnbc, happy valentine's day. i'm andrew ross sorkin. take a look at futures. perhaps it is appropriate we do have red arrows. the dow looks like it will be off about 58 points. nasdaq off about 11 points. the s&p 500 off about 5 points. yesterday the dow ended the session lows, but still finished in negative territory as investors searched for some market catalyst. but today, wall street has a mega merger to consider as american airlines parent amr and us airways announced their long anticipated deal. here are some of debt tails. roughly $11 billion transaction is going to created world's largest airline. the official announcement a short time ago. us airways ceo doug parker will be -- happy about that. he's also going to be on the show. he's going to be the ceo of the merged airline while amr chief tom horton is going to serve as chairman. both of them are going to join us in this hour to discuss the deal and you can only see it here first on cnbc.

>> we have pepsi earnings out. going through the relice right now. the company looks like it is coming in with better than expected numbers. 109 versus the 105 that the street had been expecting. also, looks like revenue is a little ahead of expectations. 19.9 billion. expectation was for $19.7 billion. we've been looking through some of these numbers again and it does look like they've got some decent organic revenue growth. 5% organic revenue growth when you look at cost. that's in both the developed and the emerging markets. the developed and emerging markets, end at the global snack and beverage business. very strong revenue growth of about 9%. take a look at that stock. and right now, it's hard to say exactly where it's going to open based on the bid/ask. but we will have more from this company coming up a little later this morning. also we've been watching what's been happening on wall street. the major averages near

break-even for the week so far. although there have been several multi-year highs along the way, investors obviously are going to be watching key jobless claims numbers and, of course, the big deal between american and us airways today. joining us to talk about the markets, jason trennert of strategas research partners at the cme in chicago jim iuorio of t.j. institutional services and our guest host jack welch. jack, you've got to look at these numbers and i want to start with you. it's great to have you here. >> thanks. >> we've been watching what's happening. what do you think about how the market's been reacting lately? >> well, everyone's decided they cat get yield so they got to go and risk trades. there's no question, you're forced to get back in. >> yeah. >> you're sitting there waiting. getting no money. the cds are doing nothing, treasuries are doing nothing. what do you do? >> lloyd blankfein's been talking about this. almost dangerous to be in bonds at this point. the markets are prepped at this point, hard to say -- >> short bonds aren't going to

hurt you. but to go long is a risky game today. >> and it's hard to fight what's been happening not only with the fed but with other simple things, as well. >> everyone's throwing -- draghi says whatever it takes. i'll do whatever it takes. >> the gdp is so still so lackluster. are you worried that we're going -- i hate to say because we use the cliche all the time, we're out over our skis, the market is run up on a relative basis to where the true economy is? >> the market is clearly ahead of where the true economy is. but the economy's doing all right. we're going to talk this morning about what's throwing sand in the gears of the economy. but the economy is a 2% tight fabric economy. across the board our businesses are doing reasonably well. not as good as they could be. not as good as they should be. but there's a lot of headwinds forced on us by this government. but we'll talk about that. but, this is not a bad economy.

but it's nothing like the stock market. but the stock market is not official based on where do you put your money. liquid ki everywhere and hat do you do with it? >> all right. we're going to get more on this with jack in just a moment. very quickly we're going to focus on the markets with jim iuorio and with jason trendent then we're going to come back to jack because we want to talk a lot more about the che. jason very quickly, what's been happening right now with the market situation? we seem to be a little stalled out, at least if you're watching the dow and the s&p stuck around these same trading levels. what's the market waiting to hear? >> i'm not sure if it's -- i think it's probably waiting to hear more uses of cash that's on the sidelines. i agree complete which with mr. welch. we've been calling it the tina factor. there is no alternative. i think one of the things you're seeing with apple, maybe with dell, is you're starting to see some of the nation's stages of companies trying to take matters into their own hands, which is say organic growth is weak, but you still have a big spread

between the costs of capital, and the return on capital. and as a result, i have a feeling shareholder activism is going to be a big part of the program this year. again, in the absence of organic growth i think there's a lot of investors, and companies, that are going to try to manufacture it. >> jim, what do you think? we did see finally the nasdaq pushing a little higher with technology yesterday. that had been the thing we've been holding off for yesterday. the nasdaq closed at a 12-year high. but what's it take to push things forward from here? >> well, i can't see where the catalyst is going to be. but i'm not going to be the 1,000th person who comes on this show and say, gosh, i think we're do for correction. i'm going to let the market tell me when the correction is due. even this morning, talk about a resilient market that can take a punch. we got bad news out of europe, the euro got pummeled for a short period of time and we were only down five or six handles. so to me it's still definitely game up. i'm very concerned about the fact that volatility has been hugely compressed over the last few months. but we got to look at it, if we

all agree that the fed comes in and they're price fixing in the bonds, they agreed that. they're buying quantitative easing to keep bond prices low. the relationship between the stocks is a yield thing. so they're price fixing in the stocks as well by comparison and that's where money has to go to achieve any kind of yield and that's why we're seeing this very, very gradual almost stair-step incline with a corresponding crush in volatility. >> tell me real quickly about that. that volatility has been a very strange thing to watch. the lack of volatility in the stock market. when ceos look out there and they're not sure about what's on the horizon. >> listen, i think, and i don't think you got a lot of help earlier this week in terms of the state of the union. i think there's certainly more concerns about what's going to happen in the future. one thing i've noticed among our clients, or institutional investors, is that there's a fair amount of policy fatigue, which is to say, listen, this is what it is. these are the cards that we've

been dealt. and we have to move on. we have to create value for our shareholders, our clients are also saying listen, we have to invest in things that are going to give us growth regardless of what the yahoos in washington give us. and so, volatility in my view, because there's such an enormous shadow from policy over the markets, there's a chance the volatility stays low for a very long period of time, because you're taking away a very important part, i think, of the process which is the pricing mechanism. pricing mechanism on treasuries and as a result on commodities to a certain extent. >> jason, jim, thank you very much. >> let's hang with jack and follow up on something jason trennert just said. regards of what the yahoos are going to do in washington we need to develop a strategy to try to make money, and at clayton and other people that

you advise on how to operate i guess ceos need to operate in whatever environment that they're given and whatever hand they're dealt. so let's assume that the hand that we've been dealt that it's not perfect, and let's decide, what do ceos do here to try to manage through what may not be the most positive political backdrop over the next three or four years. you still have to run your business businesses, you still have to grow, you still have to do everything that you need to do to try to win. >> you got to be productive as hell. you got to do more with less. you've got to be innovative. you've got to be constantly coming up with new product areas. and people are. and we've got a 2% growing economy. this is not a disaster. i'm worried about europe, frankly. you've got elections in italy. you've got elections in germany. you're teetering on recession. you're going to argue minus 0.5, plus 0.5. that's recession. quarter after quarter. japan's going to get stronger,

because they devalued the yen and the exporters are now in a competitive position. >> how did it just occur to them after 20 years that maybe they should do this? >> abe, whatever you want to call it. >> it was that easy? >> he did it. and look, and the issue is germany is going to have more trouble coming out as the euro gets stronger. you've got these countervailing winds. i see europe as a real risk area. i mean for me in terms of where they're going to get growth. >> when mario draghi says risk is gone it's not true? >> he's certainly calmed things down. but tell me how, with 50% youth unemployment in spain, in greece, with a strong euro, you get out. i mean, tell me how you do it. i mean, maybe they're going to do it. maybe they're going to pull out. are they going to get the austerity plans to get the mediterranean countries competitive?

that's a question. >> you buying any businesses over there right now? >> you know, we're not. we're not. because there's so much liquidity, you got crappy environment, you got crappy deals, you got high-priced deals, but doesn't look very good. there is a chance to go there but it is not a fertile ground. >> so it domestically you're saying that ceos are faced with being very productive, with their workforce and their company, and being very innovative. so neither one of those things sound like they would be hiring a lot of people. right. >> well, in the housing segment, let's face it, residential housing is going. now we're all excited about residential housing. we're excited that it's coming back strong. residential housing at 900,000 starts is half what it was in 2000. now it's twice what it was at the bottom. so we're going from 450,000

starts to 900, but we used to be at 1.8. so it feels good. but it's nowheres near the capacity that we need to get it going. autos are, in fact, moving. let's face that. that's a real strong market. when you think about china, and you think about china's strength, and you think about us, in 2009, china made half as many cars as we were making. now they're on pace to make 50% more cars than we make. so you see how fast that thing is changing. so china's going -- is going to be getting stronger. i mean there's no question in the last three months, we've seen more strength in china. but we got one big problem. we got an economy running along at 2%. john chambers was on yesterday talking about that. but we've got people taking regulation, talked about this before, but they've now unleashed. they're thrown into the sand, as

the wheels, piles of sand of regulation. now let me tell you philosophically, the president gave a talk, the state of the union message, all right? talked about all these growth initiative initiatives what do you think the regulatory environment is like? why would this administration, what's called a regulatory union, that's just come out, and the administration in april, and in the fall, is required to lay out the regulations for the next period. why did we get no report from this administration in october or november? election. why did we -- when was the report, listen, hundreds of billions of dollars of new regs. by december 21, before christmas. >> yeah. >> on at 3:00 this organization put online the regulations for

2013. >> this is the kind of thing we're talking about. i think ceos need to assume this is the way it's going to be done. >> they don't understand that. we have a regulatory body that is ready to launch. there's no new election. and guess what? when the first term you're hiring your regulators. now they're there. their pencils are ready. >> all right. >> and if -- it's a terrible situation. >> we're going to return to this. >> you don't want to talk about it? >> i do want to talk about it. i want to tell you something we're saving some time for. you think it's a great segment and that's the ceos that are married. one runs stanley black and decker. >> i love them. i know them well. >> see, in your situation, you know, suzy, i would say, is the ceo of your marriage. i don't think it's really a co-thing. i've seen how it operates. >> i don't think it is here, either. >> i was trying to get to that, though. it's something you know about. >> yeah. >> so we want to get to that.

and we have a lot more. >> all of us. >> i know. >> what's the saying? >> happy wife is a happy life. >> i'm going to go put on -- >> go put on a red tie. i have one up in my drawer >> we have a lot more from jack welch. we will talk more throughout the morning because he's our guest host for the rest of the program. also when we come back, salty snacks and fizzy drinks. the cfo of pepsi as our special guest. we're going to talk about global business conditions, soft drink wars and much more. the company's just out with results that beat expectations. also if you take a look very quickly at the futures, we've seen some red arrows, the dow futures are down by about 62 points below fair value. s&p futures off by about 6.

welcome back, everybody. pep kico out with quarterly reports just a few moments ago. the company came in with numbers that were better than expected. and is also raising its dividends. joining us is hugh johnston the chief financial officer over at pepsico. these look like good numbers pretty much across the board. revenue was better than expected and the stock is indicated higher at this point, too. can you talk to us about where you really see the biggest pockets of strength there, because, i don't see anything that jumps out as being anything -- other than better than expectations? >> yeah, thank you, good

morning, becky. you know, we actually feel terrific about 9 results for the quarter. as you mentioned, solid beat both on revenue and on eps. to me maybe the most heartening is the fact that we delivered 5% organic revenue growth, and if you look at really every region of the world, we saw good, solid revenue growth. europe at 3.5%. what's obviously a challenging economic environment. the u.s. did quite well for us, and the developing and emerging markets, at 9%, both for the quarter, and for the year, so it's really solid revenue growth across the board, and perhaps most heartening for us as we invested in our businesses this year we saw sequential strengthening quarter after quarter culminating in the q4 results. >> i do see that revenue was down by about 1% from a year earlier. i guess that was because of negative foreign -- negative foreign exchange impact? >> a little bit on foreign exchange. that's a reported number. but in addition to that, we did

reenfranchise some bottlers. on a like for like basis it was up 1% which is quite a nice level of revenue growth and well in line with our guidance. >> how much of this, hugh, is because the economy is improving in areas, and why don't you just tell us about what you see from the consumer around the globe and here in the united states? >> well, i think for us it starts with some of the things that we did a few years ago in terms of getting our portfolio right. we made some investments in developing and emerging markets to get the portfolio to a good spot. we now feel it's in a good spot. we don't feel the need for any large-scale need to change it. in addition to that what we see is developing and emerging consumers are doing quite well. our russia business grew 10%, our mexico business grew 7%. so continue to see good strength there. as far as developed markets go, europe obviously in the west has its challenges but eastern europe is doing quite nicely. and in the u.s., really over the last 6 to 8 months i would characterize it as a very slow, gradual strengthening in the

consumer. slowing gradual, but nonetheless, detectable in there. so we do feel like the consumer environment is getting a little bit better in developed markets. >> that's something we've spoken about before you really see it in terms of the jobs picture because people stop in the morning at the gas station, and they go in to get their lunch, maybe to grab either a pack of chips that go along with that or grab a soda with it. what can you tell us just about where the average discuss her is in the morning? are they willing to go ahead and spend on things like that? >> you're definitely seeing a little bit more of that. i mean, certainly the beginning of this year is a tough read because there are so many complicated factors going into it. the weather certainly a factor. the payroll tax change certainly a factor. so it's tough to read the first few weeks of the year. it's why i'm looking at over the six to eight-month time frame, we do see that consumer going in to the convenience stores, and they are willing to pick up our products. so, we feel good about that.

and one of the things i think that's benefitting us, as well, is we made the shifts in our portfolio from being just a soetd today and chips company, into a company with products anywhere from fun for you treats all the way through to healthy nutrition like tropicana and like quaker. when the consumer wants to reach for something healthy, we have a product. when they want a treat we have something there for them as well. we feel like what we've done in terms of both the geographic transformation, as well as the change in the product portfolio to broaden ourselves, has put us in a spot where we can post these types of results consistently. and that's why we're talking about 2013 guidance with mid single digit revenue, as well. >> hugh, thank you very much for joining us today. we really appreciate your time. >> thanks. appreciate it. >> again, hugh johnson is the cfo at pepsico. when we come back a valentine's day treat for you. we're going to meet the world's largest airline. we have the ceos of usair and amr, who will be joining us to

talk about this brand new merger, just became official earlier this morning. and joe has his red tie on now. >> yep. >> yeah, we got to talk about this tie. do you recognize it? >> i do now. we'll talk about it when we come back. the patient, presented with a hairline fracture to the mandible and contusions to the metacarpus. what do you see? um, i see a duck. be more specific. i see the aflac duck. i see the aflac duck out of work and not making any money. i see him moving in with his parents and selling bootleg dvds out of the back of a van. dude, that's your life. remember, aflac will give him cash to help cover his rent, car payments and keep everything as normal as possible. i see lunch. [ monitor beeping ] let's move on. [ male announcer ] find out what a hospital stay could really cost you at aflac.com.

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coming up next, managing through a debt crisis. jack welch is going to share more of his tips, next.

welcome back, be everybody. this is "squawk box" on cnbc, first in business worldwide. we've got a stock to watch this mo luxury goodsmaker coach is going 7 lewis as its president. he will become chief executive officer next january with the current chairman and ceo lew frank for the stepping down. he will stay on, however, as chairman. got some numbers out from general motors. this is another one of the companies we've been waiting on, earnings from this morning. joe, hate to put you in the spot. >> that's okay, beck. the first number that i saw to compare to expectations is adjusted profit of 48 cents a share. that is, and jack wants to mention last year, 4.9 billion of net income compared to 7.9

billion in 2000. that's full-year income net income. that 48 cent number adjusted looks like it compares to 51 cents, and it looks like the company also has a net gain from one-time items of $100 million or six cents a share. now revenue was 39.3 billion. that's something that looks like it's above the estimate of 39.15 billion. there's all kinds of stuff. there's a one-time noncash write-down of north american goodwill. there is a, wow, and big numbers, 26.2 billion. or 34.9 billion one-time noncash gain from reversal of tax valuation allowance in the fourth quarter. >> where's lebeau? >> this is his problem. he's got -- we have the ceo -- >> we have dan amman on. >> cfo. >> the only cfo is going to be able to explain all this. >> think of those numbers. did you just hear the special

items? >> yeah, $26 billion. $36 billion. >> you know i would always -- >> the u.s. market share actually dropped to 17.1%. >> that's one that we can understand. 17 -- >> 17.1% from 18% a year ago. >> okay. that should be something that we get to, as well. all right. but you know, we're going to -- let's talk to the cfo before we characterize it as above or below at this point. 48 versus an estimate of 51. but with all these multibillion dollar charges in here. >> okay. our guest host today is jack welch. founder of the jack welch management institute at strayer university. i want to continue the conversation we were having more. two corporate questions for you. one is boeing. the ceo is your guy. was one of your guys. what would you do if you were running that company right now? >> i'd do what he's doing. i'd take care of my three constituencies. my employees. my shareholders. and my customers. and i'd make sure they all knew

where we stood. we got to start up with a very complicated machine. we got to be sure everybody's focused on the issue. i'd take care of my customers. >> what do you mean take care of your customers? make new deals with them? rebate money? >> i'd do whatever it took to assure them that we're going to get the problem solved. i'd give them a picture of when the deliveries are going to be as best i could. jim is a cool, smart guy that won't panic in a time like this. we'll get in, get the problem solved. this is a complicated problem. >> you know him, is he anxious? you talk to him about this? >> i talked to him over the last couple months. he's on top of it. he's on top of it. this is a tough problem. millions of parts. i mean, this is -- and this is -- >> should he be communicating more? we don't hear much. >> he's communicating with the constituents. i just talked about it. his shares are holding up pretty darn well. i think within plus or minus a dollar. i think his customers haven't abandoned him.

and his employees love him. and he's got that going. and they'll solve this problem. this problem has happened in every plane that's brought out. its going to be solved. >> customers are kind of locked in. we spoke with an analyst who said the customers have also bet on this because they're planning on -- >> this lays down the entire foundation for where you're going. >> for where they're going. >> yeah. >> i think to be out screaming and yelling but wouldn't do much good. he's got to take care of those three constituents and he's doing it. >> my other question has to do with another company in the news which is dell. you're in the buyout business. so when you look at a transaction like that and there's a lot of shareholders now screaming saying this is an inside job. michael dell is trying to take over the company. does this make sense? >> do you like management buyouts? >> i i can't comment on whether it should be 16 or 22, as the guy on the west coast is talking about. i don't know the answer to what the right number is. i just don't. i don't buy the argument that

you can't grow in a public company. action you need to be private to grow in a fast-moving business. >> do you think he could do this? the argument is that the public shareholders are so a.d.d. that they can't give him the time that he needs to do. >> if they didn't, he was only at ten bucks or whatever it was, nine, ten, eleven dollars. maybe it goes to seven for a couple of years. while he's redoing the company. i don't buy the argument that you got to be private to reinvent the company. i don't buy that argument. you either do it peacefully, nobody's doing -- peaceful in private equity. we're in there and they're going to be looking at how he's doing. they'll find out that they'll be all over his butt just the way the public is, only be a different approach. >> for one more company. apple. david einhorn is now pushing for apple to give all this cash back. you were tim cook, what do you do? >> just about what he's doing. take a hike. >> take a hike. >> i got the cash, i need it.

i want to get new products. i want to play. i'm all on tim cook's side, screw david einhorn on this one. >> another one of your former proteges, over at discovery. i'm looking at some of these numbers. now the stock -- you watch that stock. when he took over, you know what the market cap is? almost like, what was the market cap when you took over? >> 12. >> 12 billion. went to. >> 400 when i left. >> he's a younger man than you but it went -- >> wait a minute -- >> are we going to get into the age issue? >> no, no, six billion where he started at discovery. 20 plus. >> done a hell of a job. he's globalized the company magnificently. >> international is up now. i'm looking at a 16 kent number but there are some factors with media companies, it's hard. you got to use operating income before taxes. and you got to use revenue. and all those numbers are above. but 61 cents is below. i don't know how the analysts

miss it on 76 cents. but the company also bought euro sport which is a sports channel in europe. and sbs -- >> you just -- i mean, and just asked me all about the short-term, you're beating up on -- >> i said the other metrics are above expectations. >> zazslov has done one of the great globalization jobs. when you listen to his globalization story and how he's growing, whether eastern europe or wherever, he's made every right move internationally. so i don't know what his numbers are. >> revenue up -- >> this quarter. but his company is stronger than ever. and he's doing one hell of a job. now he's got to yet the own network coming. but that's a niche compared to all the strategic moves he's making. >> the oprah. >> yeah. all right. >> i love the job he's done. i love the job he's done.

>> and content. that's another thing that's hard to judge how to expand that. i thought you'd run out of things to talk about and you never do. >> that's the fun of being in that business. it's all your imagination. >> and then international you can find reality shows that work in india. >> and you can bring this stuff on one network here. and then put it out all over the world. i mean, he has got a distribution now. he's just bought, the euro sport? >> yeah. >> i mean he's buying the right stuff to get in distribution i mean look what he does with the shop show >> we don't let the kids watch that. i'm a fan. >> awesome. >> we'll have more from jack in just a minute. up next we've got the ceos of amr and us airways on their deal to create the world's largest airline. plus gm cfo dan ammann. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong.

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cdw configured these lenovo thinkpad ultrabooks with intel core i7 processors. so, we can work anywhere. anywhere? sure - on the beach, in the woods, at the lake. what about on the green? let's not get ahead of ourselves. oh!!! there are many power couples in business but there's only one

married couple where each spouse is the ceo of a large publicly traded company that you've heard of. john lundgren is the ceo of stanley black & decker and tamara lundgren is the ceo of have niter steel industries which cramer has talked about many times. good morning to you both. >> good morning, joe, good morning, jack. >> good morning. >> we want to -- we do want to, since we don't have a lot of time, want to get to how each business is performing. but do you ever see each other? that's the one thing that i wonder and does that make it a better marriage? >> i'll turn to the boss. >> we do. we have a blood oath that we see each other on friday nights somewhere. maybe home, maybe on the west coast, it might be on the east coast. and then we get these occasions where we get invited to be in new york on the same day. >> do you give each other advice on running the different companies, or do you -- you don't need advice? >> we have the empathy factor. and you know, bad week, we can share that, and we've all been through it. good weeks we celebrate. we try to get that finished

before the first bottle of wine is done on friday night. >> i saw your relationship out at the at&t and it looks -- it's nice. but it's valentine's day. i can talk about that. wish we had a half hour to talk about it but we got all this other stuff. so tell me about i got to start with you i think, schnitzer what is the outlook? what's it dependent on? what do you need to happen to make the stock perform and the company perform? >> i think we're at an influkz point. there are four major drives, gep growth, production, extend yours and investment. from 2011 to two thud twelve in the markets where we sell our products which are the emerging markets in the growth economies we you asaul those indicators going down. 2013, 2014 the projections are those trends are going up. >> you make any tools out of schnitzer steel? >> very little. they're in a different business. no discloseable inside trades.

but you know, interestingly, as jack said earlier, in our business, a meaningful portion, about 20% of our total companies revenues are dependent on rebuild, and another 15 to 30 depending on how you count commercial construction and new residential construction. jack made the point that permits are up 3.6%. best since 2008 to 900,000. that's half of what they were at the peak. so while there's some green shoots, we're not planning on any help from the macro economic environment. and we're undertaking a lot of organic growth initiatives on our own, focused on emerging markets while we tend to continue to drive our domestic business. >> that's the hottest new product you've got? >> joe's got one in his dressing room. a couple great new products seriously that took off. not on our professional products but a couple of consumer products. an adjustable screwdriver and a matrix system that thanks to the

opportunity to plug it -- i don't want joe to hurt himself. he signed a waiver. >> i am such a can-do guy around the house. i am. >> joe signed a waiver before we let those in his dressing room. >> that's great. >> come back and we're going to talk. it was great to have you on on valentine's. we have little hearts and we've been playing music as you come in. and best of luck. >> thanks for having us. >> thanks. >> you'll see now why we had to keep this short. >> we have some breaking news to bring you. sources telling cnbc that berkshire hathaway and 3-d are prepared to buy heinz for $28 billion. that is a total of $72.50 a share. that's what our horses are telling us. it's a 20% premium. >> are you kidding me? >> i'm not kidding you. >> shut the front door! this really? >> this is happening. >> berkshire hathaway is buying heinz. >> and 3g are buying heinz. $72.50 a share. it's a 20% premium. some of the details -- >> and this is not out?

>> this is not out yet. berkshire is putting in 4.5 billion of equity. 3g is also going to be putting in 4.5 billion of equity. an additional $9 billion of preferred that are going to be joining this. we should be hearing officially about this transaction perhaps in the next half hour. >> last time he was on he said -- you know what? why didn't we think heinz? i kind of did i think -- >> elephant hunting. >> this is right up his alley in terms of consumer products. >> not only ketchup but looking through here. they make or eida. heinz -- it's hard to think of a second place. >> he loves big -- >> he makes one every couple of years. what was the last one? >> burlington northern. burlington was about a $34 billion acquisition. >> yeah. >> that was a massive, massive one. this one is humanitarian, too. >> consumer products. >> $28 billion. that's a big deal. >> that is big. also worth noting, 3g is --

>> brazilian investors. you may remember 3g because they participated in buying burger king. >> right. >> about two years ago. so a big deal on -- we have a lot of big deals today. airlines deal. we now have -- >> it's valentine's day. and ketchup is red, isn't it? >> you know, who brought this over here? did somebody literally bring these to me -- >> where did they get that? >> i don't know. >> inside information. >> inside information. we're breaking the news and then holding up the ketchup. >> anyway. >> stock's moving again. andrew, again, if you looked at the stock, it closed yesterday, the market cap was 19.39 billion. andrew again just talking about the news this is going to be a $28 billion purchase. you can take a look right now. that stock closed yesterday, i think at $60 and something. right now $72. >> the premium is about 20%. 19%, 20%. >> it was 19 billion and it's

$28 billion. that's bigger than 20%. >> you were talking about some of the deals -- >> that probably -- >> i think that's with debt. >> you were talking about some of the deals that were getting done that weren't great deals because some of them were the companies that they were buying were already too high. i mean this would not fall into that category i guess. i mean do you just see something -- >> this fits what he does beautifully. i mean, this is a steady, no technology to speak of. >> brand known around the world. >> great brand. >> does this say anything about the environment, though? i mean between the airline deal. between this deal. you had dell last week. >> the carbon footprint? >> no. i -- >> the deal environment. >> the deal environment. >> there's plenty of money around, we know that. there's tons of money around. money is not the issue. >> but does this say something about confidence that people didn't have perhaps six months ago? >> oh, i think, as i said, i think the domestic economy is clearly operating on a sound -- if there's -- if you think about the u.s., at 2%.

its supplies will be on the upside. if you think about europe, as 0% to 1%, if there's a surprise, i suspect it's on the downside. that's the difference in my view. >> john, since you're still here, and we've got your expertise here. is it a good time to be spending, smart people spending money at this point on acquisiti acquisition? >> jack made the point earlier this morning. there's a lot of cash and a lot of it's earning 50 basis points. you know, it's good deals that way above your cost of capital should be value creative. i would agree. europe is frightening because there's a lot of things that low prices, but you know, the investor reaction to acquisitions in europe is -- is mixed. so, yeah, i think it's a really good time. >> i'm thinking reverse pac man. reverse ms. pac man u.s. steel. schnitzer. >> we've done probably about 25 acquisitions in the last five or six years and what it does, it enhances our supply chain is what's most important.

so for scrap supply and raw materials, the supply chain is most important to us. that's what's driven most of our acquisitions. >> i wonder if this, andrew, remember everybody that's come in has said don't expect much in the deal world in 2013. it's just still not going to happen. i mean, this in one fell swoop this adds to the deal total this year in a big way. >> comcast just made -- >> yeah, that was sort of -- >> and the airlines. >> i just got an e-mail from somebody, a major person in the deal business, friend of yours, we won't name him, he said it's here finally, m&a paperline is the strongest in the last five years. i think there is a sense that i actually you know we had people on the end of the year who seemed to be depressed and what's, to me, so surprising is literally in the past month and a half, there has been this almost sea change and the question is, is the sea change going to actually continue? >> probably call warren on the phone and see if we can get him to talk about this. >> speaking of warren, i put on the red tie. and this is a buffett -- >> for valentine's day?

>> and buffett sent me this tie. remember you were out there with him and he took it off. >> kind of -- >> now to react to my tie. >> i ran out to get -- >> what i didn't mention -- >> playing catch-up ball. >> he immediately took a tax write-off for what he sent this tie. even though he loves everyone else. he did say, you know, i don't know what this was worth but i think he did, whatever he paid for it. he wrote it off as charity. which we love him. i wonder, really, whether, i think buffett is different. when he decides to buy. i don't this necessarily means -- but it should, maybe. maybe this money -- >> got in at the right -- you know he's been playing with this for some time. just the timing was right. >> and you know, he could have bought heinz, k-e-t-c-h-u-p but then there's the other one, hunt's, c-a-t -- do you know what the difference is, andrew, and why this one was more attractive? >> is hunt's owned by conagra? >> and there's talks about

what -- >> they spell it differently. it's the same thing, basically. >> ketchup? >> worth noting, by the way, and i want to go back and look at this, nelson peltz, if you remember. >> i do. >> was a huge shareholder in heinz. i wonder if he still is. he was pushing that company, and i -- you know, i'm looking at a story that said back in 2011 that he sold half of his stake, and i think he still -- >> is johnson still the ceo there? >> let me look up the stuff right now. >> and also i just decided -- >> johnson was very supportive of peltz's action on the board. >> conagra's -- >> phil johnson is still the ceo. >> we should actually get a full screen of the other stocks that are similar businesses. because conagra is higher, i would imagine across the board, wouldn't you think, that other brand-name consumer products are probably going to get -- i mean the market is still called lower, we've got a 34 bid on conagra, 34 to 36, so i wouldn't be surprised if we see a markup

in some of the other. >> we're going to put a quick pause on this story. we're going to talk general motors for a second and then come back to this big breaking story of course warren buffett berkshire hathaway buying heinz. let's talk about gm for a second. chief financial officer dan alman joins us first here on cnbc. good morning to you, dan. >> good morning. >> we do have a lot to get to. let's just walk through the earnings. we were talking about market share. let's talk about market share. there were so many different pieces to the earnings report, that frankly we were having a tough time understanding what was happening. >> very quickly, there's -- >> let me give you the simple -- >> confirming your story. i'm sore i to interpret. there is a release from h.j. heinz saying it is entering into this agreement. confirming the story that andrew broke. i'm sorry, dan, go ahead. >> okay, well let me give you the simple story for the quarter on an underlying basis, revenue was up for the quarter. profits up for the quarter year over year. margins were up and cash flow

were up year over year. so the quarter from our perspective was right in line. you look at the full year, our third consecutive full year profitability for the company. very robust results and sets us up nicely for 2013. we have a huge onslaught of new product introductions coming in 2013. here in the u.s., and all around the world, we've got a new full-size truck, chevy silverado and sierra coming in. cadillac has a lot of new product coming into the market here and around the world. we feel very good about the way we've set up for 2013. it's going to be an exciting year for the company. >> market share. it looked like market share dropped slightly. >> market share was down very slightly for the quarter year over year. we're off to a good start in 2013. we were up here in the u.s. in january. we're actually up market share in europe in january, as well. so, new products starting to do well in the marketplace and we're looking forward to an exciting '13 as i said. >> we're going to have to leave it there.

it's a very newsy day. we have this berkshire transaction plus amr. we'll come back and hopefully talk to you in the very near future. >> thank you. >> coming up, what are money managers doing to make clients money right now? we'll ask cnbc contributor rich bernstein and portfolio manager ed keon coming up next. plus love is in the air. mega merger is the story of the day. how the deal between us airways and american airlines could reshape business in the skies. if you think running a restaurant is hard, try running four. fortunately we've got ink. it gives us 5x the rewards on our internet, phone charges and cable, plus at office supply stores. rewards we put right back into our business. this is the only thing we've ever wanted to do and ink helps us do it. make your mark with ink from chase.

welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe kernen along with beckdy quick and andrew ross sorkin. jack welch is with us on the set. he's the founder of the jack welch management institute at strayer university. he used to run, what was that? general electric. much more from jack still to come. first we've had two big deals this morning. >> oh, the big one. berkshire hathaway and 3g buying heinz for $72.50 per share. i should say warren buffett will be calling in in just a few moments. let's give you a couple details on what's going on here. this is a transaction that represents frankly a -- 3 a 20% premium, 3g the brazilian

investors behind the acquisition of anheuser-busch. also burger king. they're going to be putting in $4.5 billion of equity, as well. then there's $9 billion of preferred total price with debt. $28 billion, and of course, there's been a lot of speculation for many years about what was going to happen to heinz. people talked about whether they were going to merge with campbell's soup. there was talks back i think in the late '90s about a merger with best foods. so heinz, being taken off the table. other major merger stories, amr and us airways announcing their long anticipated deal. creates the world's largest airlines and we're going to go to phil lebeau, who's got two very special guests on this valentine's day. >> yeah, you say love is in the air, andrew. thank you very much. here at dallas-ft. worth airport. with doug parker who is the incoming ceo of the new american airlines. tom horton the ceo of the old

american airlines who will now be chairman of the new american airlines. quickly, tell me, start first with you, doug, what was the key to bringing this deal to the and creating the largest airline in the world? >> i think the value. both of us knew existed. we had to work out the details. but the reality is putting these two airlines together creates an airline that is good for consumers, because we can take these two networks, put them together. they're highly complementary. it's good for investors. good for creditors of amr and good for all our employees. creates a stronger airline. allows us to do more compensation. and for all those reasons makes a lot of sense. >> tom, there was a sense when you guys went into bankruptcy and you became ceo and you said listen, we want to come out of bankruptcy before we think about merging with another airline. dog was persistent, and the creditors were persistent. what was the key in changing your mind, if there is a point where you said, okay, let's do this? >> well, at the outset of the deal, our mission was all about creating the most value for our

owners, and the best outcome for our people and our customers. we stayed steadfast to that mission. but the restructuring was about getting our cost structure straightened out, our balance sheet strong, continuing to renew our fleet. all the things we were doing to build value in the company. and then once we got to that point, and saw line of sight on a strong, profitable company, then clearly the next step was to pursue the merger. from a position of relative strength. and the outcome has been good for our owners. >> doug you look at your network now with the strength that you have not only here in the united states, especially strengthen american on the east coast and you're strengthened in latin america and in europe, do you look at the industry now and say, the consolidation game which you have been enacted for for years, has it played out for the most part? or do you look at it and say it's a pause and maybe somewhere down the road there's more consolidation? >> i think we're pretty much done. it was 2005, you had like 11 airlines. at least 1% of the industry. now we're down to, you know, three large carriers which is

intensely competitive. and then southwest which is a fantastic job with low cost, jetblue, some others doing what they do to keep, to make sure low fares 0 out there flying point to point. i don't think there's a whole lot of consolidation. we have a nicely rational but intensely competitive airline industry which is going to be good for consumers and investors. >> what about labor? this is a industry and you know it firsthand. you've struggled with that. are you confident? i know you have the agreements with the unions put in place, at least at framework in advance of this deal coming not. but finalizing those, are you confident you can get that done? >> yeah. and i think that's very unique about this deal is it does have broad labor support, and, in fact, we do have the labor agreements in place up front so we have certainty on the cost of the integration. that's very unique in an airline merger. >> andrew, i know you've got a couple of questions for these gentlemen. >> i guess the first question i have, maybe it's a quebec ki would ask, is this ultimately good for consumers?

are prices going to go up? is there any overlap issues that you see where regulators could get involved? and how are you thinking about some of that? >> i'll chime in. we think it's great for consumers. between our two airlines there's over 900 routes that we fly. of those there's only overlap on 12. most of those are hub-to-hub things like charlotte to dallas. very little overlap. highly complementary. we expect to continue to fly to all -- continue service out of all the hubs we have. service to all the communities we have. so that's good. it also creates, while today there are two very large airlines in delta-united. creates a third competitor that's as large, slightly larger. so we think it increases competition. see no issue with regulatory authority. >> as you may know, american has been investing in the product and services, lots of new airplanes on the way. hundreds of new airplanes, in fact. and this will only make the new american stronger.

and more financially capable to keep on investing for our customers. >> doug, you just mentioned this idea that you don't expect more consolidation. one of the knocks on this particular transaction has been that you don't have access to china. that you don't have enough access to asia. what do you say to that? >> i say one world. the one world alliance provides the customers the new america and the ability to fly all throughout asia extremely well. and on top of that we will have the best service to latin america. to europe, as well. and with the one world partners, the ability to fly people all over the world as well as any other airline can. >> selfishly, what's going to happen -- >> one world has the best hubs and best international business markets around the world. places like london, new york, tokyo, hong kong. that's what one world is about. and i think it really is the most powerful alliance in the industry. >> okay. selfishly for all the viewers who fly on you, what happens to our miles? and what credit card now are we

going to have to use to get the miles? >> your miles, we'll combine the two programs, so if you happen to have miles in both programs you now combine those into a larger airline and you can use them on a larger airline. this is great for consumers in terms of your miles. >> just be valued at the same rate as the venezuelan bolivar, right? one for one? they're good? they're not being -- >> they're good. >> they're sinking like the yen. >> increasing in value. >> all right. okay. >> and finally i see you have the new american airlines logo behind you. the entire airline is going to be american now? you going to rebronze the whole thing? >> yeah, that's right. and in fact, we've got 60 brand-new airplanes coming this year. they'll come in the new livery and of course we're out launching new livery on the rest of our existing fleet. that's what the airline will look like going forward. >> okay.

gentlemen, thank you very, very much. happy valentine's day to you. we hope that things happen in the air today. >> those miles -- >> before you guys go, one very quick question this is important. boeing, guys. boeing 787. do you have thoughts? what's happening? and are you negotiating with them for any type of rebate or special deals on any of the planes that have been ordered? >> yeah, we have at american we have 42787s on order and another 58 options on top of that. they're not to deliver until late next year and we have every confidence that boeing will sort out the current ish as and that will be a great airplane going forward. >> not worried. okay. thank you very, very much, guys. >> make light of it, but huge on balance sheet. sky miles, you see companies actually making decisions based on -- >> okay back to becky who has got -- >> the other big deal of the morning that we've been talking about, berkshire hathaway and 3g

buying heinz. this is a $28 billion deal when you include the debt. and by the way, just hearing from richard peterson over at sd capital he says that the heinz deal pushes year-to-date u.s. merger and acquisition volumes over $182 billion, andrew, and that compares with about $58 billion this time last year. so we are talking about quite a bit more deals coming through. joining us right now in the "squawk" news line is warren buffett. of course, the chairman and ceo of berkshire hathaway. warren, thank you for calling in this morning. >> glad to be here. >> so, this news caught all of us by surprise. $28 billion. we know you're always out with your big gun hunting for elephants. how long have you been searching for this one? >> well, george who runs 3g talked to me about about early december we were on a plane together. so i've followed, i've got a file on heinz that goes back to

1980. but, he is the one that got me going on this in early december. >> what is it that was proposed? this is a little bit of a complicated deal in >> yeah, well we're partners with 3g, and we'll both own a same amount of the equity. we'll own a preference stock in addition. it's my kind of deal and my kind of partner. >> what's the preferred stock that berkshire gets on top of the 50% of the equity stake? >> well we're putting up more of the money. but we're going to be an equal equity partner with 3g. and there will be $8 billion preferred stock and then we'll each have four and a fraction billion of common equity. so we'll split the equity. but we're a financing partner in addition. and and they're the operational

guys. >> you are paying a 20% premium for the closing stock price as of yesterday for heinz. you're somebody who's known for looking through deals and being very careful and cautious about what you pay. why are you willing to pay a 20% premium. what do you see in this company? >> well, i'm never willing. they drag me to the altar always. it's our kind of company. it's got a group of fantastic brands, led by ketchup, and, you know, the company started in 1869 with hars radish but they quickly shifted into ketchup so that the ketchup brand has been around for 135 years ago. i've sampled it many, many times. >> warren now that this is taking over, is this going to be a company that 3g does the operations? or is this getting wrapped into the berkshire fold? >> 3g, they're our partner, but

it's their baby from an operational standpoint, and we -- we're their partner, but they've done a terrific job, as you know, with anheuser-busch and burger king, and i've known georgy paolo who ever since we were on the gillette board, so for a dozen years i've admired him as a businessman enormously. and as a human being. so, it's a great partnership for us. and any partnership where i don't have to do the work is my kind of partnership. >> how much cash is berkshire putting in? >> it will be something between $12 and $13 billion. >> which is a pretty big deal for you. but you still have a lot of cash on the balance sheet? >> i'm ready for another elephant, if you see any walking by, just call me. >> how much cash do you have on hand after this deal? >> well at year-end we had about

$47 billion of cash every place. but we always like to keep -- and we we will keep around $20 billion so you might say the excess cash at year end was about $27 billion. >> so 12 or 13 out of that, you could still do another one tomorrow if you wanted to? >> yeah, and of course the cash builds from month to month. so, the gun is always getting reloaded. >> warren, how much room for improvement do you think there is at heinz? and the reason i say that in part is because it looks like over the past couple years, egged on by nelson peltz, who came and got involved with the company and stuck with it and got those two board seats and pushed phil johnson to really make the company much more efficient, you know, what do you think that 3g can do that hasn't been done before? >> well, i think bill johnson's done a very good job of running the company. i don't necessarily agree it was because he was pushed by nelson, but, bill johnson, you know,

took over a dozen years ago or so, and he's done a very good job. he's a very good custodian, and developer of brands, and he liked that. but, 3g is a good operator, too. as evidenced by -- they were actually the owner of anheuser-busch, but it's the same -- it's the same managerial group. >> and is bill -- >> i would say this. i don't think i've ever seen a better developed management group than the one that george wr paolo has done developed over the years, in brazil. he has been incredible. >> and so what happens to this current management team at heinz? >> well, they'll work with the 3g people. >> and so you expect phil johnson to keep his job? >> i would expect it. but the 3g people are in charge of things. >> warren, you buy -- at any time when you see something worth buying.

but should we read anything into an improvement in the current environment for deal making based on what's a pretty big acquisition, even for you? >> no, just means we found something. no, we -- any time we see a deal that's attractive, and it's our kind of business and we've got the money, you know, i'm ready to go. >> and i know you're -- i couldn't help but think you must be kicking yourself. you just didn't hold that us airways long enough, did you? >> well, i cake myself over that and i kick myself over giving you that good-looking tie. i should be wearing that myself. >> like i said you got the write-off for the tie. >> you've not seen my tax return. you get around plenty, joe, but -- >> you're right. i thought about, i'm trying to figure out how much, this is neither here nor there, but teresa heinz kerry still has a lot of heinz stock, and it was a good day for john when he got, you know, confirmed. but this has got to be even a better day. and i looked at their tax rate

last year, and i forget -- she's worth about a billion dollars. 12%. and that's exactly what warren's talking about when you have -- >> that 20% premium is an all-time high. >> off of an all-time high. are they dancing? i don't know at this point. but that will put a bounce in the secretary of state's step today i would think. that's interesting, warren. so now i'm just think you're going to buy every like brand name consumer product, consumer goods company, and you're a great investor but this doesn't seem like it takes that -- you don't really need to be that smart to do this, do you? >> i've absolutely got a deal. i look for it. you have to be smart to do a deal, forget it, i won't be there. >> warren, real quickly. the price is $27.50 on this. >> right. >> we're looking at the stock which is trading at $72.95. are you going to pay an extra 42 cents? >> no. i can give you the answer to that. >> if people are trading higher than this, go away? >> well, they got the last penny out of me.

>> but really we're at $72 point 90. what's going to happen? >> we've bought a number of companies where they traded temporarily higher. that is not unusual. >> you can throw in my purple shoes, warren. top it off. >> forgot about that. the purple shoes. >> all right. so, above $72.50, look out, because you made your final and last offer and this is it. >> you bet. you bet. >> okay. as you're saying that the stock's coming back down. >> even if they start printing a new coin called the mil, it will not try to use it. >> warren whenever you call in you know that now we're going to be i think cramer comes on at 6:00. so we're going to try and keep this going, now that we have you on, even though you called in about heinz because we like to get as much information as we can when we have the oracle on. >> okay, well we can talk about the or-ida potatoes. they have hash browns. >> synergy. >> you're going to keep it to heinz at this point.

>> while we have you here -- >> we got to go. >> -- moody's after everything that's happened with s&p, the trouble that they're in with the government, moody's stock's been punished by this, too. how much moody's do you still own? >> well, we own -- we haven't changed our ownership in at least, at least oh, i don't know, i'm sure almost a year. i mean, with moody's we own over 10%. so any time we have, as we had a purchase which we haven't had or a sale we have to report it within two days. so that gets picked up very, very quickly. and i know we haven't sold any anyway. i'm not at the office now so i don't have the number of shares in front of me. but it's something over 10% because we're still in a situation where we would have to report within two days if we bought or sold any. and we haven't sold any for i don't know a long time. >> what do you think about the government's case against first of all s&p, and then potentially that spreading out to the other ratings agencies? >> well, we'll just have to see what the facts are in the law.

and they've standard & poor's so they must think they have a somewhat better case against them. but obviously if standard & poor's were to lose the case, you know, moody's would obviously be a secondary logical target. >> what kind of a -- what kind of business or what kind of environment are your vast array of businesses seeing domestically, warren, is it a minus 0.1% economy they're dealing with or about a 2.5% economy? >> yeah, it's -- it's been -- it's really been remarkably similar since late summer of 2009. i mean, you know, it's just slowly been improving, and sometimes the sentiment gets, you know, stronger, and sometimes the sentiment gets weaker. but the economy, if you look at our businesses, they have steadily gotten better but not at a fast clip. and that continues right to this day.

you know, the in january and so far in february they're up somewhat but coal is down, oil is up. but there's -- and as everybody knows, housing is coming back a fair amount of strength now. but from an extremely low base. but the economy continues to improve, but it doesn't do it at a rapid clip. >> that's very similar to what jack has been telling us this morning, too. jack you see that same thing with the business? >> absolutely. it's steady. it's slow. nowhere's near enough. and i'm concerned that things, we got two big things coming at us. we got dodd-frank, which isn't out yet, really. and we got obama care. and obama care, when you look at the complexities in that plan, health care costs are going to go up, they're not going to go down. and you've got temporary workers to deal with. retail has got a hell of a problem. going from 35 hours a week to 30

hours a week for a temporary employee. if you've got 50 employees. you want 49. there's so many complexities in these two things. so my concern about acceleration, is regulatory. warren may have a different view of that. >> interesting thing is i agree with everything jack has said, but it's -- it's i don't come away as pessimistic as he does. but he's absolutely right about, you know, about what's happening with health care, and everything. i don't disagree with a word that he said. that he said. >> and i'm not pessimistic, warren. i'm not pessimistic. i just think we -- we're at a position where we could really take off if we had the right policies. >> yeah. well i -- i -- the interesting thing kind of is that america really is doing better than the rest of the world. which is, you know, everybody thinks we were lagging. but, i think from what i see the

u.s. is the strongest part of the world. but it is not galloping back at all. it is -- it is -- it is incrementally improving, and jack is right about the health care costs. and you know, there's always a lot of problems on the horizon, i always, you know, in the end, i go with that, with that new country song that every storm runs out of rain. and i think we will see improvement, steady improvement but not necessarily at a fast clip. >> that's a really popular song right now, country, and we're going to call that up and play that when we finally go to break, every storm runs out of rain. gary allen i think is the name. >> yeah. >> we're going to play it. but, so, we do see now maybe free trade stuff coming back in the picture, we haven't talked to you about that. that's good, right? i mean that the president is -- >> he mentioned it. and we've got to get a specific deal and we've got to get an atlantic deal. and the fact that the president wants to get bilateral or

multilateral trade agreements there is a big deal. if we can bring everybody along, that's another kick to the economy. >> warren you own dairy queen and other things. do you, is that -- is the right way to help the middle class to raise the minimum wage? will that -- would that affect you or the hiring? >> there are arguments on both sides. i, i -- i've never been able to figure out necessarily whether it's a plus. i mean it drives certain people out of a -- out of the labor force and on the other hand, you know, it does have an effect on rates at the lower level. i do not know whether if i were president of the united states whether i'd take that position or not. >> doesn't it sound a lot better morally but in the end it doesn't deliver jobs? >> well, that's, that's the question. i mean, it's, and, it may drive away some jobs. >> right. >> for that matter. >> that's what the data say. >> if you ever -- >> i actually worked at the minimum wage for aheil.

>> yeah, right. >> yeah, right. >> and i was glad that minimum wage was 75 cents an hour instead of 60 cents. >> was there electricity then? >> get out the violins. >> yeah. >> i think -- >> edison was like -- >> edison was flying a kite or was that ben franklin? i don't know when that happened. hey did you see john chambers, warren, said that he's got i don't know how many billion overseas, but i think he's got 46 billion in cash, 39 billion overseas. he says if he can't bring it back, he's doing acquisitions overseas and hiring people overseas. that's just the way it is. if he's got to grow cisco it's going to be growing it over there. >> but the other side of that, of course, is that if you let him bring it back, and just enjoy the low rates over there, he'll invest even more over there because you know that tax rate will -- >> he did something permanently though. isn't there a way that we can do this where it actually works, jack? >> i mean, tax situation, yeah. i mean, we haven't dealt with it. we've got -- we got to deal with it.

>> i got two -- two quick questions that are coming in from actually various viewers for you, warren, on this particular deal this morning. one is, do you expect to use heinz or does 3g expect to use heinz as a rollup vehicle? they've done this now in the beer industry, where they try to do this with other brands? >> yeah, well i would say this. georgy paolo and i are very good friends. we've talked about the deal and neither he nor i like to think of this as our last deal. i mean, we will be -- we will be buying things. he generates cash. we generate cash. i love being partners with him. and, it's certainly possible that, you know, there's nothing in mind -- no plan in mind now. certainly in terms of anything specific but i would hope that over time that we would be adding to this. >> and the other question this comes in actually from a number of investors and we should probably ask heinz the question, will they continue to pay their dividend through the close of this transaction? >> i haven't actually looked at

the -- at the final contract on that but i would say that in most deals i've seen, it is the case that the dividend gets paid. and i haven't heard anything different but i have not actually read that specific part of the contract. >> warren, can i just go back to something you said because it's a little different than what we've heard from a lot of market strategists since the beginning of 2013, you still think that the u.s. is the best place to be investing? am i hearing that correctly? you said that growth you think is best here but does that translate into this being the best place to invest? >> i certainly feel that way. we -- we at berkshire spent over 9 billion dollars on plant and equipment last year. and 95% of that was in the united states. that's a record amount for us. we're going to spend even more this year and again it will probably be 95% in the united states. there's a lot of opportunity in america. a lot of opportunity. >> i second that one in spades. i mean, that is --

>> it's crazy that we've heard from a lot of investment strategists who said you got your gains last year in the u.s. stock market you should look elsewhere at this point but other markets will outperform. >> if you talking about stock markets i'm -- i don't know of the stock market but i know if you're going to invest this is the place. great opportunities here now. >> and warren, this is another thing that we should ask you about, art cashin reminds me. he wanted to know what you saw in the nyse based on the story that berkshire had been another bidder for the nyse. >> well, i guess the answer is i didn't see anything because i was never -- i -- i was never contacted personally in any way, i never had a phone call, e-mail from anybody in connection wa the nyse. there was some contact from somebody else at the office but like i say nobody, nobody from any investment banking firm ever put a phone call in to me or e-mailed me, and, and when they

prepared the proxy nobody checked with me. >> so when people say berkshire was interested, it, it didn't mean you in this case. >> it certainly was not the ceo of berkshire. i'll put it that way. >> and would you have been interested? >> no. >> and warren while we're taking speculation off the table, a lot of reports yesterday about what was going to happen to time inc., magazine division time warner there was some speculation you were involved in part because byron trot is one of the advisers in the transaction i think related to meredith. you, obviously, do you love seem to love the print business but would you ever buy a magazine business? >> no. >> okay. >> the answer is no. >> just make sure. >> the first i heard about it was yesterday. >> all right. >> warren, you, you know, you sent me a brick, you've sent me this ugly tie. you sent me some see's candies and you set me a net jet card that doesn't work with my name on it. >> you're such a gracious receiver of gifts. >> don't bother with the ketchup -- warren don't bother sending me any of this ketchup. >> on your behalf i'm giving this right here. >> you are such a grump.

>> tulle me what you want. >> save the postage. >> you want potatoes or ketchup? >> yeah, send some more. all right. he will. that's the thing. send the net jet card! >> don't. >> a big sack of potatoes. >> big sack of potatoes. >> warren, thank you very much. >> okay. >> for giving us the time this morning. we really appreciate it. >> good to talk to you. >> thank you. >> and a quick programming note, while we were talking to warren, we've been e-mailing and nelson peltz is going to join us in just a little bit. board member of heinz to talk more about the transaction. >> and we should point out again, the stock at this point heinz this was a 20% premium to yesterday's closing price. but the stock this morning had been trading even above the $72.50 that was offered. we saw it as high as $72 point 90 earlier. what warren buffett told us is forget it people, $72.50 is the price. you're not getting another penny out of him. it you're trading above that. >> did you think he was going to say i'll pay more? >> no. >> but -- >> you know him well. >> but it's a sucker's bet until

and unless the shares are trading at $75 and two days before the deal has to close and someone's got to do -- so we'll show -- >> i believe him. >> nelson's going to call in >> >> hopefully in a little bit. >> i'm hearing teresa heinz is not calling in. but i did place she won't be joining us. coming up, more on the -- she could fly down here and come on to talk to us. ♪ ♪ run out of rain >> how do you two have the same musical -- >> he's from nebraska. >> yeah? >> yeah. country's big. ♪ every heartache >> it's a good song. more on the berkshire hathaway deal every storm runs out of rain to buy heinz and we're going to talk to nelson peltz, the ceo and founding partner of trian partners and he's on the board of heinz. plus employment data that could move the markets. we'll get weekly jobless claims at 8:30 a.m. every week this is an important number. [ male announcer ] you are a business pro.

omnipotent of opportunity. you know how to mix business... with business. and you...rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a pro.

weekly jobless claims hit the tape. falling 27,000 to 341,000 and that is a better number than had been expected.

steve liesman is here. he was talking about 360 was the number. but slightly better than expected 341 down 27,000 and you can see the futures are still indicated lower but they are off their lows of the morning. right now dow futures down by about 37 or 38 points. s&p futures down by three points right now. they were down by twice that amount earlier this morning. part of the deal activity coulding moving some of these things. better than expected earnings and weekly jobless claims that are better than expected. >> we just heard from warren buffett. now on the "squawk" news line nelson peltz, ceo and partner of trian. >> good morning. >> congratulations. you joined the board of this company back in august 2006. and it wasn't clear that they were happy to have you. to put it politely. >> that's an understatement. and who said i'm a short-term investor? >> well, that is true, too. tell us he we heard from warren.

tell us how this transaction came about? >> there was meetings back in december between bill johnson and alex from 3g. but i think the transaction really came about because of the amazing performance that heinz has demonstrated over those last seven years. i mean, i think it's been three plus quarters and i think heinz is the only food company that can say this, 30-plus straight quarters of organic sales increases which is really amazing given the time frame of those seven years. >> now, nelson, i said to warren that some of that performance is related to you getting on the board and nudging everybody. you think that's true? he said oh, i think it's a -- the operations are great anyway. >> look, i am proud to have played a very, very small part in the success of heinz. i think the kudos go to bill johnson, go to the management team, go to the board in total.

we had a plan back in '06. that plan called for more direct market spin, less discounts to retailers, that bill johnson's credit, they took hold of that immediately, ran with the ball, execution is 99% of success. and they executed terrifically, and the results are $72.50 all-cash offer and i congratulate mr. buffett and the guys at 3g. i know the guys that 3g. they're buying a great company. >> nelson, the stock is now trading ahead of the transaction price which suggests that some people -- >> karen finerman also points out that could be if there's a dividend that gets paid between now and then -- so i need to look at up. >> nelson the stock is now trading at $72.55. do you think that's a function of the dividend or people thinking they're going to be getting more? >> it could be that. there was a sell recommendation

put out, i think it was yesterday on the stock. could have taken that to heart and thought it was overpriced. >> bill johnson, you think he's keeping his job? we were trying to get an answer from warren on that, and he said yes but i thought at some level it might be noncommittal because he said 3g was going to be on rating the company. >> you know as far as we're concerned on the board, and this is very important for us to determine, that it was a fair transaction, there have been no offers and no discussions about compensation with any of the management to and including bill johnson. and that was as of through the board meeting last night. i can tell you if bill johnson is staying that's either news that occurred after last night or speculation. >> the premium is a 20% premium, which is a very nice premium off of its highs. when did you sell your shares? because i know you're a board member. but for the most part you've sold most of your shares,

correct? >> that's correct. we sold our shares probably in the high 50s. we sold our shares and interestingly enough yesterday we ran the numbers and found that the average sale of our shares resulted in a 900 basis point premium to the s&p, we then held until today at $72.50. we would have had 900 basis points north of the s&p. however, we've made some good investments since we bought lazard because we thought the m&a market was coming back and it has. >> they're an adviser to 3g. >> they are an adviser. >> you've been coming and going. >> if we bought kraft at 30 if you recall that one and that's been very good since the breakup. and we bought state street and family dollar. so we're not crying about what we've done with it.

but most of all it's a day of celebration for heinz shareholders, they're getting a great price and 3g, and mr. buffet are getting a great company. >> unable to buy any late yesterday, huh nelson? >> couldn't get an order in. >> hate when that happens. we talk a lot i know how you think about certain things. have you just decided now that businesses just need to operate regardless of the political back drop in washington. is that where you are -- >> that's exactly where i am. and that's comwhere i think most ceos are. i think they said we know what we got for the next four years. like it or not, i agree with mr. buffett, the united states is probably better than the rest of the world. but i liken it to being the world's tallest midget. i think we could do much better if washington could get out of the way a little bit more. by the die is cast. we've got an administration that we put in office and therefore we know it, and we're going to

go forward with it. and i think that's what the ceos have decided. >> that's right. >> yeah. >> nelson, this transaction say anything about confidence in the board room? we asked warren. he said this was a one-off for him, and you know, was an opportunity, but we're also seeing lots of deals. it is valentine's day. we saw the airline deal. but it's been, it feels like there's a lot more going on right now. >> you're 100% right. i think there are many more deals coming. i'll say it again. that's why we made our investment in lazard last year. we think this m&a market is back. revenue growth is hard to come by. i think most of the corporate america feels that they have skinnied down their operations to a point where they can't get much more out of it. so synergies are the next wave of getting eps growth. and that's where i think, and you know where -- you know where the cost of money is. you know there's plenty of money around. the banks need to lend.

so i think you've got, and we know what we've got in washington for the next four years. >> right. >> so i think we're going to see a lot more of these. >> mario gabelli says legg mason is going to double. >> my money is on mario. i would never bet against mario. >> you like the new ceo joseph sullivan? >> i think he's fantastic. i love our new director, dennis cass. i think joe is going to do a terrific job, but the pieces to that business are very valuable individually, i think joe is going to be able to pull them all together to work together properly, and i'm thrilled about that management change. it took awhile in coming. but if the board did the right thing there, as well. >> i don't expect you to tell us other situations that you're interested in right now, nelson, but can you give us overall what -- you know, like for example, family dollar. i figure if the economy is not going to get that much better you buy stores that cater to people that have no money? >> family dollar continues to get same-store sales, increases,

this is a retailer that's had same-store sales increases for 20-plus years. not quarters. but years. this is a company that really has changed. they've learned a lot. they've adopted well. and i think you're going to see continuing success out of family dollar. it's been a great investment for us. we got in in the 30s, i can't give you the precise price. we believe in the company. we like it. we're involved in ingersoll-rand. you saw that they made some initial moves there by spinning off security, increasing substantial increase in the dividend. a huge share buyback with a time frame on it. first quarter of '14 to be completed. so we think they're moving in the right direction. we think there's wind at their back, and we're very happy with what we're seeing. we're not stock market buyers.

we're buyers of a few companies that we like, and that we think that we can have some positive input with. so, but i think there's m&a market is just getting rolling. and i think you're going to see more of it. >> would you -- would you short some herbalife so we can have you on with carl icahn and you guys could talk about which way it's going to go. could you just play along with us? >> that's a duet. that's a duet. it's the bill and carl show. i would never want to get in the middle of those two. >> come on. >> i don't know herbalife. >> say hello to jack for me. >> jack is right here. >> hi, nelson. >> nelson, thank you very much for calling in today. >> grat was great. >> we hope to see you in studio soon. >> okay, thanks, guys. >> coming up, much more on the deal of the morning. berkshire and 3g buying heinz. we've heard from warren buffett. we've heard from mr. nelson

peltz. we've heard from the master of management jack welch. we've got to talk about your mba stuff. >> talk about a lot 6 things. >> okay. >> okay. and yep, we'll have more from jack coming up right after this. and the financial sector has come a long way since the crisis of 2008. but, are banks really safer and better equipped to handle shots to the system, we'll ask t.-paw. tim pawlenty. yep, same guy. i will speak to him as well. stor but i'm a busy guy. it used to be easier but now there are more choices than ever. i want to know exactly what i am investing in. i want to know exactly how much i'm paying. i want to use the same stuff the big guys use. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed

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welcome back, everybody. financials have gone full speed ahead. and according to new numbers the banking industry is much safer and more capable of handling shocks now than it ever was before the 2008 crisis. tim pawlenty is the president and ceo of the financial services roundtable, and he joins us this morning and tim it's great to have you here. >> good to be back, becky, thank you. >> so let's talk about the situation right now. we have seen financials, they've been doing pretty well. many of these stocks that have been coming through but your point is, look, this is a much safer industry, things look pretty good right thank you. >> the financial services roundtable in partnership with some other entities have put together this third party study called the hamilton financial index and year over year a 10% improvement and prior to the crash of 28% improvement as

measured by capital levels, and also measures of the financial stress by the st. louis federal reserve. >> as jack was pointing out, dodd-frank still has a lot of measures that need to be implemented. a lot of things that need to be decided. so, where does that leave you in terms of the regulatory structure. >> obviously dodd-frank, which was responding to a crisis, it was put together in a crisis environment, and directionally needed. you know, the more oversight, more capital requirements, more provisions about how these institutions might be wound down in a future crisis all important directionally but a lot of the blanks still need to be filled in and of course markets don't like uncertainty and overburden and there's concern that the future of dodd-frank could touch those two trip wires. >> what's the worst case scenario and is it at this point freezes banks from doing more lending as they worry about what they're going to be required to do? >> it's not freezing banks from doing more lending. but there's uncertainty. there's uncertainty in the regulatory landscape. when people are deploying large

amounts of capital and plan strategically for the future they want the rules of the road to be clear and that's currently not the case. >> is it having an impact? lending may be happening but is it happening at the same pace it would be without clarity? >> well, example. one of hundreds of examples within dodd-frank there was a recent rule that came out called qualified mortgages. qm promulgated by the consumer financial protection bureau put some rules of the road out. now overall, you know, not a bad set of regulations. there's some concerns and some tweaking needs to be done but it says to the industry if you want to make qualified mortgages and don't want to get dinged legally in the future here are the objective requirements you have to follow. that gives the industry some certainty, reliability, predict and. those kinds of declarations are actually helpful and constructive. >> so it's a good thing. >> it's directionally a good thing. it needs some tweaking. but yes. it's good. the industry overall, there's a few minor complaints about the qm rule but overall it was constructive and good piece of work. >> don't you feel like the piggy

bank, whenever they run short they come back on the mortgage and sue you for another billion dollars, $2 billion? don't your bankers feel a little bit like a piggy bank? >> well, keep in mind, jack, that if the mortgage crisis didn't just involve banks. it involved nonbank actors, thrifts. >> but banks are getting nailed -- >> yes. >> every month there's another billion dollar lawsuit from the federal government about something. >> no question. you know, but there's an overhang. obviously there was a lot of bad behavior. let's just face it. there was bad behavior. bad judgments. bad decisions and there's consequences for that. it's taken awhile to dig out from underneath it. when you see the headlines of people cleaning up those things from five years ago, ten years ago. but you get trust by earning it. and the banks and the financial services industry, more broadly, i think is headed in a better direction, as the index indicates. >> what do you make of the s&p suit? and the reason i ask is because the suit is based on the idea of protecting federally insured institutions. they're trying to do this on behalf of the taxpayers. and yet some of the cbos that

they're talking about were issued by banks like citigroup and bank of america. >> yeah. well, it's interesting. we'll see how that suit plays out. it's interesting that s&p got sued but the other rating agencies didn't. one question is, how do you single out s&p and not the others. >> first s&p just the first to get taken off, because we had warren buffett on earlier, who is an owner of more than 10% of moody's. he said if s&p loses this he expects that moody's would be a secondary target. >> it could be becky but let's also remember that part of the crisis, there are many, many elements to the crisis, but one element to the crisis was people thinking that assets were secure when they really weren't. part of that was because people misunderstood or mischaracterized the assets. so some inquiry in that area is legitimate. >> tim, we want to thank you very much. pleasure having you here on set. >> good to be here. thank you. >> let's get back to our guest host, jack welch, founder of the jack welch management institute at strayer university. which we haven't talked about. every time you come on you got more, more, more mbas.

>> yep. >> we're over 500 in the mbas now. we've graduated our first 100. we got certificate programs. for graduate of 350 people. but most importantly, we've got training program now. that we got courses the welch way training courses way training courses where we're teaching management with appear app, leadership. all kinds of companies, $500 a seat, people to apply 10 hours of learning on how to hire, fire, motivate, lead, et cetera. this is going to sweep across america. this is really a terrific leadership program put together by the dean of the cornell business school, put together by -- we just hired for our faculty the associate doean fro virginia. we've got first class casualty

putting together a 10-hour management training school as our school is moving towards 1,000 mbas. it is really taking off. and our graduates are having great suck. we couldn't be happier with the program. strayer has been a great partner and we're off and running. this idea of corporate training being done with an app, where you can really teach people on their time 10 hours of classes. we could teach you to be a great manager, andrew, in 10 hours. >> in just 10 hours. >> in 10 hours, we could give you the basics -- >> someone is going to come up with a 9-hour version. >> do you have a pro capitalism training program that just shows the benefits of capitalism. >> our graduates will tell you that. 75% of them have gotten a significant raise or significant promotion since graduating. that's a real number. >> you've got ivy league degrees

outfit your -- out of your -- >> i'm happy to be a capitalist. >> absolutely. >> we have time now. let's take the sequester. don't get yourself all hung up over the next month for the sequester. if it happens, it will slow the economy a bit for a while but we'll take action. can you believe a $3.5 trillion economy and we want to take 3% cuts. god, any leader in the world would be able to do it. if we can't do it surgically, which would be the ideal way to do it, the way a good leader would do it, let's do it with a hatchet. the old trick, we're not going to move the carrier, we haven't got any fuel, that's like the game people play in corporations. the manager comes in and says, if you're cutting my budget i won't be able to do your favorite project. boom. so we stop the cuts.

taking $100 billion out of a $3.5 trillion economy, that will end up with the economy -- the constant government lattened. we're not talking about slashing. we won't grow. the silliest -- we'll have debates, front row seats, headlines. you guys shouldn't -- we've got 24 hours to get to it. it's all nonsense. get that money out of there. >> it's like raising $60 billion a year from the 400 and above, which we did, on a trillion dollar deficit. >> let me just tell you, don't get hung up over the sequester. if it happens, we might slow the gdp by half a percent in a quarter. that isn't it. we'll turn the curve over and we've got to do it. >> you will see some businesses that take hits, though. we talked yesterday, mark from aetna. he said it could effect them

because they will be looking particularly at the defense company. >> laying off some people. >> that will, in turn, take the medicine, the hit. >> take the hit, it's a small hit, and get around it. mark can cut some costs at his place if they have to. the idea, just step back for a minute, that taking $100 billion annually out of the $3.5 trillion expense, there isn't the reports manager in the world could handle that. >> let me ask you a different question. what's the biggest cut you think the economy could take and be okay with it, meaning people talk about entitlements, all sorts of things we're cutting back on. the question is when do you put those through where the economy is. what's a number that is okay? >> i'll tell you -- >> politically palatable. >> a different argument. $100 billion isn't going to sweat anybody. okay? no. there will be a yelling -- they

will have a carrier park somewhere. they will take pictures of the carrier sitting there. they will find one cop that got laid off somewhere. they will find a voter that couldn't vote. i mean, it will be all silly stuff, okay? i'm going to start e-mailing every day you start moaning about the sequester as it comes time to do. get over it. we need a leadership on both sides that will get this $100 billion surgically, not with a hatchet, and they can do it out of entitlements. they can do it out of discretionary spending. filled with layers, layer after layer after layer. you could delayer that place and get all kinds of money out. >> you know how when we run trillion dollar deficits, one way out of it would be growth. that would be great. let's say it's not growth. maybe it's not going to be. >> i've got a way to get growth, if you want to get growth. >> what are the chances it

happens. >> now you're going to go back to politics. >> no, we're not allowed. >> let's say you do a trillion dollars. you just assume for the next four years at least a trillion. we've done the taxes, maybe more. a lot of trouble with any spending cuts. do you in your ceo planning for the next four years, would you plan we'll have a trillion dollar deficits for the next four years? what would that moon to the bond market? what would it mean to -- we can last four more years at a trillion dollars a year. >> i'm more hopeful you'll get an energy policy that will drive oil and gas, that will do research on renewables. i don't want venture capital on renewables but i want research on renewables. i want to drive fracking on public as well as private land. we haven't touched public lands. i want to be an exporter,

sorry -- >> we talked about that. >> of gas. i want to be somebody that provides the low cost energy producer. that's how you'll bring jobs back. you don't bring jobs back by legislation. you bring jobs back by making it the place to be. >> the president did mention this in the state of the union, more natural gas to keep electricity prices low. >> come on. he also talked about heck coalte costs lower. obama care isn't in yet. that's all recession related. that's nothing to do with obama care doing that. let's talk about regulators. i get the energy policy, if we open up and go. we replace chu, live, a jackson, these are people when you replace them, watch those appointments.

>> it will be worse. >> pray to god you're wrong. if we can get the regulators to turn maybe not 180 but turn 120 so their slogan every day is come in and find a better way to create a good economy and jobs. wait a minute. don't come in with an attitude of let's get the bastards. >> they are going to turn 360. >> are there any names you like out there that you think would be palatable to administration but business as well. >> i don't know people. i just want somebody that comes in and has a goal of regulating sensibly and creating jobs, not being punitive. i like the president's immigration lines in the announcement. i think he was right on the button, if he can hold to that, fix the border, get a path to citizenship and keep people that

we educate. i'm telling you, in government trade, he mentioned that. let's do it. it take us four years to get panama and south korea done. it was on the bush table. it took four years to negotiate and we didn't get anything else new. those trade agreements would do all kinds of things for exports. >> are you at all nostalgic about -- ge out of nbc and comcast is running it well. >> comcast has done a great job. look, the market said good for both companies. the market said comcast got a great bunch of assets. ge has more cash to do things with. time and men's fortunes change. you go with the flow. >> every time they do a deal, they say it's great for both parties. stock goes up in one case and down in the other. ge is in one, can use the money, comcast in another and actually worked. >> worked out well. comcast has a great set of assets now a ge has cash to

invest in what they want to do. we all do it differently in our times. >> jack, we love you, on valentine's day especially. >> happy valentine's day. >> merger thursday with all these deals. huge day on wall street. almost $100 million in fees for the banks. center view bank. >> make sure you join us tomorrow. happy valentine's day. congratulations to "squawk." what a breaking news. warren buffett making a big deal with heinz. i'm carl quintanilla from the stock exchange. kramer is off. we hope aol call in. heck of a week to take a vacation, one of the biggest months for m and a. year-to-date, m and a volume up 25%.

berkshire hathaway, 3g buying heinz for $72.50 a share. $28 billion in debt. i know you've been working this, too. the notion now buffett is prorking with operational partners important -- portends a new area. >> one after a flurry of phone calls, the power of the brazilians. we keep saying this name 3g. people might be somewhat familiar when they think about abm or the buyout of burger king. really what 3g is is an investment vehicle for three of the richest men in brazil, some of the richest men in the world, frankly. one of them in particular. jorge paolo. there it is. they tell us, jorge paulo on the board of gillette.

he was the driving force behind this deal having approached warren buffett, not long ago. this happened very, very quickly. something we'll start reading about, perhaps second day leads. we'll bring it to you now, how incredibly wealthy brazilians are. these are bullet investments. in other words, not like a private equity fund where they raise a fund. this is their money. they put it in. $4.4 billion put in by them, $4.4 from berkshire hathaway, taking back a preferred $8 billion, which they will get 9% on. we'll get the details for you. that's the interesting point, carl. your point interesting as well. they are buying this and they are doing to keep it. they are not going to take it public again. again, it's not a private equity model. they are going to keep it. the likelihood, this new partnership between berkshire and 3g, from what i hear, maybe they look for another company to buy. then you get synergies, not readily available right now

through this purchase of heinz. >> another company to buy and combine in this space with heinz. therefore, the move higher we were seeing across the packaged foods area this morning. >> i don't want to get ahead of ourselves. this is something that will take years. my point, unlike again private equity, this is not. 3g is not, berkshire obviously is not. they are going to keep this thing and potentially have it forever, be a private company heinz. down the road, you could expect once they put a new management team in place and everything else, you will get other acquisitions. >> still, you can't ignore a bud, a burger king, now this. they seem to be making a few plays within a targeted space. let's bring in becky, of course, spoke with buffett about the deal earlier this morning. what a morning. >> this has been a heck of a morning, guys. i've been listening to the conversation around the table. what we've been talking about is how this really is stepping up the amount of deal flow coming through. we had some statistics earlier today that with this deal between berkshire,