. today's top story, there's only one. the dow rallied more than 300 points in the last two sez sessions. the blue chip index is now within 89 points of its all-time record rose. europe is seeing a lot of green in early action, as well, on thursday. february 28th, 2013, "squawk box" begins right now. >> welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. our guest host this hour is sentinel president and ceo christian swake. good morning. thank you for being here and joining us. as you said, it is a good day to

here be here. we've been watching the u.s. equity futures because of all the actions yesterday. this morning, you did see a few green arrows, but no massive move at this point. the magic number is 14,164.53. that is the record closing high for the dow. it was reached back on october of 2007. the bulls -- a number of catalysts for monday's sharp sell down. some are calling this the bernanke bounce. the stocks soared after the two-day testimony on capitol hill. >> the evidence thus far is that the housing market is hit the bottom and is recovering. we've seen rising prices over the last year or so. we're seeing some significant increases in starts. and sales. foreclosures are still too high, but they're coming down. the number of people under water on their mortgages is coming down. so we're still far from where we would like to be.

but the evidence is that the housing market is strengthening and that low mortgage rates are one reason for that strengthening. >> although a long period of low rates could encourage successful risk taking and continued attention, the developments is certainly warranted. to they point, we do not see the potential costs and some risk taking is outweighing the benefits of a stronger growing economy and more rapid job creation. >> we are seeing positive reaction in europe and asia today. the nikkei was up by 2.7%, a gain of over 300 points. the hang seng was up by almost 2 22%. in europe, you're continuing to see that strend with modest gains there. right now, germany, the dax is up 0.5%. less than 0.25% for both the ftse and the cac. we're going to talk more about the situation in europe with a special squawk newsmaker in the next hour.

ecb member nuwall nnowotny. the sequester will go into effect at midnight unless congress takes action. it looks as though there will be no effort to stop the automatic cuts before they kick in. our squawk newsmaker on this topic this morning is house budget chairman paul ryan. he's going to be joining us in a cnbc exclusive at 8:00 eastern time. and this is the first time we'll be talking to him since the presidential election. >> maybe we can have a sequester every week and the markets will be at 30,000. markets, ooh, they're really worried about this. don't do it, don't do it. and you can't say this time that they're expecting a deal. to happen at the last minute. that's not what it is. >> they've been invited to the white house but not even until tomorrow. there's no expectations. the next big issue -- >> unless you believe that the markets believe that in the next

two or three weeks things get worked out and the real deadline is not tomorrow but in three weeks time. >> but this is a slow -- >> i'm a little bit miffed now because i looked at the journal and it has a piece today, the reason this was done is both parties put off spending cuts. we will cut spending. we promise. we will do it. and they both agreed to do this. now it was a -- obama is not asking to do targeted spending cuts. he's asking to do a deficit reduction package. >> it has moved. >> it has moved. and the u.s. -- >> we talked clearly about it and -- >> and you ask the people in the u.s., what about sequester? i just want to see that we can cut spending. the reason we -- >> it's symbolic at this point. >> it is. it's only 44 billion by tend of the year. >> i would agree. i would think that if you hadn't looked at what you had done over the last couple of months where it had been partisan politics

and where republicans feel like they got the short end of the stick, you might be able to do a better deal right now. but every time one side feels like it's lost, it has to come back and make up ground. >> government has grown 20% over the last four years. we're trying to cut it marginally. >> but you know as well as i do, it's discretionary spending that's the big problem. >> but there's still hundreds of billions of dollars in discretionary spending. but there's 200 billion in discretionary spending you could still cut. >> when you start hearing about what they're threatening, the department of agriculture will no longer be making meat inspectors available. >> that's what the white house says because he has a choice of what he can put in. >> they have to go across the board on all of these things evenly. >> lisa kept saying, will i accept a 3% cut in my hair? yes. you don't have to pick sides or the front.

0.03 of an inch? you can't even tell. and if i was a republican, they would still say, oh, the grand bargain, we still want to do it. >> it's not happening. >> if you give the deductions, you get rid of carried interest, you give them all that, then that's what you're finally negotiated on if -- >> that's what they could do if they hadn't given everything on the higher revenue. >> this was supposed to be spending cuts. this was supposed to be agreeing -- now, if he had said i want to do this surgically, i don't want to do it across the board, but he's not saying that. he's saying i want to raise taxes again and -- but it's a deficit reduction package. and you say, well, the public is for it. they don't -- i think it's crooked. i think it's dishonest and i'm like woodward. >> that is washington. >> well, no, it's -- >> yeah, it is. that is washington right now.

>> woodward said this is the biggest madness. a very senior white house aide said to woodward, you're going to regret this. >> if you remember when we ask him about what woodward said, i've known him for 20 years and he's never been more wrong. >> i should just come to you for the behind the -- i shouldn't say i don't know who it is. i should say, andrew, who was it? you know. >> in fact, ann was telling us. >> ackman is really smart, but if he gives me any investment tips, we're going to --

>> it's almost like his very first big, you know this, too, was a retail deal. and it keeps coming back to retail. >> target barnes & noble, borders, they make things people don't use any more. >> we'll talk about that one in a minute, including that "vanity fair" piece. there's a great piece. >> the next battle? >> there's some delicious quotes in there. let's talk beyond the markets and the sequester for a moment. a few other headlines in the news this morning. "the wall street journal," this is a big one, reporting that boeing and its lithium ion batterymaker at odds about what should be included in a fix for the 787 dreamliner. the boeing commercial airplane ceo is now telling reporters in tokyo that there was no dispute between the company and the batterymaker. boeing proposed its dreamliner fix to the faa last friday. in other news, and this one is kind of crazy, investigator ves widened a probe of potential

insider trading ahead of a buyout in heinz options a day before the deal was announced first attracted some suspicion. the "new york times" reported that regulators are focusing now on a complex derivative debt rooted through london built on a recent regulatory action mounted towards a goldman sachs account in switzerland. the product in question is now known as a contract for difference. it allows investors to simply bet on changes in the price of a stock without owning the shares and it's not an option, either. such contracts are not apparently regulated in the u.s., but they are popular in br britain. and goldman sachs knows who put this trade forward in switzerland. >> and won't tell, right? >> and will not tell because the swiss laws say that goldman sachs is not allowed to even tell regulators in the u.s. who actually put the trade through. >> that's crazy. >> they'll fold on that.

if the s.e.c. or the u.s. regulators come hard on the swiss, they're ka partnership ewe late. >> the swiss will? >> yeah. they've been under the gun so much in the last five or ten years, banking secretessy has loosened up. >> but it's not going to be pressure on goldman. it's going to be pressure on the swiss. >> it will come through the s.e.c. and if they need to push hard enough, they'll find out from the origin of that. >> apparently goldman sachs has hired lawyers to defend itself, to effectively defend the anonymous -- >> they have to. >> they're in a bad situation. why would you allow yourself to get that that position where you're making trades that -- >> but ultimately the company is going to prevail over an individual. >> it is official, the senate has confirmed jack lew as the new treasury secretary. senators backed the former white house chief of staff by a vote of 71-26. all 53 democrats voted in favor and that's probably not much of a surprise.

>> also, sears quart ily results crossing wires just a few minutes ago. the retailer reported adjusted earnings of $1.12. revenue is expect than expected. that stock is up by 4.5%. we talked about stocks at the top of the show, but let's look at the broader markets. oil was down fractionally this morning, down the 3 cents. the ten-year, smoothing at 1.8837 we'll take a look at the dollar. i don't know what the italians talked about yesterday. the day before they were saying some funny things. >> the dollar was up across the board yesterday. >> the guys making the coalition or trying to make the government were disparaging one another and can saying you're never going to be in this government. and we didn't have that before, but let's check out gold finally which gave back a lot of the gains that it -- and getting a little more volatile on what has been happening with it, down about nine points or so today. >> right now, it's time for the global markets report. kelly evans is standing by in

london. kelly, good morning. >> becky, good morning. just to pick up on joe's point, today was actually the germans who were doing some name calling about the italian election. in fact, it was policymaker steinbrueck who suggested that clowns were silvio berlusconi and beppe grillo. as a result, the italian president canceled his meeting last flight and is now meeting today with angela merkel. this is one election reverb rating and causing problems for policymakers. more broadly, take a look at the italian markets. it is the red spot. down 0.4%. this has been key to trade both with the euro and generally with u.s. features futures this morning. so down about 0.4%. it was down about 0.6%. at those levels, you started to see u.s. futures turn negative. it looks like we're going to be able to hold up here. german unemployment data only that and can cpi data, the main

releases this morning. german unemployment adjusted at 6.9% held steady in january. the cpi fell on the month but was up 2% year on year. it's spurring talks about a rate cut. quick look at the bond space next, this is where where he watch for policy cues. we're seeing a rally. we're seeing yields slightly lower. no real signs of concern emanating from here this morning. turn quickly to forex and the euro/dollar which was trying to continue to hold its ree bound, that's not the euro/dollar. we are at 1.5186 for sterling/dollar. sorry. we're over here at 1.3109. giving up about 0.2% this morning. the nikkei, if you want to talk about where the outperformance was in the overnight session, nikkei in japan up almost 3% on a day when the yen didn't weaken that much.

it's strengthening. go figure that one out. back to you. >> that may take me a little bit. thank you very much and we will see you again tomorrow. we have two other household losers. jcpenney reported a much larger loss than expected in the fourth quarter. in fact, that company los lost $500 billion over the quarter. the street was only looking for a 17 cent loss. revenue missed the mark and this could be the biggest concern. same-store sales fell about 32% during the quarter. analysts were looking for a drop of a minor 28%. the biggest sales drop that we've seen since the ceo ron johnson announced the grand transformation plan 13 months ago and, guys, you thought these lessons would get smaller and smaller just out of the fact that you're dealing with a lower base. >> right. >> these companies have sales down 32% is going out of business. >> and to see saelts down like that four quarters in a row. >> yeah.

>> he said the last quarter when the earnings were so miserable that they cleared out everything, that that's the whole point of what was happening is they were clearing out of inventory, clearing out all of the old stuff to bring in the new stuff. this is the same argument they're making saying now we have cleared out the stuff. >> the problem is, they've cleared tout shoppers. >> i want to go back to the pin. >> yeah. >> the christmas pins. >> yeah. >> the promotional pens. we had a box and said this is going to do it. you said buttons are going to be -- you see, when the make the buttons, the buttons never -- we don't have the tape to spin off into the ether but we still have those buttons and we could be wearing those buttons today. here were the jcpenney buttons. this is what you posited as ron johnon's genius. i still have them. we could have them like flares.

get ner is going to be on. the economist with suspenders. tgi friday flares. don't you wish we had some of those buttons? we don't. >> the crazy thing is, i saw an ad for jcpenney yesterday. their ads are good. the ads are great but i don't even know where there's a jcpenney around me. but i'm not a crazy shopper. i've been in a walmart this week and a sears in the last week and a half. >> do we automatically do a stock quote of macy's after this? >> we showed the two charts. >> but isn't it -- some of the 32%, aren't they going, we'll jv just move those shares to target?

>> groupon was down in after hours trading. at one point they were down by almost 30%. that company losing a quarter of its market value as it posted a loss of once in a share. analysts were looking for a small profit, i think 3 cents a share. the company revealed that it began to take a smaller cut of revenue on daily deals before the holidays, saying that it sacrificed revenues and profits to track and keep the ones they have. groupon offered the street a disappointing first quarter revenue outlook. coming up, can we call a two-day market rally a bernanke bounce? how many times can you rally on the fed? i mean, we have done it -- dozens. >> this is the reversal of the f on omc minutes. >> we've been rallying. >> yeah, but we've reversed on those already last week. we came back last week when andrew was the first who said at first dins meet. >> but bernanke calling this week? i guess so.

but sooner or later, the fed could print money and buy s&p the. >> no, they can't do that. >> they can. >> they can't. legally they can't. >> japan is coming close. >> but -- >> well, we had to discuss -- >> you have the coins. >> they can only buy treasuries and mds. >> but they can put money in the bank. >> they're actually printing money. their money supply didn't change at all. it's money that's out there already. we've got them doing it until at least the end of the year. >> yeah. but certainly asset classes have gone up. in japan, they're buying all kinds of different stuff. >> not yet they're not. >> reits? >> not in any great -- >> you're ruining our whole discussion from yesterday with the guy that was on. >> back. >> i was going to tri of your retailer over there that might be getting the same -- what's

the one where you have tea? >> harris. >> we're going to have mark vitner. he's going to be on and we're going to talk more with christian. warren buffett is going to join us live on squawk monday morning. we are fielding questions for the oracle of omaha. e-mail and ask cnbc.com or tweet. i think we're going up because of the sequester, not bernanke. that starts at 6:00 a.m. eastern. ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken. ♪ to help you not just to stay alive... but feel alive. the new c-class is no exception. it's a mercedes-benz through and through. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. through mercedes-benz (announcer) at scottrade, our cexactly how they want.t

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welcome back to squawk. let's get the national forecast from the weather channel's reynolds wolf. >> hey, guys. we're looking at a bull's eye in parts of the northeast. scattered showers in the northeast. that's going to end by mid day. some of the heavy snowfall will be in up state maine. we could see up to 3, 4, maybe 5 inches of snowfall before all is said and done. the center of the u.s., it is cricket city. 37 in kansas city with clouds. 31 in minneapolis. and back out west we go, rain in seattle. and it, look like partly cloudy skies for much of central and southern california. now, what about travel? what can you expect today as you head out to the airways? at a couple of the airports, you could see some delays. minor delays delays expected in new york. the mix of travels. a mix of rain and is snow in spots lot of cleveland. there you go, guys. let's send it back to you in new york. >> reynolds, we were just

talking about sorkin on the best dressed list and you may not be on it, but this is the guy that might replace it. loot him. >> thank you so much. >> you know what? i think he knew he was going to be back on squawk today. it's been a while and you said i'm going to be back on "squawk box." >> got the pocket square going. >> representing. >> and the hair is high .tight today, too, right? when was that done, yesterday? >> high and tight. my dad, god rest his soul, was a high and tight man. >> do you miss us on the days on -- >> every day. a day without "squawk box" is a day that is not worth living. >> how about that as a commercial? >> oh, wait, now he's laughing. >> yeah, he is. that's sarcasm. thanks. >> and we can't repeat often enough this morning, the dow is less than a hundred points from an all-time record close which is back in '07. what happened in '08? i don't -- anyway, joining us to

discuss is mark vitner and guest host christian thwaits. and i'd like to get this -- i'd like you guys to fight, i think. on break, christian looked me straight in the face and said bernanke has been the greatest central banker in the history of the world in the last 50 years. then i asked him, i said, you're british, right? yeah. i said do you think gordon brown was a great -- because i'm trying to figure out where he's coming from. do you think you have good food over there, too? >> coming from where we are in the depth of '08 and march of '09 and is a central bank that -- >> what about the economy -- >> and this is the guy who said housing was probably contained. he said the housing market is contained, it's not going to get out of hand. we don't need to do anything. you, on the other hand -- i'm starting an argument between you two. don't argue with me. and you said this is the first

reactive fed guy would i have had that hasn't tried to preempt certain problems. >> monetary policy worked with a long invariable lag. it takes 12 to 18 months for monetary policy to impact the economy. the unemployment rate and inflation rate are lagging economic indicators. so if you're going to wait until the unemployment rate falls below 6%, i'm hoping he misspoke. 6% is probably full employment. that may never happen again. >> when do you think we get there at 6% on today's policies? >> i can we could get there late 2014. i don't think it's 2016. >> i think that's optimistic, though. i would hope we get there. >> we are fairly optimistic. and i would say per about unanimousky has faced the most challenge economic environment that any fed chairman has faced. >> the man who saved the world. >> i would agree with these

guys. volcker has a massive task. >> bernanke, paulson and geithner together on the cover of the magazine? >> i think what we faced back in the late '70s and early '80s is just as challenging. and the policy is working to some degree in that it has helped re-ignite the housing market. increasingly, it's leading to increased speculation. >> it went all in. and with greenspan, we thought he was the greatest ever. >> the prices have increased. it could tighten up on inflation. what's your thought on how quickly they could raise interest rates? >> they could raise interest rates fairly quickly.

they have neutral federal funds rate and employment. it's probably around 6%. >> 2% to 2.5% and they're in zero. >> they would probably go a quarter at a time. the next economic disaster are so in the early stages of recovery. >> so the problems we're going to face in the next recession are going to come out on the policy mistakes that we're making now. >> they'll be long gone by the time we're dealing with the exit strategy for all these moves. >> i agree. the difference is the real economy is under duress. >> all the real economy stuff is chugging along at 1.5% to 2% growth rate. >> they're coming back. in the fourth quarter, we're going to get the revised number this morning.

the demand grew and the private sector is growing. you've got all these private investors going out and buying houses now. all these private equity funds. they're buying brand new construction, newly built homes from home builders. this is -- we are seeing the types of increase in speculative activity that in the past would have triggered a response from the fed. >> i understand your point. i just don't think the price ves moved that much. the house affordability is still very, very reasonable. but what should nonfarm payroll numbers should we be looking for to get to 6.5%? >> well, you know, the revisions to the employment data that we had, we had thought that we added 150,000 jobs a month in both 2011 and 2012. the revisions took it to 180.

then we add 650,000 more jobs in 2011 and 2012. if you add the higher run rates, the 180 a month instead of the 150 that we thought we were a adding, that's more by 2015 which was that arbitrary date that we put out there. combined, that's more job growth likely to occur between now and the middle of 2015 than it was when they first came one that date. so to me, that means you move that date. if they felt like that's when we were going to get back to full employment, you knew that day was mid 2014. >> and you look at the extraordinary things that they've done and this is all we get? i mean, aren't there better ways to get economic growth? it's been said again and again and again. just keeping rates at zero is not a pansea and it doesn't cause demand. >> no, it's not. >> but the central bank is -- >> but it's not vary effective use of --

>> with the contraction of fiscal policy, the government has been contributing about a negative 1% growth to gdp. and they're about to do it again with the sequester for another 0.6%. in the absence of any meaningful fiscal policy, monetary policy is the only tool and interest rates have a major tool. >> and there's a private sector that we watch. watch work. >> we used to watch it work. we didn't have the fed there every minute holdsing our hand. >> declining interest rates helps the corporate sector a lot. >> you can't go below zero. >> it's not just that it's contractionary. it's so uncertain. it's hard for businesses to plan. and if we were to raise taxes to fix the sequester, everybody that gets their tax rates knowing they'll come back for more because the sequester doesn't fit the budget problem. it's the uncertainty that takes a toll on the private sector.

if we could have a better understood plan to reduce the deficit, and can deal with entitlements, the increase in certainty would help those private sector growth. >> how about fiscal policy fix it all in january. these new tax rates were made permanent. >> it's appreciation made permanent. >> you're really going to have a grand bargain. you can't do it piecemeal, right? and i don't think either side has come up with a plan. >> no, i agree with that. >> the solution would probably be to replace the sequester as a threat. i use this -- >> oh, kicking the can again. >> no. replace the sequester. the sequester is something we can't do and it doesn't do the job, anyway. if we can't come up with a better plan by september 0th, then we'll enact simpson. >> but here is the problem. you're seeing when this sequest we shall as much as you might think there's a scalpel in bolt-simpson, there's a lot of

things that people don't like. you'll see the same headlines that you're seeing now about some group that's going be affected, some group that's going to be laid off. >> we have the guy from the home builders association on yesterday and said no way, the mortgage deduction that is something that bowles simpson lays out, too. a lot of people have built homes and -- maybe it's the grandfather or something. >> you know the training wheels are kind of fun. >> you can't turn and go fast. with the training wheels there, it's not riding a bike. >> or it's like a patient who has had a heart attack. >> you can't even leave the hospital, really. we need the private sector on its own here. >> can you imagine? >> what if you never could get -- what if you had a bike

with permanent training wheels. you could never take them off. how bored -- you wouldn't even ride a bike any more. i would say keep it. i'll roller skate or something else. are you leaving? >> am i leaving? >> no. >> stay. i need help with him. >> i'll stay here as long as you want. >> phil might keep you. >> bring me a bloody mary. >> mark, thank you for coming in. we really appreciate it. >> a lot of fun. >> when we come back, the clock is ticking till midnight. we'll head to washington and ask john harwood about the latest negotiations right after this. later this morning, a cnbc exclusive house chairman paul ryan will be joining us live at 8:00 eastern time. it's the first time we'll be talking to him since the election. first, though, take a look at yesterday's winners and losers. revolutionizing an industry can be a tough act to follow,

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welcome back, everybody. the dow rallying 300 points over the last few days. the blue chip index now within 89 points of its all-time record close. the dow is indicated higher by about 17 points. our question this morning is what is the driver behind the rally? could it be the sequester?

chief washington correspondent john harwood joins us from d.c. and, john, this is really different from the market reaction we've seen to other deadlines we've been facing the last couple of years. >> interesting the way the market is discounting the effect of this. maybe they know something that those of us covering washington don't. it looks as if we're in a state where the two parties are unable to at the moment come together, bad stuff is going to happen to the government. but either wall street completely discounts the lasting nature of what's about to happen or they see it as a positive development on the long-term attempt to wrestle our deficits to the ground. >> that's an interesting question. we've been kicking that around this morning. par part of it may be that this has been described as a slow leak and could change at any point. i don't know what it is, either. >> so much stuff with housing, so many other things seem to be getting a little better, you know, john? and the market. and it is -- we are talking

about by the end of the year what is $45 billion or something. it's not even 85 we've been saying. >> well, and the key phrase that you just said, joe, was so many good things happening in the economy. that's the good news is that if, in fact, we're in a virtuous cycle economically, maybe the headwind that's ben bernanke was talking about in his testimony the other day won't be that sequential. yes, it may have an impact and you're saying, you know, aggregate demand out of the economy and there's some people who are going to have less money. but if we've got a whole lot of other positive stuff going on, that may offset and overcome that. >> hey, john, what's your expectation that actually what the market is betting on is that the something does happen, not in the next 24 hours, but in the next three weeks. >> that's what i expect. i think something is going to happen. >> but what does that look like? >> sorry? what does it solution look like? it's the two parties coming together around the march 27th deadline for government funding.

you've also got the debt limit coming up in may. and people decide, you know what? we really didn't want these cuts affecting defense and affecting domestic programs. let's come up with a deal. let's commit to tax reform. and by the way, maybe we'll get a little revenue out of tax reform. those are the words the white house wants to hear and the administration says and we're in on those entitlement cuts that we put out in our budget. maybe we'll go beyond that. that's the formula. >> all of that revenue was on the table for the grand deal. here is what i got miffed about. both sides agreed that this would be about cutting after they got the tax deal that raised revenue. this is going to be about, okay, we promised we will cut eventually and we'll put the sequester in just to hold us to the bargain that we will cut. so then when it comes up to where it's going to be done, instead of -- would it have killed the obama administration to say, okay, i'm going to do

this more targeted? it's going be all cuts. it's going to be 3% or 85 billion. it's going to be all cuts, but let me figure out where to do it. did they have to replace it with a deficit deal that raise aed taxes? couldn't they have stuck to the original bargain? let met do it in a surgery way but i'm going to do all cuts. then come back and use the tax loopholes and use the carries interest, use that in the big grand bargain dodd a simpson-bowles. he doesn't give anything, john. >> they both agreed to cut. there is no talk about a deficit reduction replacing the cuts with the deficit reduction package or introducing a new element to it. >> no, no, you're wrong about that. the administration said from the moment they struck that deal in the summer of 2011 that their intention was, a, for it not to

go into effect. that was also republicans' attention. but the administration always said the president ran around the country for a year xaping for re-election saying he wanted revenue. and when he struck the revenue deal in late december/january 1st with republicans, he said at that time i tell was not enough revenue and he wanted more revenue. this is not a surprise from somebody. the strategic point from the white house is do they make a mistake by accepting so little with so little revenue that they didn't achieve their goals and now they're coming back to get -- >> so the sequester can't created, it would be spending cuts? >> but is woodward wrong then? >> no. joe, joe, the sequester itself was spending cuts. that is correct. but the administration's intention and republicans' intention was that the sequester would not take effect. >> i know, i know.

>> that it would be in the place of something else. >> but it was we promise we'll cut eventually. we'll even put the sequester in here. and then when it comes around, here we are again. i think woodward is absolutely right. >> no, he's not right. >> and he better watch himself is all i'm telling you. >> what would they do? audit him? >> hold on a second. >> i'm surprised that -- >> no, no, guys -- >> quick last word. we have to go. >> this is one of the stupidest controversies ever. joe, stop. >> i wonder what they're going to find on it. >> he was not -- no. it's ridiculous. >> i love him. here he is. he brought down neckon and now the left hates him. and they have -- and they're embracing a president that has nixon-like qualities. >> this is crazy talk. >> that's what he was saying about the white house. anyway, john, we will see you very soon. >> hasn't seen this madness since king george. >> we'll talk to you tomorrow

when we go over that cliff. our conversation on the sequester and the u.s. economy just getting started this morning at 8:00 eastern time. house budget chairman paul ryan back on squawk. we've missed paul ryan. he's going to be back here with a squawk exclusive. first, we're going to get a ceo perspective. thomas watson is going to join us on set when "squawk box" returns. [ male announcer ] here's a word you should keep in mind. unbiased. some brokerage firms are. but way too many aren't. why? because selling their funds makes them more money. which makes you wonder -- isn't that a conflict? search "proprietary mutual funds." yikes! then go to e-trade. we've got over 8,000 mutual funds, and not one of them has our name on it. we're in the business of finding the right investments for you. e-trade. less for us. more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses, and other important information and should be read and considered carefully before investing. for a current prospectus, visit etrade.com/mutualfunds. ♪ [ male announcer ] it was designed

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welcome back, everybody. union finished 2012 on a high note with strong results from its core business. will the company follow the same path in 2013 or will european headwinds put up some economic road block?

joining us right now is thomas watson. he is the president and ce of of unice. >> it's great to be here. >> we know you've been focusing on the u.s. market. it's an underserved market? >> we continue to feel that way, actually. many consumers live paycheck to payche paycheck. they don't have a safety net to fall back on. and frankly, as we know the federal programs are very inadequate right now and under a lot of pressure. so there's a lot of desperate need for the things we do. >> a desperate need for it but it is something that may be a stretch for people when they're living paycheck to paycheck. >> it is. and it's always been a historic problem for our industry. roughly 70% of americans don't have disability insurance. i can go through each of those categories and talk about the fact that it's a very independent market. i think some of our products were too complicated, some of the price points were too high. we've worked very hard to simplify the things that we're

doing as well as we have a big business in the uk, as well. the same issues exist there. we have found demand for the product despite these soft economic conditions. that need is very much there regardless of the economic environment. >> where would you put the economic climate sthp. >> we actually market our business primarily in the workplace to workers in the workplace. so we have an interesting window in terms of how employers are thinking. and things like wage inflation, things like extending benefits, increasing employment as we know it's a very slow process right now. >> can you buy disability insurance without an employer? >> you can. not from us directly. >> it's hard to find, though, isn't it? >> it is. we've limited ourselves to working primarily in the work lace. >> if you're self-employed, it's a very difficult thing. >> it's very difficult. and back to the penetration in the marketplace, you find some of the greatest under penetration issues exist with the small employer. so not just with the individual employer, but get down to a

small business owner. those are places where it's very difficult to seek coverage in place. >> do you seek to look at the benefits for these places? are they more willing to pend more on packages swals giving employees more? >> it's a little mixed ride now. the trend before we began this economic crisis, as employers, we're beginning to shift the cost of those benefits to their employees. that trend is continuing regardless of what's happening in the economy or politically. that's a thing we in the industry have had to react to. many of our protects have the ability to pay whatever the employer is not paying. that is existing in our business, as well. to the extent we have a good product to communicate the benefits clearly and the price point res low enough, you'll find individuals are going to pay for it themselves. this is a necessary benefit to protect yourself and your family especially if you're in the lower -- >> and through payroll deducting in the workplace. >> so they can get things in the work place that they frankly couldn't g have you back to talk about low interest rates. i know that's made it difficult

for people in your industry, too. >> it is. it's a necessary evil, unfortunately. if you think back, again as a piece of background we have about a $50 billion fixed income portfolio. we primarily invest in high grade corporates, high yield, commercial mortgages, private placements, things like that. we're not an equity purchaser and interest rates are a big issue as we think about managing a business. even though, again, i think this is not a bad environment for us to grow our business, the clearest and biggest headwind is interest rates. they put a lot of pressure on it. >> still to come. thanks, tom. >> complete coverage of the dow's march to close to an all-time record high. our guest host at the top of the power, michael novagratz of fortress plus. please ecb member ewal nowatny. i had both of them just now. you would have been -- you would have said the one guy works for this place and we got some other guy who's at this place. house budget committee chairman paul ryan, also -- oh, no wait a

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all right, everybody, welcome back. e-mail us your questions for warren buffett. this is askwarren @cnbc.com. or you can tweet #askwarren and you'll hear his answers live on monday morning. that starts at 6:00 eastern time. >> let's get a final word from our guest host for the hour. we were just talking about just how cool the white power is

over, and then you immediately brought up the torture team -- >> yes. >> yes. >> where the ravens are. >> about the tower of london, which is probably the oldest prison in the world, and that's everyone was sent for treason, locked away and eventually executed, so toe the line. >> are you saying we have become -- he wants -- come on in the water's fine over here in europe, and we're resisting. and would you argue -- >> no, in the u.s., it's still very -- it's still very unpleasant -- >> -- multinational -- >> in the u.s. it's very unpleasant to be unemployed. so you know, make no mistake it is not a thing like germany where you can go many, many, many years with 100% full income replacement. these things expire after 75 weeks. they were shortened as of january 1st. and of the 12.5 million people unemployed do you know how many people actually receive unemployment insurance benefits? >> how many? >> 3? 3.5. so this is not a country -- >> 3.5 million.

>> 3.5 million. so about a quarter of people who are unemployed get the benefit. so this is not a country where you can sit on the couch -- >> the reason that we're worried -- connect the dots in italy why we're now worried. the labor reforms that were going to happen based on having a stable government are not going to happen now and you're going to be stuck with no growth for 20 years. we don't want a labor situation -- >> italy had no growth for 15 years and everyone thought berlusconi was -- >> we don't want any of that. because, you can never -- you can't hire anyone because you can never fire -- >> we are nowhere near to having french, german, spanish, whatever, you know, in the united states. it's a very business friendly labor laws that we have here. >> christian, thank you very much. when we come back on "squawk," stocks soaring. the dow now fewer than 100 points from the all-time record close. i know what you're thinking...

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the bernanke rally. >> we want to keep evaluating until we see, in fact, we are getting benefits from the policy. >> the dow now within 89 points of an all-time high. the fed, affirming their stimulus policy, and strong economic data pushing markets higher ahead of tomorrow's spending cut deadline. today's guest hosts will tell us if investors can hold onto these gains, where the market could be headed next, fortress investment group president mike novogratz and economist constance hunter are here for the hour. >> inside the eurozone debt crisis. the head of the austrian national bank and ec policymaker ewald nowotny joins us. it's a first on cnbc interview that you can't afford to miss. >> and the sequester now just one day away. a special look at how federal workers are feeling about cuts that may be coming their way as the second hour of "squawk box"

begins right now. good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin, and the futures after yesterday's rally are indicated higher once again. dow futures up by about 17 points. the dow, in fact, is on the cusp of reaching its all-time high that was set back in october of 2007. the bulls can cite a number of reasons for the rebound from monday's sharp sell-off including upbeat earnings and economic reports. some are calling this the bernanke bounce as stocks soared after the two-day testimony on capitol hill. we'll hear more about this from our guest host in just a moment. in the meantime some of your other morning headlines it is official. the senate has confirmed jack lew as the new treasury secretary. senators backed the former white house chief of staff 71-26. all 53 democrats voted in favor. jcpenney reporting a much larger loss than expected in the fourth quarter. actually losing over half a billion dollars. revenue also missing the mark.

same-store sales fell by about 32% during the quarter. that is the biggest sales drop since ceo ron johnson announced the company's brand transformation plan. and investigators widening the probe of potential trading ahead of the heinz buyout. there was an unusual spike in trading volume in heinz options a day before the deal was announced. it first attracted suspicion. now the new york times is reporting regulators are focusing on a complex derivative bid that was routed through london. 9 product in question is a derivative that allows investors to bet on changes in the price of stocks without owning these shares. contracts like this aren't regulated in the united states but they are popular in britain. and "the wall street journal" reporting boeing and the wall street firm that makes lithium-ion batteries disagree about what should be included in a package of measures aimed at getting the airliner back to the air. but boeing commercial airlines ceo ray conner tells reporters in tokyo that there is no dispute about the proposed solution. boeing proposed its fix to the faa last friday. the previous day the

batterymaker told the faa that its laboratory test indicated a power surge outside the battery or other external problems actually started the failures on two batteries. boeing's solution included a stronger containment box, a battery with greater fluid capacity and some other changes as well. another day, another retailer reporting earnings. today it's sears. their just reported adjusted earnings of $1.12. 14 cents above estimates. revenues also better than expected. chairman and ceo of sears saying, our focus continues to be on our core customers, our members, and finding ways to provide them value and convenience through integrated retail and our top your way membership platform. i'm not sure if that membership platform -- well it's actually working. better than people had expected. what can you say? kohl's also reporting results just minutes ago. earnings of $1.66 a share. beating the street by three cents. revenue's just a little bit short. current quarter guidance,

brackets, the street consensus. so, good, bad, well that's going to be down a little bit in premarket. >> good? >> i heard brackets. >> march madness? >> another huge night last night. i have no confidence in anything anymore. penn state had not won a game in its conference and they beat michigan. >> that's why my way of doing it is the right way. who has the better uniform. >> that's right. arizona looked unbeatable and i don't even know if s.c. played -- a lot of weird things are happening. it's fun to watch. so is the fed. fed chairman >> -- segues for 100. >> strange segues. exactly. you don't -- and you say if i say cockshire and pigeon hole. >> joe kernen said cocksure and ruffled pigeon feathers. >> it's a walk in the cake for me. when i do things like that. >> fed chairman ben bernanke reaffirming his support of the

central bank stimulus policy yesterday in front of the senate banking committee. his comments and some solid earnings helped to drive what we're calling the bernanke rally, which i don't agree with. steve liesman is here with more and we've been -- >> the guy can convince you. >> we've been talking for so long, steve. remember when i said he's got to say really, really, really, really long time. how many times can you go back to the well and say we're going to do this for a long time? >> imagine if the market thought there were only two reallies there and he added about seven. over two days the fed chairman ended up changing the market's mind for the outlook for quantitative easing not only this year but beyond. here are three things that happened. he said qe benefits outweigh the cost. that had an affect of really reorienting the market's expectations for this year. then he said 6% unemployment doesn't happen 2016. then he did what i'm calling a stealth easing. and that stealth easing are comments from the fed chief that the central bank needs to reconsider its exit strategy. the strategy, which they put out in june 2011 called for selling

assets it had bought over a three to five-year period after hiking rates. bernanke says one strategy may be not selling the assets at all. i want to show you the results of the last cnbc fed survey we did in january. 45 expect asset sales in 2014. 74% if you had 2014 and '15. for three quarters of the market what bernanke said is essentially a stealth easing for 2014 and '15, we're holding onto the balance sheet. we're not letting it go. >> -- buy anything else but -- >> after we get done, right. and we get done hiking rates we may be able to pursue a strategy of not selling assets. there's one other important comment. again i don't know if i'm convincing joe here. but there's one other comment that bernanke made that could be a game changer for stocks and the economy. >> my sense at this point, and it's very early, is that we are getting some traction in the housing market, which has shown some strength there the last few days. the data most recently.

in automobiles and other durable goods, to some extent in investment. to some extent perhaps in commercial real estate. we've seen some signs of improvement. but we want to keep evaluating and seeing if, in fact, we are getting ben fits from this policy. >> it has been the distinguishing feature of this recovery that it has occurred with monetary policy spinning like wheels on ice. if we are now seeing the massive amount of stimulus the fed has put in place to begin to have traction, things could begin to move more quickly than probably anyone has anticipated. they've been out there. they've been lowering rates. they've been qe this and that, and there's like this kind of impact in the economy. relative to how the economy would have reacted previously, because of what's happened in housing. because of what's happening in the credit markets and the deleveraging minimal effect. if you have a situation of monetary policy, bernanke's 6% unemployment could be wrong. a whole lot of things could be wrong. with the -- the asterisk would be, whatever happens to federal spending, which ends up being a drag on all that, some way, some how.

but it would be a really interesting change in the dynamic. again, that's the snapback that everybody's worried about out there. that all of a sudden, things could begin much more rapidly than anybody's -- >> it's just -- if you tie the coincidence of these much better, you know, economic numbers that we've seen for the past month, if you decide, okay, that's the lag effect of all this fed policy, finally catching, is what you're saying, then maybe i would give credit to -- but they said it -- but it's happened. i don't know what the cause is. sooner or later the economy is going to heal. >> we have -- but i will say just real quickly, the changes he has been noting are interest-rate sensitive sectors. >> i know. but we've heard you just can't keep rates at zero and no one wants to borrow anyway. >> what if it does happen. >> but can we not call up the sequester rally? i can switch anything -- >> let's -- >> let's open the conversation

and make some proper introductions for a second. he runs one of the world's largest publicly traded alternative investment firms spanning hedge funds to private equity. joining us now on the net, michael novogratz is the president and director of $53 billion fortress investment group also a one-time wrestler. we'll talk about that in a little bit. also joined by constance hunter who is the head of economics at international solutions network and consulting. so, either can take it. should mr. bernanke be proud of himself? >> i think he should. i think -- i think he's getting traction. and it is an interest-rate sensitive sectors. and this is the transition mechanism. but i don't discount the sequester issue. i think that that's part of it. the recent rally. but if you look at what's happening in the economy, this is having an impact. and you're starting to see the impact of what happened in housing in 2012 now reverberate through. you're seeing lumber mills coming back on line that had been shuttered for five years. you're seeing jobs getting created. and housing, which we all have

to remember is normally a leading indicator in a recovery and this one has been a lagging indicator, is starting to create some jobs and that multiplier effect -- >> no but that's a two-step upgrade you just gave the sequester, from hurting the market to not hurting the market to actually helping the market. you're actually raising it to an actual positive for the market? >> i think it's like what happened at the end of the year, when everybody felt we were going to go over the fiscal cliff, we had a patch -- >> so you think there's going to be a patch? >> i think there's going to be something -- >> but a patch -- >> you don't think the sequester in itself is good for the market? >> i think that the -- look -- >> it would show that we can cut. >> we need to cut spending and it may not be as disastrouses aeverybody hopes or thinking. because, if you talk to people in washington, they've already been preparing for this. they've already been cutting for the past three or four months, right? >> compared to what -- it's such a drop in a bucket.

>> what i think of the rally. first of all you mess up by thinking anyone's important at the fed other than bernanke, yellen, and when you read the minutes you hear this debate, people worried about exit, is the growth of the balance sheet problematic. those three don't think so. and so, what always happens is you get comments from other fed members, people get nervous that the fed's about to change, and then the chairman and/or his two acolytes bring things right back -- >> do you hit that in your investments? when you see the market beginning to stray from that focus, i think there's -- there's money to be made on that. if you have a clear investment concept that three people matter, and unless those three people change their tune, i'm going to be a buyer on these dips? >> that's 100% the right mind-set. when you talk to those guys, you read those guys, they believe we're at low rates for a long, long time. they think if they're wrong, and the economy does accelerate and we get credit growth, they can raise the interest they charge

in excess reserves and they don't even need to sell all the assets they have on their balance sheet. >> constance do you agree with me it's a stealth easing when he says we may not have to sell any assets in our exit strategy? >> i do agree with you. i mean, i think it's an important shift, because -- and it comes down to what's going to cost less in the end, right? for selling assets they're going to have to report losses to the trernry. versus paying interest on reserves obviously is going to be a cost. but when you look at the end of the day, i think that that's probably what's going to cost less. it's also more effective. it becomes self-easing. >> make, you've got $53 billion, what are you doing? >> you don't fight the fed. you want to stay long risk. >> did you double down this week? >> there's -- you know, i run the macro fund there so we try to be very agile. but we've been buying into any weakness. you know, we've had big bets in japan, as well, so that's been the bigger focus -- >> the boj. >> what are you doing in europe right now? considering what's going on in italy and all the worries over there?

>> i think the italian thing was worrisome. it created a decent sell-off, and it's probably being bought into, in that you're going to have no real change in government now for six to nine months. so no positive progress, but no real negative progress, right? italy's got a self-regulating mechanism on the deficit. their real problem wasn't fiscal. it was reform. so the reform agenda has gotten put off for at least a year. so that's not a positive. but it's not a huge negative. >> all right. >> so, again, there's so much liquidity in the world. people are stretching for yield. we continue to hear this idea of the great rotation. add a fixed income and into equities. we haven't seen any indication people are leaving the bond funds. you know, when i started -- >> does that mean there's no equity bubble? >> i think the equity bubble is going to go. but it, you know, when i think about this, when we -- >> you're calling it a bubble? >> not yet. when we started our hedge fund in 2002 the cover of barron's was the housing bubble. five years later the housing

bubble popped. this idea we're in a credit bubble, we don't see great value in credit but i think credit will be rich and stay rich for a long time and that's going to drive money into equities. >> by the way, you don't care about the sequester? >> maybe you do. >> in the short run, certainly. i do think fiscal is going to be a boogeyman this year. we're going to worry about it, we're not really going to have to. when i think about the big picture, the grand bargain was $4 trillion. if we could get to $4 trillion. that was going to bend the curve and we were going to be okay. we're going to get to 2.5 to 2.7 trillion. growth was a little better than expected. if you look at the ten-year forecast which everyone talks about, you know, debt-to-gdp stays around 80% and doesn't get any worse. in a world with reserve currency, that's fine. the dirty secret is looking at year 11 to 20, when the lock ki stick goes straight up. no one talks about that. the markets don't look that far ahead. listen in the short run, i think the republicans are going to finally, you know, trump obama. >> you do? >> i do. i think we're going to push through the sequester, they're

going to be tough, and they're not going -- >> you're a huge obama guy, too? >> you know, i was an obama guy. i really believed that -- >> see, was is the operative word. >> joe, you said you wanted to haircut somebody out. >> i said a flowbee. >> here's mary. >> take 0.3 of an inch. >> 0.03 of an inch. >> he's willing to take 3% off. >> why don't we just give it to you and you take it over there and cut it and then bring it back here. >> randomly, mary. that's the idea. it's a random 3% cut that he's willing to do. >> it's across the board. 3%. >> it's not considered, right? >> it's just -- >> you are like the pope giving sex advice. you have no idea about what people do with hair. listen to me. do you know what a flowbee is? >> i don't. >> a flowbee is that vacuum cleaner -- >> where's barry? >> come on in there. >> where you put it on and it pulls your hair up and cuts an

exact amount everywhere. >> i don't have any knowledge of that. >> i know you don't. >> -- for 1950s -- >> they talk about baldness like it's a sickness, like you've got a cure. >> that was how i showed -- because you have no feel for any of this. that's why i was talking about you could do 0.03 everywhere with the flowbee. >> mary is going to do a random 3% across-the-board cut. >> number three or number two -- >> and get the flowbee going. >> you did this? >> i did this, yes. >> what have we told you in the past? >> don't try to be funny. >> don't try to be funny. >> everybody's laughing. >> and they're laughing because it's not funny. >> which is the new kind of humor. >> you know, there's -- >> there's -- >> there's laughing at and laughing with. >> it doesn't matter to me, joe. make him laugh, make him cry, do something. >> comments, questions about anything you see here. is this funny? is it not? shoot us an e-ma e-mail @squawkcnbc.com. still to come, federal workers are preparing for budget cuts.

we're going to live to washington and one of the busiest commuter stations there. for more and a special interview with one of the more influential policymakers in the eurozone. we've got a good one for you. ewald nowotny, he's going to join us to discuss the euro debt crisis and the ecb stance on the recovery. >> monday on "squawk box," the oracle of omaha, live for three hours. answering your questions, markets, the economy, and where warren buffett is putting money to work for investors. e-mail your questions to askwarren@cnbc.com. or you can tweet us @squawkcnbc is our handle. make sure to include the #askwarren. always an event and never disappointed. it's our annual ask warren show. and it all starts monday at 6:00 a.m. eastern. ♪ [ male announcer ] if you think you've seen all that the cadillac xts has to offer...

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welcome back, everybody. thousands of federal workers pour in and out of the southwest federal metro stop in washington every day so we wondered what do they think of the sequester, our eamon javers is there and he brings us some of their thoughts and the impact it might have on them. eamon? >> good morning, becky. there's a whole lot of uncertainty and anxiety here on the part of federal workers, no region really will be hit as hard by the sequester as

washington, d.c. in fact, one local business group estimates that about 400,000 jobs just in this area alone could be at stake. the metro system here is expecting about 12 million dollars a year in annual revenue losses if those riders don't show up anymore. with all the furloughs and layoffs they think that ridership on the metro system itself is going to decrease. so we stood here yesterday, talked to a lot of these federal workers and asked them, what's on their mind. take a listen. >> personally, it's tightening my budget, and it's thinking about where i spend money, where i don't spend money. >> it simply means that we do more, tighten the belt, and we're all in this together. >> well, i still have a little bit of money, so i can survive maybe two weeks, not more than that. >> i've got to pay my car payment, and my insurance. because i got my contractor i have my own insurance so i have to pay for that. and the government's my source of income. >> joe, a lot of those workers

told us they've been giving kind of conflicting or confusing instructions from their bosses. they say they don't have a whole lot of idea what to expect but they're all expecting they're going to have to tighten their belts over the coming months. back to you. >> all right. eamon, we appreciate it. thank you, like the couldn't tell where he was, necessarily. but that was d.c. >> right outside the metro. >> all right, coming up, enjoy free internet music while it lasts. we're going to talk about -- you said he was the novo crusher? he was a professional? >> you were a wrestler? >> you were a hulk hogan. >> no, the novo crusher. >> he was a college wrestler. princeton. >> okay, he wasn't doing the tag team stuff where you got to run -- >> the rock. >> scissors. >> he was jumping off the top row. >> and then ecb council member ewald nowotny on the state of the eurozone. italy's election gridlock and the fate of the euro/dollar. at the top of the next hour, a very special interview with, yep, paul ryan. budget committee chairman, former vice presidential candidate, we'll talk the sequester, the economy, all

kinds of stuff right here on "squawk box" all morning long. keep it here. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ [ male announcer ] to hold a patent that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader.

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now, the answer to today's after flak trivia question. welcome back. we've got a little bit of bad news if you listen to radio over pandora. internet service pandora is copping free radio listening at 40 hours a month. the change, which begins in march, and will affect about 4% of the $66 million listeners, so maybe not that many, the company said that the average listener spends about 20 hours listening across all devices in any given month. the company said that listeners who reach that 40 hour on their mobile listening device, they

can now pay 99 cents for unlimited listening for the remainder of that month. or they can listen for free -- you can listen for free for as many hours as you want on a laptop or desk top. >> take a look at the markets this morning. the futures have been indicated slightly higher, even after the gains we've seen the last couple of sessions. right now dow futures up by about 14 points. overseas at this hour, europe is showing similar gains. in fact, germany, the dax there is the best performer of the reports we're looking at right now. up by 0.6%. "squawk" will be right back. coming up, inside the european debt crisis. governor and ecb council member ewald nowotny on the challenges facing europe, and the world's central banks. from the italian elections to the fate of the euro. we cover it all. right here on "squawk box." profit from it.

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welcome back to "squawk box" this morning. making headlines, rare earths metal minor molly corp won't be filing its annual report on time with the s.e.c. they're going to be delaying releasing last quarter's results. the company says it still needs

to calculate exactly how sub san francisco q4 write-down is going to be. sector delays are not taken well by investors. realty track reports nearly 1 million properties which were bank owned or in some sort of foreclosure were sold last year, a decrease of 6% from the year before and a decrease of 11% from 2010. and we're waiting for weekly jobless claims and a revegs to q4 gdp at 8:30 a.m. eastern. forecasters are looking for the data to show the economy shifted to growth from contraction for the fourth quarter. becky, over to you. >> andrew, thank you. the euro crisis has entered a new phase. and the european central bank has been pro-active in promoting growth and assuring the survival of the euro. but there are some tough decisions that still remain. ewald nowotny is governor of the austrian central bank. he's also a member of the governing council of the european central bank, and he joins us this morning. and governor, thank you very much for being here. >> good morning. thank you. >> we have been trying to get a feel for it ourselves, but where

do you think things stand right now in terms of the european crisis? >> well, i have been with you a year ago, and there is improvement in the economic situation. i think both the governments, and also the central bank have done their homework. so from a financial side, we are clearly in a much more positive situation. where we do have a problem, the real economy, the growth rates are not adequate, still. also, one has to see that there is quite a great amount of differentiation. there are some countries like my own country, austria, germany, outside the euro, poland, sweden, that have positive growth rates. but the southern countries, many of them, most of them, are still in negative growth. we hope that this will improve in 2014. but i think this is the main challenge. but the emergence in growth and we have to overcome this.

>> growth in 2014 there are a lot of people who think that that is a real stretch for some of those southern countries, in particular, and that while the ecb may have bought time, none of the underlying real problems in some of those countries have been addressed. do you get frustrated with that? >> well, i wouldn't see this in such a kind of negative way. there have been a number of -- there has been a number of progress done. for instance, you could look at the current account situation. this imbalances have narrowed quite substantially. you see, this is, of course, a number of structural changes. they take, it needs time so that they really show the effect. but, i do see progress. but, as i said, it will take some time. >> but the italian elections this week were proof that some of those changes could get thrown into -- into the side very easily. do you grow concerned -- i mean the market was concerned when it looked at italy this week. do you grow concerned by that, as well?

>> of course, everybody's a bit nervous, i have to admit about that. i would say one should keep things in perspective. so, i do not they that there will be fundamental change in the politics in italy because there are just economic necessities that you have to follow. if you look at the bond auction yesterday, it went quite well. so i think one shouldn't overdo it. >> of all the countries that you watch, where do you think the biggest concerns lie? would it be in some of those southern countries where they're going to be facing more austerity, or is it in some of the northern countries, where your constituents are doing very well, as you said, there's growth there. maybe they get tired of pulling some of these southern countries along. >> well, we know, and this is something we have learned, and we learn id the hard way, that we all have to stick together at the euro. so, there have been last year discussions about a breakup of the eurozone.

this is not relevant anymore. so i think there is quite clear, in order for the constituencies, that this is something that is staying to the. so therefore, it's not the problem so much, let's say of my country, and the other northern countries, of course, one has to be, to admit that this reform process for some of the southern countries is a very difficult one. means high unemployment for a period of time, so that i think that some of the growth elements have to be given priority. i think this is something that we have seen, not only from the political side, but also from the economic side. >> but i guess i go back to the idea that the people who are in charge may understand that and may understand the necessity of staying to the very well. do all of the voters, the constituencies, necessarily think the same thing, particularly in a country like germany? >> in germany, as you know, there will be elections this

fall. and in the election campaign that is kind of starting, there is nobody who is really oppos g opposing, let's say, the policy of being part of the european union, or being part of the european monetary union. there may be some kind of -- but basically they stick to this. no, i don't see any kind of fatigue on the northern side. but the real challenge is on the southern side. >> sure. >> and there, especially what worries me and all of us is the high rate of unemployment. and i think this is something that some kind of special actions, for instance, or giving special job opportunities for -- and the eu commission is already discussing this i think this is something that has to be added, and that, i hope, will also

increase the understanding of the population of these countries. >> what do you think about what the bank of japan is doing right now with its policies, really pressuring the yen, that adds pressure, in turn, to the euro, which has pushed higher, versus the yen on these things, the u.s. watches that very closely. what do you think of their policy? >> yes, of course, we do watch it. but i think it's much overblown to speak of the currency war, something like that. what we observe is that the japanese central bank, the japanese government, wants to avoid the deflationary development, which i think makes a lot of sense. so i'm not too much concerned about that. >> so it's not a beggar thy neighbor policy at this point with the central banks around the globe? >> no. if it really leads to higher growth, that is the intention to have, then it's not beggar thy neighbor, then it's something that is helpful for all of us. and with regard to the

relationship of the dollar to the euro, this is in the historical range. so there we don't see any need for intervention, or even not much need of nervousness. >> what point does that range start to concern you? >> well -- would give us a special point. of course we have to observe it. and you may have seen that for instance one european country, switzerland, intervenes, when there was the idea that it would be too much. but this is not a model that suggest in the foreseeable future for the european central bank. >> governor nowotny, want to thank you very much for joining us today. it's a pleasure having you in-house and we really appreciate your views. >> thank you very much. thank you. >> thank you. >> coming up, something near and dear to guest host michael novogratz's heart, the fight to keep wrestling in the olympics. have we got everything set up for you two to -- >> we got the ring set up?

>> you going to do a -- >> do a guillotine sleeper hold on you? >> i'm going to do macho man savages slim jim on him. >> oh, you are? >> well we're going to see that. >> and then at the top of the hour, the interview of the morning. former vice presidential candidate and budget committee chairman paul ryan is here. "squawk box" will be right back. [ woman ] if you have the audacity to believe

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was he governor? >> oh. you're talking about jesse ventura. >> are they different people? >> they are. hulk hogan is a different wrestler than jesse ventura. >> let's get back to our special guest host, michael novogratz. president and director of the $53 billion fortress investment group. he's also chairman of the board of beat the streets, a nonprofit organization which builds wrestling programs in new york city public schools, and also joining us are cnbc sports reporter brian shactman. you didn't wrestle, did you, bri? >> no, i got beat up by a lot of wrestlers in school, though.

>> they were better than people who try to throw punches. because you can't throw punches when you're all -- >> not that you would get in a fight. but you don't want to get inside with a wrestler in a fight because you're done. you've got to stay clear, use the jab, right, michael? listen we want to talk about wrestling in the olympics. i don't know if you knew they got voted out by an a oc wrestling committee. michael wrestled at princeton. you're the spokesperson for the committee charged with getting it back. >> indeed i am. >> i think a lot of people think of marathon and wrestling is what the olympics are all about. what the heck happened? >> the ioc is a political organization. there's a 15-member executive committee. it's northern european based. you know, they started the olympics with us, a lot of europeans want american and they, five, six years ago started a process where they told all the sports hey had to resell themselves to the olympic games. the guy that ran the wrestling federation did a really miserable job of selling wrestling to this committee. they didn't like him. he didn't take it seriously.

and you know, they got a bee in their bonnet about it and so they dissed wrestling -- >> why? >> because it's a political organization. and each person on that ioc has their own sport that they care about. there were no americans on the executive committee. there were no representatives that came from countries with big wrestling contingents. you know. and so -- >> he's being diplomatic -- >> other than the u.s. what are the countries with big wrestling contingents? >> wrestling is one of the most widely done sports. we're in 155 different countries in our federation. we had 79 countries participate in the olympic games. 29 countries won medals. no other sport had that kind of -- >> people -- olympic sports? >> it's the single biggest sport in the muslim world. iran is a huge wrestling country. there are 300,000 wrestlers in iran. it's their number one sport. russia, georgia, turkey, azerbaijan, and so, in a weird way, like the olympics is trying to make this more grown, and it was a big slap in the face to

the entire muslim world. and i don't think this was all necessarily thought out. two of the three potential host cities for 2020, japan and istanbul, tokyo and istanbul, you know, 70% of japan's gold medals were in wrestling. >> wow. >> and turkey, wrestling in turkey go hand in hand and it is an age-old tradition. >> they kept the pentathlon because basically there was a member of the 15-person committee that likes the pentathlon. but there were many countries participating in the pentathlon as there were different countries and medal winners in wrestling. since title ix wrestling has had a little bit of a profile shift in this country. i think the key is -- >> we have more wrestlers in new york city, we just started five years ago, than there are modern pentathletes in the country. >> why are we trying to shrink the number of sports? >> that's one of the things we're talking to the olympic committee about. what's the big deal of going from 25 to 26? >> what is the big deal? >> they originally -- >> is there a cost issue? >> tv ratings.

it's money. if it's not a sport that people watch that generate revenue, they have a formula. they won't tell you what the numbers were, the results, but that's what they say. >> like when we carried the olympics, we got eight channels to run it on. i mean, people are addicted to -- >> curling. >> curling which is supposedly really great if you watch it. >> it is great. >> let's -- >> you can curl, you can wrestle, can't you? >> what about wrestling curling? >> people watch wrestling in general. i mean we were talking at the break about all the, you know, wrestling events that occur. i would think that wrestling would be a well watched sport. >> wrestling is the fifth biggest sport in high school in america. you know, we're not a minor sport. we're a major sport. we've got huge youth programs. we're growing our programs in division ii and division iii colleges. the kr tournament sells out every year. and so there's a big following certainly in america. it is bigger than russia. it is bigger than iran. and so globally, you know, the decision doesn't make a whole lot of sense. i'm 100% confident, not even 90,

that they will overturn the decision. you know, part of this was a political process that the wrestling community screwed up. we've now bounced the guy that used to run fila. he's out. there's new guys in. one of the new board members is alexander carolyn. if you ever want to see what the olympics looks like, you just look at a picture of this guy. he is hercules. he was the russian superheavyweight who won three gold medals, and that's what people think of when they think of the olympics. so i can't imagine an ioc member on the other side of the table telling that guy no. >> it wasn't about the ears. your ears get messed up, don't they? >> you wear those things -- >> and your neck. you have no neck. >> you know, it's -- especially the foreign wrest lurs. having the bad ears is really a mark of honor. >> they look like cauliflowers. it's called cauliflower ears. it is a real fraternity. >> yours are okay. >> i had plastic surgery on this ear. >> did you really? >> i used to have hair like you. i was a pretty boy. and so -- >> i'm going to take that in a good way, i think. >> yeah. >> you think this might -- not

being reversed very much in the past the reaction's been so furious that there's no doubt in your mind? >> you know, on the social media, it's 99-1, people saying what the heck? and so i'm pretty positive that we'll get this reversed. >> thanks, brian. >> thank you. >> thank you. >> the overcrusher. coming up final thoughts from our guest hosts. the crusher, and constance hunter. we've got to come up with something -- no, that's not going to work for constance. as we look to -- you know, it was. >> it was. >> good god help us. >> cloning! >> former vice presidential candidate, and budget committee chairman paul ryan. joins us for a special interview. from the sequester, to the state of the nation, there's nothing this young gun won't talk about. a special interview with paul ryan, and it's only right here on "squawk box." (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to.

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debating i took pretty boy very positively, and my immediate thing was tom brady is a pretty boy, isn't he? >> he is a fine-looking man. >> tom brady loved and hated. >> that's okay. i don't want someone to be right in the middle with me. love me, hate me, call my pretty boy, whatever.

>> pretty boy called extra. this is a stocks to watch segment. sears holdings -- >> pretty stocks to watch? >> sears reported a higher than expected quarterly profit boosted by lower costs. it was $1.12 versus $98 cent estimate on better than expected revenue, as well. kohl's topping its already dour fourth quarter earnings guidance to it wasn't that great. it already cut the guidance. the retailer is projecting little if any same-store sales growth for this quarter. jcpenney -- >> ugly stocks to watch. >> this is not pretty. >> fourth quarter loss $1.95 versus an estimate of 18 cents. the analysts don't look -- >> it only gets worse. >> groupon reports fourth quarter losses of a nickel, and the estimate is supposed to be three cents. revenue was basically in line, but the guidance for revenue was

below expectations. >> i will need a secretary if you -- >> you usually have that. >> but i've got to put it into the machine, andrew. 3.9 billion. but that's before today's move. >> like a $10 billion market cap company? >> it's going to lose a quarter of its value. it's going to be about $3 billion when it opens today. >> what was the high on it? >> what happens to that company? >> i don't even know what it does. it tells you he there's a sale on a massage or something, right? >> yes. >> i've never-i've season things come in on the computer at home. >> mike you guys have never bought any groupon, have you? >> no. not a macro call. i remember when google wanted to buy groupon and they decided not to sell. >> it was five or six billion dollars. >> i'm thinking to myself, just sell. it's a brand-now company. it's coupons. intuitively felt like, hit the bid. >> and if you think about it you

have the google -- they'd own google stock right now. >> you could have been mark cuban. >> mark cuban. >> let's get some final thoughts from our guest hosts. we've already been getting some. >> you can tell them who you are db >> the novo crusher. member of cnbc's delivering alpha advisory board. >> bigger title. >> constance hunter is the head of economics international solutions network and consulting. we were talking during the commercial break, dissect -- i would actually like to dissect the interview with the governor while he was here so you guys could have battled it out. >> if you say the governor anyone that watches the walking dead thinks you're talking about the governor. you're talking about the european -- >> european central bank- -- >> when you say the governor -- >> ewald nowotny is who we're talking about. >> apparently you disagree. you didn't have the courage to tell them that?

>> i didn't feel that interrupting him was good form. >> you're going to talk behind his back afterwards. >> it's an open forum. it's not behind his back. it's in front of his face. i think, look, he's right in the sense that ecb will continue doing what it takes. they're going to cut, again, they're going to do everything that's in their tool box. but they don't have a big tool box. right? this is central bank. they only have a few tools. and this is going to be decided in the voting booths in dusseldorf, and look, this italian election says that people want there to be a focus on growth. and the austerity has been important. there's been structural forums that need to take place. but we need to focus on growth now. you're seeing this in italy. they're in a growth quagmire. >> are you buying anything from europe? >> yeah, i'm buying italian and spanish bonds every time they sell off. the ecb the day before the olympics started, came out and

said we're going to buy these bonds as they sell off so they gave you a put to the market, so every time they sell off they seem to be a pretty easy place to put capital to work. and as those rally, spanish banks, italian banks, european banks are going to rally. and so i'm bullish on a -- >> you have a bullish call? >> it's not because i see -- >> absolutely. if you're running money, that's right. from the real economy perspective, it's going to be a long road. >> real economy versus the traders. >> everyone worries about we're going to have social unrest and social upheaval. in greece the single worst place, the point of the spear, you never had looting. a few protests. a couple molotov cocktails but no real destruction of property. i was just in spain, it doesn't feel like it's a country on the verge of -- >> okay on that positive note we're going to say thank you for being here. constance, thank you. >> thank you guys. >> when we come back, we have a very special "squawk" newsmaker. budget committee chair and former vice presidential candidate paul ryan. we're going to find out what is keeping him up at night and what he wants washington to do about it. "squawk" will be right back.

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the oughtic sequester cuts are all but certain to kick in tomorrow. washington can't get its act together on a plan to reduce the deficit. budget committee chairman paul

ryan will join us to talk debt, the economy, and the impact of spending cuts. plus, breaking data on employment and economic growth. weekly jobless claims in the fourth quarter gdp numbers hit the tape at 8:30 a.m. eastern. the third hour of "squawk box" starts right now. welcome back to "squawk box" here on cnbc first in business worldwide i'm andrew ross sorkin along with joe kernen and becky quick. ahead this hour, budget committee chairman paul ryan on the economy and the looming sequester cuts. and then at 8:30 a.m. eastern we've got breaking economic data. the closely watched weekly jobless claims and the second read on the gdp in the fourth quarter. forecasters are looking for the data to show the economy shifted from growth to contraction in the fourth quarter. then at the bottom of the hour, the star of the new cnbc prime reality series treasury detectives. they're going to be joining us on the set. but first, becky's got your morning headlines. >> andrew, thank you. why don't we start with the

global markets? that is the big story after the dow rallying more than 300 points over the last two days. the blue chip index is now within 89 points of its all-time record close. u.s. equity futures at this hour are indicated slightly higher. those dow futures up by about 35.5 points above fair value. so we're sitting right on the cusp right now. overnight in asia you did see some massive gains. the nikkei was up 2.7%. the shanghai composite up 2.25%. and in europe this morning, they are following the same trends that we've been watching through the course of the morning, with some modest gains. in fact, if you take a look right now the biggest gain comes in germany where the dax is up by just over half a percent. joe? >> great, beck, thanks. with no deficit compromise in sight, the automatic spending cuts known as the sequester almost certain to kick in tomorrow. what will it take for washington to come together and tackle the debt crisis. joining us for his first cnbc interview since the election, representative paul ryan. also chairman of the budget committee. welcome back. it's great to see you,

mr. chairman. >> hey, becky, joe, and and drew. thanks for letting me back on your show. i appreciate it. >> we've had a standing invite. it's great that you're finally with us again. i guess the first question to ask you, it looks like it's going to happen but we don't know a lot of the stuff that goes on behind the scenes that the people don't talk about. do you -- are you aware of anything going on right now behind the scenes, that could possibly avert this or not? >> as you know the sequester was designed to force action to deal with the deficit and debt. we passed a bill 300 days ago dealing with this. as recently as december. senate still hasn't done anything. so i do expect the sequester to take effect because the senate hasn't acted. the president's around the country campaigning instead of governing here in washington. so what i think we'll see happen next week is we will pass an appropriations measure that gives the administration more flexibility. we'd already negotiated spending bills with respect to veteran's

affairs, military and that will be part of this, because those spending levels have been negotiated. so i think you'll see more flexibility for the military and national security and more flexibility for spending so they can go over inefficiency as the sequester takes place. >> can you put to rest about whether the deal was actually changed? i was under the impression that both sides at one point had agreed that this would be about actually finding having some spending cuts kick in. to then change it to a deficit reduction zeal that includes higher taxes and revenues instead of what it was intended, was that changing the rules or all's fair in washington? >> no, i mean, we obviously believe the president moved the goalpost. i think bob woodward has mapped this out pretty effectively. don't forget, joe, the president got the largest tax increase in american history eight weeks ago. now he's trying to move the goalpost and say instead of

spending cuts which is what the sequester is i need a bunch of tax increases for this as well to fuel more spending. if you take these tax loopholes you're killing tax reform. that kills our chance for economic growth and job creation. more to the point, more to the point, even with the sequester taking effect, spending will have gone up 18% since the president took office. so spending is the problem. the deficit's a huge problem. we're going to tackle this. we don't think the sequester is the right way to do it but it's going to happen and we will map out a budget that shows you the right way to grow the economy and prevent a debt crisis in this country. >> that budget will include not only discretionary budget spending but also the full entitlement part of it? >> that's right. you have to reform entitlements to save these programs from bankruptcy, to save the country from a debt crisis. we're the adults in the room, we've been proposing this for years. the president is around the country campaigning. and not coming to the table with equal 3r0e7als to deal with

this. unfortunately that's the stalemate we have today. >> was there a time when you could have gotten together with the president and said, and i guess maybe the blunt nature of the sequester is a bad thing. maybe there was a way to do it surgically, with waste or whatever, but if he had come to you and said, look, i just don't like the way that we're doing it without being, you know, without being effective in where we're looking to cut things, i want to cut where i want to cut. will you let me do that, would you have let him do that if he hadn't said we'd have to raise revenue? >> we're going to give him the flexibility to actually cut. as long as it's cutting -- >> that's right. so joe i've thought about what you just asked quite a bit and i really don't think the president was ever interested in a grand bargain or big budget deal to deal with these entitlements. he's unwilling to put out ideas to save these entitlements from bankruptcy and he's been more focused on campaigning against republicans on these issues, and the net result is nothing gets done up here. so that's obviously our side from the republican perspective. >> all right. >> but the point is we've got a spending problem we have to deal

with. we're being responsible about it, because the goal here is growth. a healthy economy. job creation. and the debt is really hurting that >> but, paul, is that a nonstarter, your plan to say to the president, go ahead, we'll give you the discretion to put 10% any way you want it? i mean is that something -- >> 10% -- >> i'm sorry. 10% in the discretionary spending area, 3% overall? >> well, yeah, it's about 5% on domestic discretionary. we've already agreedse spending with democrats, then the sequester will hit. but it already has the flexibility, and so yes, do we believe that the government which spends $3.5 trillion this year can do with $85 billion less? yes. do we believe that a government that spends more than $100 billion a year in what we call improper payments, money that shouldn't even be spent, could go over waste and inefficiency without raising taxes? yes, we believe that. we'll give the president the pool to do that. whether he chooses to do that or not is his choice. unfortunately, when it keeps

campaigning it makes governing that much more difficult. and solutions harder. we've offered solutions. we're going to continue offering solutions. hopefully at the end of the day we'll actually start solving some problems around here. >> paul, the republicans reserve the hr-1 designation for a tax bill. >> that's right. >> do you expect in this environment given what we've just lived through with the sequester, any form of real tax reform to take place in the next let's say 8 to 12 months? >> i don't know, andrew. i really don't. the way we look at it, i'm on the ways and means committee, dave camp and i have been working on this, it's not going to be for our lack of trying. we have the highest corporate tax rate. we now tax our sixful small businesses a tax rate of about 40%. in wisconsin we compete against canada. they're taxing businesses at 15%. we need for economic growth for international competitiveness to reform our tax system. we're going to do this in the ways and means committee. we're going to do this in the house. we hope that our senate counterparts will follow suit. there are a lot of moderate democrats who agree with us on

this. bowles-simpson, you name the group, they think tax reform lower rates broader base is the way to go. so we're going to move this. the president -- we'll see if the president, you know, follows suit, but it's not going to be for our lack of trying -- >> rights rates are already higher. let me just add to this one thing, paul, the we wanted the grand bargain of $4 trillion. we had a guy on earlier that said we've already done 2.6 or 2.7. then i got something from someone who knows, i'm not going to out this guy, but someone who is involved with all this, he tells me actually out of the $4 trillion, even if the sequester goes through, we're only at $1.2 trillion that we've culley cut because you can't count the obama care trillion dollars because it's not going to pay for those taxes aren't going to pay for obama care. so that at best, with the sequester we're at 1.2. so we're nowhere near the 4 trillion. >> that's right. >> are those the right numbers? >> those are the -- >> you guys have horrible pr.

>> here's the deal. >> that's what i want to tell you. >> look the 2.6 trillion dollar number is a gross number. it ignores all the deficit spending and increases that occurred under the president's stimulus payroll tax cuts. increase in domestic discretionary spending. so they're giving you gross, not net deficit reduction. and so yes, we're not even close to fixing this problem. but that's what really concerns me, joe, when you hear the president at the state of the union and around the campaign rallies saying the job of deficit reduction is nearly complete. that's really worrisome to me because it tells me he's in complete denial and we've got to got ahead of this problem. that's why we're going to continue to offer solutions. >> paul i want to go back if i could to the tax issue because we have so many ceos and other business people who come on this show and want tax reform both in the corporate sphere and on the personal side and given what seems to be a rather large divide in washington, over how

to do this and whether there's an ability to raise revenue, my question for you is, is their ability to effectively lower the top tax rates, but as you've talked about, once you remove the loopholes to at least either keep revenues level, or maybe keep the average effective tax rate higher or the same and is that something you'd be in favor of or do you think that rates and effective tax rates ultimately have to become lower? >> i think rates and fengtive tax rates ought to converge in tax reform. that's the whole point of base broadening and rate lowering. we want to have tax rates that are internationally competitive. that means they've got to be 20 something. and that look we've run a lot of numbers around here. if you give away more loopholes for spending which is what the president's calling for you're making that an impossible job to accomplish. you already have a higher tax base, so that base broadening is gone. we believe with the current revenues we have, we believe with the current revenues we have we can have what you just described, lower rates with a

broader base, without losing revenue. and having an internationally competitive tax system. if you keep giving away those loopholes to fuel more spending you'll never get that. we're pretty much on that bubble there and that is why we're saying let's do tax reform, and hold loopholes to pay for tax reform. meanwhile, spending is the problem. and let's focus on spending. if we stop campaigning and start governing i think we can fix this problem. unfortunately we control one-third of the power arrangement here. we're in the minority. we have nothing to pass on the other side. we have no other solutions being offered and that's hard to get things done that way. >> chairman ryan, we watch a lot of polls and try and get a feel for whats public would like to see here. and a lot of it seems the way you ask the question you'll get a different answer on this. it's still unclear to me -- >> that's because of the ben bernanke hearings these days. >> it's still unclear to me what the public feels about this.

it seems most people are in agreement that they would like to see some sort of spending cuts. a lot of them say they would still like to see some cooperation between both sides. i think it really depends on how you ask those questions. but, next week, once the sequester kicks in, once you start to see things like longer delays at the airlines, once you see the threat of inspectors, meat inspectors from the agriculture department coming out and that meaning a lot of people getting laid off along those lines, do you expect to have massive pressure from many of your districts to go back to the table and renegotiate, and will the republicans change their stance at that point? >> so, this reminds me of when your local school board is saying we need this new tax increase and if we don't get it, we're going to cut the high school band and the football team first. we call it the washington monument effect here. we are going to give the administration the flexibility they need to not do those things you just said. to go after the waste, the fraud, the abuse, low priority spending. if they choose not to do that, then the president will have

made the choice to do the things you just described, for political benefit. we think that's wrong. we'll see if he does that. but the fact is, becky, we can't keep spending money we just don't have. we have got to get this deficit and debt under control. not because we just like numbers adding up, it's because that's necessary for growth for a healthy me, for job creation. for prosperity. and then we're going to show how you balance the budget to create jobs. we'll show that in a few weeks. this, to me, is what matters most. and so, we will give the administration the flexibility, but no, we're not going to walk away from the only chance of getting spending under control around here, when push comes to shove, we'll see if the administration uses the flexibility or not, and if they choose not to do so, then i would just basically say the president's still out there campaigning, trying to maximize political benefit for his ends, instead of coming here, getting solutions. >> i was going to ask you do you know what big ten team had the best record in february.

compared to their peers. i'm wondering. woof got indiana michigan state michigan. wisconsin is a real sleeper now. >> we're not only a sleeper we're on fire. >> you didn't go there. i've seen you do this before. you like all the teams there. even though -- >> i'm a big wisconsin guy. >> even the rivals. >> gurg the campaign i said nice things about ohio state. >> yes, you do. >> we're watching you guys. i'm not sure what you guys need to do for pr. i guess you got to do the rope a dope for the first year of the new term while he's so popular but then i don't know. lay in the weeds, and you got a message don't you? i >> i believe good policy ends up being good politics. i'm tired of the idea that we're in this permanent campaign mode. some of us like getting things done. we like governing. we actually like solving problems. >> never happens. >> especially with this permanent campaign. that's the situation we have right now. >> all right, mr. chairman, thank you. we appreciate you coming on "squawk" this morning. great to see you again. >> all right. >> thank you, don't be a

stranger. come on back. >> i won't. >> am coulding up the dow just 90 points away from closing at an all-time high. take a look at u.s. equity futures at this hour. we do have green arrows across the board. dow looks like it will open up 5.5 points higher. next the futures pits in chicago for what's more for what traders are looking at this important and in the next half hour, check this out we're going to talk to the stars of the new cnbc prime reality series "treasure detectives." curtis dowelling investigates arts and antiques to determine if they're trash or treasure. he's going to join us on the set. monday, a "squawk box" fan favorite, back by popular demand. it's your chance to ask warren buffett questions about his investments, and the broader markets. three hours with the oracle of omaha. starting at 6:00 a.m. eastern. [ male announcer ] at his current pace, bob will retire when he's 153,

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welcome back, v. some retail earnings to talk to you about this morning. kohl's is reporting earnings of $1.66 a share. that beat the street by 3 cents. but these were lowered

expectations that they were hurdling over. revenue did come in a little bit short and the current quarter guidance bracket the streets consensus. that stock has traded down on this news by almost 3.5%. also sears reporting adjusted earnings of $1.12. that was 14 cents ahead of estimates. this is a positive story in the retail sector that stock is up by about 2.6%. jcpenney well this would be in the disaster category. much larger loss than expected in the fourth quarter. over half a billion dollars that were lost. the per share loss was $1.95 a share versus a loss of expected loss of 17 cents a share. revenue missing the mark, and here's the biggie, same-store sales falling about 32% during the quarter. analysts were looking for a drop of about 28%. but again, these are continuing drops in same-store sales. you can't continue this at this pace forever. this was the biggest sales drop since the ceo ron johnson announced his grand transformation plan 13 months ago. >> at least same-store sales didn't drop by a third.

i mean -- >> yeah they missed that by 1%. >> 32%. i mean -- >>.33333%. >> so they didn't drop by a third, right? am i lying by saying that? >> you're not. >> you could average -- >> unbelievable though. 32. >> got to get ron johnson on the show to talk about this one. the dow just 90 points from its closing at its all-time high. jim euro joins us from the cme in chicago. he's a cnbc contributor. good morning to you, jim. >> good morning to you, andrew. >> what do you make of all this. is there a chance we get to the all-time high? >> well, i think we'd better. if we don't it's going to be considered a failure and the market is finally going to have the correction that about 100 of us predicted. i know the market doesn't give a darn about the sequester. i'm not sure that they think it's only the 2% or it's the fact that if something bad happens to the sequester economically bernanke's there

with his awesome set of tools to reinflate things which, i mean, i think he's tried to put the market at ease on tuesday. either way the market seems okay. now if we can't take out those highs. i think we've got about two days to do it. that's when i think the correction comes. >> here's my question on the sequester. everybody doesn't seem to care what happens in the next couple days. what happens in the next couple weeks? does that matter to you? >> yes, i think it's significant and will get more significant as we get closer. remember the market has been here before. they were here at the fiscal cliff and if they feel at the end of the day most of this is just posturing. there was a time a brief time where when the president came out and talked about the doom and gloom, air traffic controllers, teachers, puppies and babies all were going to be affected the most that the market cared a tiny bit. every time he comes out and says that i think the market thinks we've been pushed up against this wall, we can't spend time worrying about these things that politicians are doing. at the end of the day they'll do the quasi-right thing, which is probably to kick the can down the road. in the bigger picture i know that that's not the right thing but from a market perspective it

is. >> jim iuorio thank you for the market perspective this morning. >> thank you. >> coming up breaking economic data. we're going to get initial jobless claims and gdp numbers at 8:30 a.m. eastern. and if you were looking forward to the jobs number tomorrow, it's not coming. even though it's march 1st. because they got all these discusses and caveats, and -- >> blah blah blah. >> when is it next week? >> yep, next friday. we were looking forward to it. >> we're going to explain it actually. and fourth quarter gdp is going to be a rise up to 0.5% after initial decline. that's what's expected. that should be interesting to look at that. we'll have the number next.

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welcome back, everybody, tomorrow is the first day of march. but it is not jobs friday. the reason is a little complicated. we've been pondering that ourselves here. but the employment report typically is released on the third friday after the conclusion of the reference week, the reference week is the week that includes the 12th of the month. the late survey period combined with the short month of february means that the first of march is only the second friday after the reference week blah, blah, blah, blah, blah, blah, blah. long story short it just means we're not getting the february jobs report tomorrow. it will come a week from tomorrow and you can all set your clocks on that. >> okay. >> been waiting for that. >> get it? >> i do get it. so it's not the bottom line it's

not the first friday of the month. it's the third friday -- >> after the reference week with the short month. you know you don't short >> all right. >> when we come back we have some breaking economic news for you today. we're just a few minutes away from the closely watched weekly jobless claims. the second read on the fourth quarter gdp also coming. right now as we head to break, take a look at the u.s. equity futures. yeah, they're mixed at this point. barely budged across the board. [ indistinct conversations ] [ male announcer ] when you wear dentures

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welcome back, everybody. we're just a few seconds away from weekly jobless claims and the second quarter -- the second read on the fourth quarter gdp ahead of that we've been watching the u.s. equity futures. at this point they're basically unmoved. but if you've been watching what happened you saw the dow industrials closing at a five-year high. at this point they are within 100 points of an all-time closing high. this came after erasing some steep losses from monday over the past two days on tuesday and wednesday you did see some big bring back shares from the from the after those losses. this came because of bernanke and the speech that he'd been talking about. rick santelli is standing by at the cme in chicago. steve liesman is in the studio. also economist drew matous joins us from stanford, connecticut. rick, go ahead and take it away.

>> our second look at fourth quarter gdp, it rose in the positive territory by the absolute minimum amount. it's up 0.1%. this is second look first look was down 0.1%. and it fell short i think the calculations for various exports and inventories just didn't prove fruitful. we didn't get the half a percent. if we look at all the internals, the consumption, the personal consumption, moved up just -- or excuse me down a bit from 2.2 our last look to 2.1, couple shy of new estimates. the price index, hotter than expected by 0.3 at 0.9 and the personal consumption expenditure quarter over quarter core is also up 0.9. jobless claims dropped 22,000. dropped 22,000 from a upwardly revised 366 between last week reported at 362 now stands at

344,000. we've had a wild response in the marketplace. dow futures went from unchanged to down four. you know i guess they're somewhat impervious to the fundamentals and anybody who doesn't think we're going to click off new highs obviously haven't been reading the game plan of the federal reserve. >> rick, stay right there. for more information on this let's get to steve liesman and drew matous who is the senior u.s. economist at ubs. >> you know, i think i can give you the numbers or i could do the sort of broader story which is i don't think the story from what happened in q4 really changes at all. i think the story was that the private sector side of the economy was pretty good. you actually had a upgrade to business investment from 84 to 9.7. consumer spending hung in there basicsly 2.1 versus 2.2. no change there. okay not terrific but okay on the private sector side and then you had inventories are revised

down even worse than we thought so 12 billion gain as opposed to 20 billion gain. and government took off a big chunk. it's 14.8 versus 15. it was a story of a big deline in government spending that may have been episodic in that it was just the fourth quarter but perhaps a sign of things to come depending on how washington figures out the deficit problem. and the private sector hummed along at the 2% rate it's been. i don't think there's much more to this story right now. people are getting more optimistic about the first quarter. some as high as 3% for the first quarter. that's where we are. >> drew, that's, fourth quarter is fourth quarter. we knew it stunk. >> i think we're getting better. i think the claims numbers point to that. that's actually the story of the day. the gdp number went up but the details got worse. i would rather have it stay negative and have the old details i have before. >> which details are worse?

>> the consumption numbers revised lower. people were expecting it to go higher. we actually hit this right on the head or i should say my analyst did because i'm not smart enough to forecast gdp -- >> but you're smart enough to hire the analyst. >> everyone's got to have a skill set. on claims we expected claims to actually return into the mid 340s. we think that's the trend. we think that's where it's going. it's probably going to go lower from there a bit. and that's because we're finally seeing a sustained pickup in hiring. >> what does 340 mean a week from friday folks, it's not march 1st, it's going to be march 8th. what does it mean right now would you say for employment? >> i mean i think you know, the trend has been where we've been at the last couple of months and you have to be thinking a little above trend. i hate to duck the question but we haven't actually finalized our numbers yet. but it does seem like they should be a little better than people had been expecting. >> the trend is 150, 160. >> and then you have to add you know there's obviously a whole bunch of variations and you

know, the timing of the weeks matter, so you know, for anyone out there who is doing all the math and trying to figure out why it's the 8th, sometimes that can have an actual effect on the numbers. >> so drew, i figured out a way that rick could be right, in his concern about the economy. and bernanke may have given it to us. >> i'm concerned. you're going in the direction -- >> here it is. bernanke yesterday talked about traction on monetary policy which i think we can agree we've not had for a long time. but if the interest rate sensitive sectors begin to get traction and monetary policy begins to get traction, things can happen and unfold much more quickly than anybody's anticipating. is that a possibility. do you hear that from the chairman yesterday, and does that concern you? >> he's told the title of one of our last weeklies, it's absolutely the case. one of the things you have to remember when you're up this high in ferms of unemployment rate it can move around by percentage point in two or three

months. we've already seen that. people forget, what we've really seen the unemployment rate is it went from 10 to 9 and then went from 9 to 8 and has been sticking around 8. it's entirely possible for it to drop to 7 more quickly than anyone is expecting and that will leave the fed in a quandary and you and i might disagree but the exit strategy is a lot harder than they're making it out to be. it's going to be a lot more difficult to do it without derailing what they've already achieved and i really think they're giving short shrift to the idea they're going to have problems exiting. that's not to their benefit. that's going to be a hindrance to them as they try to affect the exit in the near future. but in the future. >> i'm calling what bernanke did yesterday a stealth easing. if he says we're not going to sell assets as per the strategy, the exit strat they put out in june 2011, they said we can let the balance sheet naturally run off as these coupons expire, or term out, that means that 14 and 15 are going to be a whole lot

easier than the bond markets think. >> i think anybody who tries to extrapolate the very packed parking lot of treasury traders in addition to the huge positions owned by the federal reserve i think that's crazy. anybody who gets diverted from the minutes and who actually thinks that the internal debate will affect the outcome i think woe be to them as well. in the end i don't see any percentage in ben bernanke ever retracting very much liquidity, i think it's you know, you cover your but mentality. all right, find me a logical argument how he would be better off in the grand scheme of things should anything go wrong. doesn't make sense to me but i think he's covering himself. politicians that's reprehensible. they would get to work if there were better signals from the interest rate. >> i think that's to rick's point. but my point is not so much whether or not it's good or bad

i think that's a good discussion. but my point is what is the market expectation, and what is -- what is bernanke now saying? my point is now that it's an ease -- it's a comment that the fed is easier longer if it's not selling assets from what our you is va show the market anticipates. >> steve do you have a favorite baseball team? >> i do, yeah. >> all right. now if your favorite baseball team is -- >> mine's better than yours. >> -- and you know that the other team's going to win do you city bet on your team or not? >> i don't bet on my team that's stupid. >> see, and that's the way traders see the market. just because traders have positions to draw conclusions about those market statements about what the market expects is kind of crazy. in reality, they understand what the plan is of the federal reserve and they want to make some bucks. drawing these conclusions is a mug's game. >> gentlemen. thank you all. we'll see you all again soon. >> thank you. >> are you a mets fan? >> yankees.

>> okay. coming up, check this out. he is the star of cnbc prime new series "treasure detectives." curtis dowling and his team of investigators, they help art and antique collectors determine if they're holding trash or treasure. also do a little bit of investing too. curtis is making his way to the "squawk" set. good morning, i want to know -- we'll figure out what's real and what's not after the break. >> >> can't catch "squawk box" on television? well, we're just a few key strokes away. find the show online and on mobile. our twitter handle @squawkcnbc. like us on facebook, and visit our show page squawk.cnbc.com. ♪ [ construction sounds ] ♪ [ watch ticking ] [ engine revs ] come in.

♪ got the coffee. that was fast. we're outta here. ♪ [ engine revs ] ♪

welcome back to "squawk box" this morning. this coming tuesday, march 5th, cnbc prime is launching its first reality series, "treasure detectives" at 9:00 p.m. eastern time and pacific and curtis dowling and his team dig into the history of potentially counterfeit items using high-tech science. their mission help collectors discover if they have trash or real treasure. curtis and his longtime assistant andy are investigating whether a liechtenstein print is an original or fake. >> i have the negative. >> marvelous. >> i had andy make a meggive transparency of a real liekten

stein student to be able to match up with ours. this should give us the answer we're looking for. i need to be 100% convinced that this hasn't been produced by a master forger. so what i need to do now is compare the wood grain fingerprint from our liechtenstein with the liechtenstein that we know to be genuine. >> joining us now is curtis dowling. thank you for being here. >> morning. >> good. so tell us your history hop did -- how -- -- what did you start doing before you started doing this program? >> this program is really just the cameras turning on what i do on a daily basis. >> you do this every single day? >> yeah, pretty much. >> so the question we were talking about off air, mr. kernen's hair, can you -- what can you do --? >> he tells me it's real. i think it's fantastic. >> you have looked at other things and you've been shocked to find out things. i think you were more shocked when i claimed that this is not dyed, it's not fake, it's not a system, there's no plugs, and you looked at me you were totally incredulous that it

could be this good and not be tampered with. >> well it's a strong provenance, isn't it? >> but then i finally showed you how it goes gray here, right? so you can see that it's -- there's no dye job and no -- so you -- i want you to do this. i want you to clon you'd for yourself that it's real and see if you're really any good. if you conclude that this is fake then i'm not going to believe what you find out on prime-time. >> i've not spent 27 years looking at hair. >> what was the hardest thing you ever had to -- had to determine the truth about? >> the next one. probably. because they all have their own challenges don't they? because these things are all so different. on this show we've had some crazy things. you know, we've had we've had neil armstrong's cuff links. we've had james brown's cape. >> that's crazy. >> how do you make sure that those things are real? >> everyone comes with a different set of challenges. >> okay. how about the cuff links? how did you verify that -- >> there's only three things you can ever use when you're doing this job at all.

that goes for whether it's hair, liblgten stein prints or cuff links. provenance, the story, the story -- >> make sure it matches up, right? >> you can break stories so easily. the second one is testing. these days you can almost technically test anything. be careful. and the third thing is obviously connoisseurship. expert opinion. now i don't like using the word expert, because anyone that calls themself an expert probably shouldn't be calling themselves an expert. you know, you just learn as much as you can, and at some point, you know, you'll have sufficient knowledge -- >> have you ever found out more about something later, meaning you looked at something one year, you thought you knew the answer, and then five years later something changed in the story? >> yeah, it's happened in the past. but, say these days because we use technology an awful lot, technology doesn't lie. >> is that what you were doing with the liechtenstein? >> the fingerprint. so the challenges of something being right or wrong are going to come up when you start using

that level -- >> i would think if you go back and you're trying to look at a renaissance painting, number one, you can see the brushstrokes -- i can't look at a rothko and tell that it's any good so i couldn't tell if it was a fake or whether it was real. and also it wouldn't be nearly as old. so you can't make sure it was real by carbon dating. do you use carbon dating -- >> you would for certain things. don't forget also these tests cost an awful lot of money. so if you're the average man on the street, you know, first of all, you've got to know where to go. >> if you're painting a campbell's soup can, how do you know if it's a war hole or not? >> there's ways. >> there are. >> do you know the forgers? >> i do know a lot of them. >> you do? >> yeah. >> what have they taught you? >> everything. >> do you actually meet them and they'll show you how this is all done? >> yes, the metropolitan police once said they'd be delighted to get hold of my address book. yeah, because if you want to learn about anything, do it. it's like this, isn't it? people probably watch this program and say i'd love to do that. go and have a go and see if i

really enjoy it or not. because they might hate it. it's the same with learning about forgery and art. you can't be two dimensional. you can't learn this from a book. you've got to touch and feel and smell and taste and all those things. and the only way you're going to be able to tell whether this is real real or fake is make it. i bet if you start making this within an hour you'd be able to spot ones that aren't made -- >> could you make a fake liechtenstein? >> yeah, yeah. you'll see on the show as well. i make a few fakes. >> have you ever -- what -- what has been -- have you ever been sued for saying something was real and it wasn't real? >> no. >> no? >> have you ever made a big mistake. >> everyone makes mistakes. everybody. >> you thought it was real but it wasn't or you said it wasn't real and it was? >> well, it's probably a long time ago now, because, say the methods you now use are so watertight, it's almost impossible to be wrong. >> yeah. >> but don't be fooled. because the best fakers haven't been caught yet. >> yeah. >> that's what you have to remember.

every time you read a story about, you know, one of the big auction houses having to give money back because it's a fake. >> would you do wine? >> i would avoid it -- >> that's a huge scam, too. >> oh -- >> they sell $10,000 bottles of wine and who the hell knows. >> if there's money involved, somebody's -- >> you brought up an interesting point off camera how it's almost in vogue to have a knockoff of something these days. people walk around i guess it's a point of pride. like you were talking about a prada bag. i paid 20 bucks for this and people think that's -- >> it's a strange world we now live in. none of us want to be ripped off. >> right. >> but if we are knowingly sold something that's a fake, we take pride. right. you're sitting with your girlfriends in manhattan and you paid $4,000 for yours. look at mine, $20. there's -- there comes a point where you have to really think about what you're doing there. because your, i guess depends how crazy you get. >> it's counterfeiting.

>> it is counterfeiting. and you know, i mean prada bags, i hope you haven't really got a fake one. >> no, i don't. >> one of our anchors has a folk rolex. >> and do you know how they're made -- >> or what time it's on in the afternoon. >> how to make -- >> late midafternoon. >> they're made by children because their fingers are small enough to get into the things. >> that's terrible. >> so -- >> what percentage of people who come to you with their item actually have the real item, or have the fake? >> thomas hoefing at the metropolitan museum of art once said 40% of all collections are fake, he just wished he knew which 40% it was. >> oh, my gosh. >> it's probably 30%, 40% of everything you see is wrong. >> but do they really want to know after you've already paid for it? do you really want to know at that point? >> yeah, they do want to know. for lots of reasons. >> it's self-selecting if you're going to him you must have a suspicion that maybe it's not real, right? >> not necessarily. you might be it for insurance purposes. >> i have a lot of questions. this is interesting. >> you know, if you've got a

liechtenstein on the wall that's worth $2 million and you find out it's worth $50 it cuts your insurance. point one. secondly, you better start thinking about investing in something else pretty sharp. >> right. >> so a lot of it is by investment. why wouldn't you want to know. >> i guess you get the money back from the auction house if you bought it at an auction house. >> or wherever you got it from. a lot of these things people have inherited. >> ever done anything like alive like a purebred $5,000 dog, $10,000 dog? >> no. >> but nothing has ever been alive? >> afraid not. that's a strange question. i've never been asked that one in 27 years. >> curtis dowling. >> i have what i think is a real michael jordan rookie card. baseball -- do you do cards, no? >> yeah. >> yeah. >> okay. we had a honus wagner on the show. >> coins. >> all that stuff. >> well, don't miss the show. you can catch the premiere of "treasure detectives" tuesday, march 5th at 9:00 p.m. eastern and pacific. and cnbc is launching the car"t chasers" at 10 p.m. eastern and pacific.

>> i came over on the mayflower, my family was a mayflower. >> curtis, we are excited about this. we will be watching with the premiere. >> that watch real? >> of course it's real. >> his share real. when we come back, we will check in with jim crimer are. stick around. "squawk" will be right back. w dr car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you.

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welcome back, everybody. let's get down to the new york stock exchange. jim cramer is standing by. jim, we have seen a couple of spectacular blowups over the last 12 hours or so. jc penney and groupon. you want to weigh in? >> michael eckstein, stuff i love. laugh out loud line, after reporting another beyond worse case scenario, down 31% comps. how does ron johnson keep his job? it is incredible to me. this company is being run into the ground as we speak. >> my question, too how much

patience and how much time does ekman have on this? >> admit things aren't going right before you start thinking maybe something has to change. speaking of that, that's groupon. if you read the group opinion comment buys andrew mason, he would think -- would you think this company is doing incredibly. we have two never -- two peter pan situations here. everybody at these companies seems like -- ron johnson, jc penney, the turn is here. groupon, mason, this was a fabulous quarter. how stupid do they think we really are? pretty stupid, i guess. >> jc penny, i have to say, jim, i thought two quarters ago, they couldn't keep up if they didn't get the comps improved, particularly when working off a lower base to begin with, couldn't improve your comps after that i thought it was game over. what changes? >> game over, man. i have never seen a company in this kind of tailspin pull out of it. i have to tell you i don't think jc penny will be in it.

>> yep. >> what else do you have coming up this morning? >> look, i think that we have to talk about the fact that the market doesn't seem to want to quit, that it doesn't seem to care about what's happening in washington, that it's really focused on earnings, profitability, retail sales strong, groupon and jc penney the outlier. sure we got to touch on apple and the patience that's required for apple shareholders. >> you know, the bond vin lanty russ gone. i wonder, jim, would you ever attribute something, a positive move, to austerity, that we come to grips with it in this country? would you ever attribute that? doesn't happen with traders, does it? they want what they want now? a southwester is not being taken positively, is it? >> no, but at the same time it is really hard to figure out how that impacts home depot after home depot told you things are really fabulous. the facts just keep getting in the way of the negative story. a lot of macropeople come on our air and make me feel like i

should slit my wrists or hang myself by my time. the fundamentals seem pretty good. >> thanks, jim. see you in a couple of minutes. coming up, more of our top stories in the stock of the day when "squawk box" returns. ♪

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