good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and the birthday boy himself, joe kernen. 6:00 a.m., we remembered already. here we go. among our top stories today, a dangerous arctic blast that is expected to be the coldest in decades. more than half of the continental united states is facing below zero temperatures. the dakotas and minnesota clocked temperatures of 20 degrees below zero yesterday. in fact, at its lowest point, the windchill in minnesota was a numbing minus 50. that's right, minus 50. as we were talking at last week, when you get down to temperatures like that, that's colder than life on mars. tracking website flight aware reports that 2300 flights were canceled yesterday. we'll have a live report from the weather channel in just about 15 minutes. and speaking of the cold, a less than stellar start to 2014 for the bulls. two sessions in, wall street started the new year in negative

territory for the first time since 2008. the futures this morning after those two trading days do look like they are indicated higher. dow futures up by 19 points above fair value. the s&p futures are up by just over 1 point. on the economic agenda, december nonmanufacturing ism and november factory orders, both due at 10:00 a.m. eastern time. later this morning it's about jobs. the adm jobs report on wednesday and the government's payrolls will follow on friday. that's going to be the big one we're watching. we have more on the markets and the economy throughout the morning, but first andrew has a round-up of the top corporate headlines. good morning. >> good morning, becky. we have a lot of news for you. jpmorgan nearly a $2 billion settlement with federal authorities to resolve suspicions of the bank ignoring signs of bernie madoff's ponzi scheme. "the new york times" says the bank's civil and criminal settlements would involve deferred prosecution agreements and of course the $2 billion

settlement number will be added to the $13 billion and all the other numbers we have heard from jpmorgan recently. they reserved $23 billion for all the settlements. and this morning, happening at 5:00 a.m., mens wearhouse launched a cash tender offer for shares of joseph a. bank. you will like the way you look, well, if this deal happens. this comes after the retailer rejecting the earlier offer. mens wearhouse is offering to acquire all outstanding shares of joseph a. banks for $57.50 per share, higher than the november offer of $55. that was a pacman situation where one guy went after the other one and he turned around to go after the other one. in other news, boeing's machinists approved a crucial labor contract by a vote of 51% to 49%. the deal is that boeing will now be building the new 777x jet liner and wings in seattle.

they would have considered making the plane elsewhere, or that's what they were telling people, if the workers rejected the offer. joe, over to you, sir. happy birthday. thank you. >> how does it feel to be so young? >> you know, it's -- i'm glad i'm here. glad i'm here. glad i'm here, glad i -- glad i have my hair. i found it this morning. someone in this place -- glad to have my health, basically, you know. you know the drugs i take. i take -- >> really? >> well, i take the vitamin. >> right. >> and i take the fiber con. >> i know about other drugs, but we won't talk about them. >> that's not every day. that's not every day. that is not every day. >> it's for special occasions. >> only when called upon, and not necessarily then. what's the difference between his pacman and your pacman? is that a ms. pacman?

remember when ms. pacman came out, what was the difference? >> she had a bow on her head. >> so it's basically the same thing. all right. a lot of sports. cramer will have to cry on his shoulder. who would you rather be, cramer or me? because i'm used to the bangles, i'm used to that. >> i thought the eagles were going to win. >> i thought so, too. that's almost worse to lose that way than to just watch the implosion. i quickly switched. because cincinnati, to college hoops. that team beat memphis. xavier, one of my favorites, beat butler. notre dame beat duke. and colorado beat number ten, oregon. oregon was undefeated. i'm telling myself that -- >> cramer is still -- >> he was tweeting down here with the first person, my wife was first, but q. >> i saw him this morning. >> he's the wind beneath my

wings. >> he did say that. >> that was nice of him to remember. but he's a colorado guy. i think -- both of those guys thought the eagles had it. >> everybody did. i mean, i thought from before the game started, but then watching the game -- >> i was hoping for green bay yesterday, but i just knew -- compared to the way they run, andy -- i don't know about good old andy. and i have to hear from welch why everyone cincinnati team chokes in the postseason, the reds and the bengals. >> so he did hear your comments last week? >> he's funny. i said, did you hear my comments last week about how good looking ceos have better performance. i go, oh, really, how does that explain welch, and he said, i think it's obviously. the conclusion is obviously. i said, you're right, you are devastatingly handsome. the bit coin is back above $1,000. the digital currency came under

pressure the end of last year in large part due to a crackdown in china. among the reasons for the latest surge is word that zynga would start accepting virtual currency for some of its online social games. you should -- that looks like kind of a combo between walter white, kanye west and a currency, the joe kernency there. can you make money launching this? i think this is going to spin around the states, sore kip, we should bring some of the dollars just in case, in case we need to use them. >> you realize they are not physical things, right? >> you can have a coin. can't you actually have a coin? >> you cannot have a coin. >> i want a coin. >> i know. >> joe kernency, you saw -- it's going to look like that. >> you can have some plastic coins made. >> what are they made of?

they are not made of anything? >> they don't exist. it's on your iphone in your account. it is if your digital wallet. >> i don't think i have a digital wallet. >> well, you'll have to get one. >> you know these guys are back in town, the senate, that's really good. we have that going for us. the senate is going to vote on janet yellen's nomination. that's set for 5:30. oh, my god, they are working that late today? she's expected to win confirmation. and treasurecy secretary jack lew is going to visit france, germany and portugal and hold discussions with his counterparts. he's expected to renew pressure on germany to boost domestic demand and embrace a deeper banking union, which a lot of people think would be important. they have -- they are supposedly one place and it's only just -- words are one thing, but they need to have a lot more things to come under one body. >> that was the problem the

whole time. you have to be able to take autonomy and make decisions overall, if you can't do that -- >> remember when tim told him what to do. they didn't like that. >> yeah. they do chafe at things like that, but i think we're in a position -- >> it's a lousezy time of year to go over there. >> we're headed to, i do. >> if he's going to ski, that's a different story. we'll talk about technology news, the annual international gadget show is taking place in las vegas this week. the electronics consumer association says global spending on technology will slip to $1.1 trillion. among the reasons, lower average selling prices for smartphones and tablets. and yahoo! running into a little bit of trouble. the company says that some advertisements of the european websites last week spread malicious software. thousands of users were potentially infected. yahoo! removed the bad ads and users of mac computers and mobile devices were not

affected. the countries with the most infected users were romania, britain and france. we have a bit of transaction news over the weekend, liberty media is announcing or offering to buy out the minority shareholders of sirius xm. this will still need shareholder approval. the offer to make sirius a subsidiary gives them the financial flexibility to pursue other deals. liberty has a large stake in the cable operator charter and made no secret of its pursuit number two provider time warner cable. if you own the pipes -- this is sort of a pipes content story. actually both, maybe both. it's sort of like comcast nbc. there you go. we'll look at the markets this morning, as we mentioned the futures are indicated higher this morning after a bad start to the first two sessions of the year. you can see right now the dow futures are up 30%, the s&p futures are up 2.5. the oil prices are higher this

morning. they are up 56 cents from wti trading at 94.52. at this point, the ten-year is yielding at 2.981%. the job numbers will be a huge focus for the markets and can impact where the bonds are trading. if you want to look at the foreign exchange markets, the dollar is down against most of the euro and the yen. euro right now is at 1.362. the dollar/yen is at 104.53. gold prices this morning at this point are down slightly, $1.20. time for the global market report. ross westgate is standing by in lyndon. i can't help but just wonder what you do on a weekend when there's so many great sporting things happening over here, and was there anything happening over there? i don't know, anything? do you get to watch? do the games get televised over

there? like were you able to watch? >> some of the games get televised, some of the football games get televised. we have enough things going on. >> oh, really? >> we're okay. >> like what? >> yeah. well, you know, just the old soccer game, rugby game, cricket going on, there's things happening. it's okay. we're not under nourished, joe. we are not under nourished for the sport. >> i don't think you know -- ignorance is bliss, i don't think you know what you're missing, probably. so in that respect, you're okay. you're all right. you don't know how great it can be. just in general living over here. >> there is bliss in ignorance, is that what you're saying? >> i was saying that. anyway, i see some green. please take us higher for the start today, will ya? >> well, it's going to be difficult, joe. we are doing better than asia did. japan was down 2% earlier today.

we had disappointing pmi out of china. better mpis out of europe is the story. it hasn't helped stocks. we are even stevens on advances over decliners. pretty much on the flat line. ftse last week was also flat and hasn't done a lot at the start of trade today either. just down three points. we had service sectors pmi out slightly weaker, 58.8, but it's still hugely in expansion territory. 60 was the number in november. the good thing is it points to quarter gdp of .8%, so annual growth for the u.k. in 2013 may have topped out around 1.9%. an awful lot stronger than what people would have said this time last year. at the expectations component of that are the highest since march 2010. we also had numbers out of the eurozone up .20%, ibex is up a third as well as the ftse as

well, but the pmi is not quite as good. we are matching what we got in terms of the flash number. the big divergence still between germany and france as well. there's one sector worth looking at. the best performing sector last year was ulta. we had numbers from bmw group, u.s. auto sales up .3% from the year earlier. stocks down a little bit. volkswagon down three quarters a percent. there they saw their sales down 22.7%. the u.s. auto sales for them up 17%. so this was the best performing sector in europe up some 36%. that's where we stand in europe. i'll hand it back to you. >> all right. ross, thank you very much. when we come back, we'll talk about what's missing from the wolf of wall street. the film is full of excess, nudity and profanity, but there's something left out of

this three-hour tall tale. that's next on "squawk box." aflac! aflac! got 'em. ♪ yeah, he's clean, boss. now listen to me, duck. i have an associate that met with, uh, an unfortunate accident. while he's been incapacitated, somebody's been paying him cash. now, is this your doing? aflac? now, if i met with some such accident, would aflac pay me? ♪ nice. this is your stop. [ male announcer ] find out what aflac can do for you and your family... aflac? [ male announcer ] ...at aflac.com.

♪ all right. let's get to reynolds, the dapper, the splendid weather man from the weather channel. >> how is it going, boss? >> it's going all right, how are

you? >> just dealing with crazytown here, this is nuts. i feel like i'm the lead conductor of the cuckoo express. we had the jet stream, a big trough developing across parts of the nation, which basically has allowed the cold air to come funneling in. there's the windchill, which is a combination of your low temperature with the strong winds. some of these are staggering, minot, minus 46. minus 48 in minneapolis. air temperature at this point, we expect it to be around 21 degrees below zero in minneapolis. again, it's staggering. you take a look at what you expect in terms of today's highs, chicago, minus 10. minus 10 out to green bay. for tomorrow, the cold air remains locked in place. single digits back in minneapolis. st. louis at 28 degrees. cleveland with 5 degrees. at this point, snow is not really the issue, it's going to be just this brutal cold. i got to tell you, joe, you have roughly 80 million americans

right now under some kind of a winter weather advisory or warning at this point. and we're going to see this cold air stay locked in place for at least the next 72 hours. now, will travel be affected? we are going to see backups in new york and washington, d.c., but it's not going to have anything to do with the cold, just the rain drops. and in chicago and atlanta, colder times, but just moderate delays here and there. but it will be the brutal cold air mass to keep millions of americans shivering for days to come. back to you, joe. >> we didn't set a record in green bay, did we, reynolds? it was about zero, felt like minus 15 or so, but did it set records from the previous time? >> did not set records, did not set records, but it was crazy yesterday seeing the quarterback for san francisco without sleeves. go figure. >> yeah, i know. >> my daughter said, those football guys, they play for three hours a week, that seems like a pretty good job. >> three hours out in that? >> i said, do you have any idea on a frozen field if a guy that weighs 280 pounds were to hit me

once and then fall on me with the frozen field underneath me? i think my organs would come and blood, things would splatter. things would splatter. those guys are -- that is manly men out there. >> you know, the job to have in pro football, you think about just in terms of health, it is not the starting qb, you want to be the third string quarterback, the guy who holds the clipboard and the baseball cap. that's the dude i want to be. >> the kicker is -- unless you got three seconds left and you're down by one point. >> right, second-string kicker, second-string kicker or third-string quarterback. there you go. >> reynolds, all the rain we were showing for new york, that worries me because i know cold weather is headed this direction, too. is all that going to freeze by tomorrow morning. >> it looks like the timing will be okay because most of the moisture moves out and then you have the colder air coming through. but later in the week we could see another wintry mix. however, we are not expecting

any great shakes from it in terms of what we saw, say in boston or parts of upstate new york over the last several days. so the timing is going to be favorable for new york and washington, d.c. >> all right. reynolds, thank you. >> you bet, guys. we go from ren nolynolds wo the wolf of wall street. it sparks controversy for the language and the representation. here to talk about her article, what the wolf of wall street is missing, the women. she's the co-author of "strings attached." joanne, the way your article started is a stunning way to kick things off. back in the '80s you were a reporter at wall street journal and what happened? >> as a young reporter, i was a reporter right out of college, and this is the time when this film and so many of the other wall street films have taken

place. the first -- one of the very first interviews i had, i walked into the guy's office, he locks the doors, he leers at me and he strips. and at the time i didn't know what to do. i was a little bit alarmed. >> this was a guy at a media publication or a wall street firm? a wall street firm? >> this was a guy who i was interviewing for -- >> not for a job, an article. >> no, i was a reporter. >> i understand, you walk in, he closes the door. >> yes, locks the door. >> does he say anything to you? >> no, i was actually interviewing the guy. i was a young reporter with all my questions written down on my notebook. >> how far down did he get? >> got down to his underwear. >> completely, tighty-whities and boxer shirt? this was a while ago, but my point is, so what was so fascinating about this is that i

didn't know what to do. so i just basically kept interviewing him, right? i just kept asking him my questions. i escaped as fast as i could, but my point in the article is that this situation was such that the '80s -- this is what the films are missing, this drives me crazy, because there were women on wall street. the only women you see in "wolf of wall street" are pretty much hookers, strippers, and an occasional trophy wife. >> "wolf on wall street" was on long island had nothing to do with wall street. >> right. you're right. but the mythology of this popular culture mythology of wall street really centers around kind of this very macho-infused sexual drive -- >> women weren't part of the bucket shop culture. there were a lot of bucket shops and i never remember women being a part of it. >> there was one woman in -- >> there was one woman -- >> one woman works there, they screw up her background because

she used to be a stripper. >> yeah, i read the book, ieadt >> she was a stripper and he came and helped her and gave her all this money and helped her with her first child and all this stuff. it was supposed to be a heartwarming story, but the real story is much more complicated, but she's the only one. >> joe's point is exactly right about the film. my point was a larger point about the portrayal of wall street in the '80s and this mythology that has gron up is one told by men, dominated by men, narrated by men, but in fact there were quite a few women. what is so fascinating about the women who were there were living through this culture that is so much more absurd than anything i have seen on film. because we were living in a life where this sort of was your life. the guy -- the guy who stripped in front of me, you know, i went back to the office and did mention it to the guy who was editing my story, and his response was, he laughed. i mean, he thought it was

hilarious. >> on addison avenue, i'm sure. >> this was years later. and it's the same thing. i think pretty much any woman, certainly any woman who worked in or around finance -- >> we had all those stories. >> but it was part of the kind of culture, the fabric of being there. >> i have a roommate that was a great friend of yours and she said you never mentioned it. >> yeah, most of our girlfriends or set of friends were around finance. and the women were in the major investment banks, not the boiler rooms, but the major investment banks and the experiences they had through the lens of today would certainly be considered outrageous, but at the time was totally normal to us because that was -- >> this is not normal. there was a "seinfeld" where elaine is out on a date, and she tells jerry -- i can never imagine -- i don't want to

mention the next president, but men -- i was so scared to try -- i was always trying, it wasn't my clothes i was worried about, it was their clothes. that's from "seinfeld," but that's a weird guy to do that. >> be in the '80s the culture was so widely different than it is now. >> i worked on wall street in the '80s and never thought of taking my clothes off for a stranger. >> good for you, joe. >> i don't know too many men that would. would you ever in your wildest dreams make a move like that? in your whole life? >> no, joe, but courage. >> courage? >> let's move beyond the guy -- let's move beyond the naked guy. the every day experience, my roommate didn't think to tell me of the things that happened to her. our friends, for example, i was talking to my roommate, recently, she's still a close friend of mine, there were things she didn't tell me at the time because they were so normal, like one of the bosses glsh.

>> i can't believe that it could work. the governor of arkansas, remember that? there were two or three women that described the same kind of situation. >> listen -- >> are you kidding me? could it work? >> i think that -- >> no. >> joe, you really got to understand, you were talking about a wildly different culture where anita hill hadn't happened yet, so to women at the time, we had no concept of sexual harassment. it wasn't a phrase we had ever even heard of, so, for example, i had -- we had a friend, and this was not unusual, whose married boss at her major investment bank was stalking her. the only conversation we knew about it was because we had a conversation about how could she gently fend him off because he was in charge of her job. she could lose her job if she alienated him. and it was -- it was -- >> how do you do it without offending him? >> right. there was no conversation about this is wrong, there was no conversation -- that wasn't part of the conversation.

it was just life. you know, if you asked any woman who worked in or around finance -- >> that's a pretty unique story. you never had anything close to that, did you? >> it did remind me of something in the '90s, one of my first jobs as a reporter for the wall street journal, it resonated with me because i had a similar situation sh not down to his underwear, but the same -- >> come on. >> no, it's not as uncommon as you might think. at the time, i still didn't know what to think of it. >> high school teachers that are hitting on their -- where was i? i can remember, andrew, we would go like this, like in a movie, and try that. and try to put the arm around. but i would be scared that would be rejected. >> you know what? the culture was extremely different. there was another friend who worked on a trading floor, and again, only recently mentioned the strippers on the trading floor. she said it happened so

frequently that after a while she didn't look up from her work. the movies and films are not captured the sub surdty. you have to put us back in the time. >> it does make me feel good about the progress that's been made. >> there was a guy who dressed up as a cop who ended up stripping, too. >> and that makes it much better. >> well, exactly, it was the whole environment, exactly. >> but that was my point. none of us saw this as out of the ordinary. it was just -- it was life. there wasn't sexual harassment. it was just going to work. and it wasn't just that, by the way, the culture in terms of -- you've got to remember the 1% at this point was lionized. >> in this contest with wall street, you are talking about a bucket shop of pure criminals. >> well, absolutely. i 100% agree with that. 100%. >> joann, thank you. coming up, 100 years of merrill lynch -- what a horrible

segway. he's the son of one of the founders of merrill lynch. and it was a great firm back then. we'll talk about how the firm changed and also influential back analyst dick bove will give us his comments on the bernie madoff settlement we are seeing in the headlines this morning. he on chestnut street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i-95. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪ ♪ this magic moment and it feels like your lifeate revolves around your symptoms, ask your gastroenterologist about humira adalimumab.

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky

quick and andrew ross sorkin. apple acquired snappycam. >> do it again? >> snappycam. good name. it allows you to modify the way the built-in camera. i think my daughter and son do things like that, you can make it different -- make it black and white, make it -- get rid of red eye, i don't know. and how quickly the photos are taken, this is apple's latest deal of buying 11 companies in 2013, but not like twitter. and deal news for you, the nyse topped the nasdaq in technology and internet ipos in 2013 for the first time in at least 19 years. companies preparing to make their public debut are increasingly worried about technical hiccups. some technology firms atriblt the shift in big board to the so-called designated market makers formally known as specialists, those are the guys on the floor who make sure there

is an even flow constantly. >> just to clarify on snappycam, what it does is it allows you to take your picture faster and to do sort of rapid pictures. >> oh, where it is just like -- four different shots at a time. >> rather than changing the way it looks. >> with a good camera you can do that. >> exactly. we have other news, a survey ranking london now as the top city for far real estate opportunities. they beat out last year's winner of new york. the united states remains the most stable economy by a wide margin. the second place company, germany. speaking of real estate, office vacancy rates in the u.s. remain unchanged in the fourth quarter. real estate research firm rates cities about concerns on the economy. the national vacancy rate during the quarter, 16.9%. this month marks a major milestone, the 100th anniversary

of merrill lynch. the firm is still standing. joining us now is wynn smith, president of sugar bush resort and author of "catching lightning in a bottle." how are you doing, wynn? >> i want to commiserate about merrill, because i was in o.p. and joe ross, you remember the guy. >> totally. great guy. >> he spoke to my class. i remember don regan -- at that time, seriously, you also, in a solemn way, almost used to nod when i talk about merrill, such a good firm. and i don't know -- i do know what happened and it's a shame what happened. because you basically had someone see what was happening at some other firms and how much money you could make in mortgages and stan o'neal changed the culture of merrill, didn't he? >> absolutely.

that's write i came on the show because i want the real story to be told. because a lot of bad memories from the days, but from your days there, this is real merrill. by the way, happy birthday. charlie merrill had a core set of values passed along to everybody. and then the new ceo when he came in, he really rewrote history. he had no regard for the culture. he got rid of businesses that we had spent decades developing. and the alternative to get the profits was to jump in, use the balance sheet, deliver the balance sheet up to 32 to 1 and that was the tragic moment that happened in 2007. >> komanski went in and went international, he did things where the margins slimmed down a little bit. >> no, see, that's what you have to remember, 2000, the end of 2000, merrill earned $3.8 billion, a record year. we had 24% return on equity. $1.5 trillion in client assets.

the stock hit an all-time record of $80 a share. that was not a failing company. sure, 9/11 happened, we would have had to pair back as we had done many times in the past, but to write off $1.8 billion. to get rid of what i had built international, to pair down the international banking business was uncalled for. nobody else did that. >> were you on your way to dealing with the change in the business model from a commission base to a -- because i remember you did the cma, remember with bank one, the first time we did it, it was a checking account to get interest and keep your securities there, so you were on your way to assets under management. >> what we were doing, it started with lonnie, who ran the business for 20 years. we are moving to a feed-base structure where the ad visors had the option of charging the commission or the fee base. and that was evolving. >> but everybody was dancing, chuck prince was dancing, and there weren't going to be enough chairs to sit down.

so stan o'neal saw these huge profits being generated by the other firms, lehman, some of the other firms, bear stearns. and it was tempting because the compensation was tied -- >> a lot of the other businesses were cut off. so what might have been sustainable businesses in that period of time were no longer there. so it was more compelling to get into this. >> do you blame all of this on stan? >> no, i blame the board of directors as well. >> it is never black and white. so who else -- how did we get there? >> what they did, andrew, if you look at 2000, you look at two years later, everybody member of the executive committee was gone, either fired or chose to leave. the board of directors was actually very different in 2007 and 2001. so the people who were with him were not bad people. smart, young people. they had never been through a market cycle and didn't understand the history, didn't understand why we weren't a

player in the mortgage-backed securities and the history was gone. also there was a culture of fear that developed, so nobody was willing to challenge him. in fact, the one person to challenge him was the head mortgage-backed director, and he did not want to expand his own business. when he challenged that, he was fired. by the way, the year before he was the highest paid guy at merrill lynch. >> any possibility that merrill comes back out from under bank of america? i mean -- >> why, i think it's doing too well for bank of america. >> so you're fine with that. >> well, i would like to see merrill lynch independent, but the reality is they are part of bank of america now. and they are doing very well. if you look at a recent gold member report, they had revenues of 4.4 billion in the last quarter, profit margins of 20% according to goldman sachs, 1.8 trillion in client assets, they are doing some really nice social impact partnership investing. so the old culture actually is trying to be staying through. the new leader john field who grew up at merrill lynch is

celebrating history today, i'm speaking to a reception in stanford, connecticut, going back to celebrate the 100th birthday. so i like what i see. >> what do you think of morgan stanley now getting into the business? >> the irony is morgan stanley and ubs are run by former merrill guys, bob mccann, bob muhulland, invitation is the best form of flattery, i think. >> i remember when tully walked in to our class, he was 6'4" and the perfect suit with gray hair, it was like -- >> it was interesting, i loved your segway into my segment, but dan tully, if he had ever heard of that, that person would be down the stair in a flash. he was a moral, ethical guy. he called everybody pal. and he understood merrill lynch to make it what it was. >> bear stearns is one thing, lehman is another, when i saw

merrill, i was like, you're kidding me. mother merrill, i thought it was big and invincible. >> it should have been. the one thing we learned from charlie merrill is the value of leverage but the destruction of leverage. and that was passed on. we were the first firm to get commercial pay to get a long-term debt rating, and we protected that debt rating as much as we could. when i left the firm, our leverage was 22 to 1 not 32 to 1. >> my biggest mistake, when you do well at merrill, you call lehman brothers and say, you need to be at a boutique. that was the biggest mistake i made. >> there was a great cartoon in 1987 after the crash of '87, and it was a two-part cartoon in "the pittsburgh press." ronald reagan is calling up to get a financial adviser, and that shows you the impact merrill had in those days. >> good to see you, thank you.

coming up, we've got a big jpmorgan story this morning. and the influential banking analyst dick bove will give us his thoughts on the sector. and amazon's chief is taking a big vacation, but it got cut short. we'll tell you why. a little bit of a hiccup there. heading to a break, check out the price of gold! . when does your work end? does it end after you've expanded your business? after your company's gone public? and the capital's been invested? or when your company's bought another? is it over after you've given back? you never stop achieving. that's why, at barclays, our ambition is to always realize yours. is your tv powered by coal?

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welcome back to "squawk box." a number of stories about the amazon founder who was flown from the galapagos by a navy helicopter after suffering an attack on new year's day. in a comment to cnbc, galapagos

five stars, kidney stones, zero stars. the local media reports say the business was flown from academy bay in santa cruz island where he was aboard a cruise ship to a private jet. he was then taken to the u.s. for emergency treatment. i always worry about kidney stones and galstones, it can green up on you at any time. >> one of my doctors told me that even if you drink diet coke, that can cause -- i know. i think they are painful, like passing a kidney stone is -- >> yeah. galapagos is on my list, kidney stones are not. >> i can't believe you have not been there. when we come back, we'll talk about the top global risks for 2014. turkey, russia, china, just a few of the names on the list of concerns for the new year. but there are many more. we'll break that down at 7:30 a.m. eastern time. first, though, the guardians of property. influential banking analyst dick

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today, twitter on the rebound. we'll tell you what's driving the social platform's latest surge. conquer the morning, conquer the day. "squawk on the street," 10:00 a.m. eastern, cnbc. welcome back to "squawk box." the banking industry has been under intense scrutiny. our next guest has written a new book explaining why the big

banks are the key to success. he's the although of "guardians of prosperity: why america needs big banks." dick bove. good morning. this is an unpopular thing to say at this point in time. it feels that. >> i think the united states is going in the wrong direction in terms of the legislation, rules and regulations that have been put in place. i think the risk in the financial system has been increased meaningfully as a result of what's happened. i don't think anyone is looking at what's going on in the international environment concerning american banks. i think while the government put a ballistic miss until place to hit the banks, they missed the banks altogether. the banks are doing just great. they hit the american public. that's who they hit. >> you said there's more risk in the system now than there was before. where is that risk if it's not at the big banks? >> okay. basically when you overregulate an industry and you continue to print money, in the case of this

industry, you are stimulating the shadow banking mark tote grow. what's happening is mortgage companies are popping up all over the place. auto finance companies are growing again. there's a whole wide variety of person personal finance companies that have come back. what's happened, those loan which is are not being made in the regulated system are being made in the unregulated system. since the unregulated system is very high risk, we know from history, for example, you can't name the biggest public mortgage company in the united states. it doesn't exist. there's one credit card company. that's discover, right? visa and mastercard are not -- don't lend money to anyone. there's no commercial finance companies with be no consumer finance companies. they're all done because that business model doesn't work. >> right. you are not a fan of glass steegle and not a fan of the vocal rule. >> right. >> you and i are together on this. when you think about the risks created by the london wale which

i would argue was a minnow in the larger scheme of jp morgan, preassuming that a problem like that could get even larger at a place less well run, isn't that a probable potentially for the taxpayer? >> if you do 50 transactions and 49 of them are great and one is lousy, is it fair to focus on the one that didn't work and forget the 49 that worked? in other words, did jp morgan -- >> if there's a trade that ultimately takes down a firm, right, you have a problem. the question is how does that trade actually help the economy? if you think banks are supposed to be the back room engine of the economy, not the front room, how does that work? >> first off, that trade did not take down jp morgan. >> i appreciate that point. i'm extrapolating out. >> it had impact on jp morguen. >> i'm extrapolating out to suggest something like that

happens at a smaller firm on a larger scale. >> mf global is where trades occurred that did drive a company out of business. yes, obviously the industry needs regulation. i'm not arguing that it shouldn't. i'm also arguing that, you know, if anybody did anything wrong, they should go to jail. you shouldn't penalize the shareholders of jp morgan because of what kerry killinger did or jimmy cayne did, is what the u.s. is doing. the net effect, what we've seen if you're a multiproduct company, all right, in the financial industry, you survive. if you're a monoline company, you don't survive. the fact of the matter is, we're going back to monoline companies from multiline companies, which is a mistake. >> what i also hear you saying is what the regulators' best intentions are will not result in what they had hoped. if you end up with a black market or a market that exists outside of the rules, then it

does you no good to have super tight regulation. >> exactly right. in other words, becky, what you've seen is a constant pushing of transactions out of the regulated markets into the unregulated markets which increases risk in the system. >> that was like the aig example. >> yes. >> if you have these transactions that are taking place outside of what are normally called banks they're happening and they can't do anything to stop them. >> that's right. the regulators have done a lot worse than that, okay? essentially when people talk about the financial system in relationship to regulation, they never mention the international situation. in 1950, 88% of the world's convertible currencies were the dollar. today 18% are. there are three, if you will, currencies out there, that are bigger than the dollar. the dollar is shrunking inin i

dominant factor. how do we retain the currency in the united states if the united states keeps shrinking? >> we have to run. thank you the book is called "guardians of prosperity." it's worth reading. it's awesome. i agree with a lot of what's in here. we disagree on a couple things but you did a great job. >> thank you. >> appreciate it. a big week for the markets with several key economic reports on the way. plus, the wicked weather is causing major disruptions for the airline industry. we'll have a report on those issues facing air draft this week. and how will the auto industry follow up 2013? mike jackson will join us in the next half hour, he's from autonation. "squawk" will be right back. i always say be the man with the plan

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the markets gear up for a storm of economic reports. will the numbers put wall street into a deep chill? the top global risk for 2014, china, russia, turkey, just a few of the hot spots for the market in new year. we run down the list. can the automakers have repeat pefsh nance in 2014? autonation's chairman and ceo mike jackson gives us his forecast for the sector. "squawk box" begins right now ♪ we got a thing and that's called radar love ♪ we've got a wave in the air ♪ ♪ radar love good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. you can see right now the dow futures are up by about 28 points above fair value, s&p futures up by 2, nasdaq slightly negative. the ten-year note has been

interesting, watching this, the yield is just below 3%. right now it's trading at 2.994%. in our headlines this morning, congress kicks off its 2014 session today with the fed on its first day agenda. the senate is set to vote at 5:30 eastern time on the confirmation of janet yellen as fed chair. she's expected to win approval. she would take over after ben bernanke's term expires on january 31st. boeing machinists have approved a new eight-year labor contract. that comes after a rejected a contract proposal by a wide margin. the agreement is sures that boeing 77-x will be built in washington state. we'll be keeping our eyes on shares of clothing retailers men's warehouse and joseph a. bank today. men's warehouse has launched a cash tender offer for joseph a. bank at $57.50 a share. it's nominating two independent directors to serve on joseph a. bank's board. each company has bid to take

over the other during the last few months with each other being rejected. >> neither of these guys talk to each other. you'd think they both want to own each other, they'd be talking constantly. >> what is that going to mean if the deal goes through? >> the problem is -- i don't know. >> do they hate each other? >> there's the price but also the social issues. in both cases each company wants to run the other company. so that's sort of -- >> that sounds like it's a mess setting itself up. >> ultimately it will happen one way or the other. just a matter of who will capitulate first. >> this is like us talking about -- me talking about abercromb abercrombie. you know nothing about either one of those firms, nothing. i don't think you've walked by the outside -- >> you're talking about it from an operational standpoint? >> yes. you don't own a tie or underwear, a jab etcket, a suit >> not true. >> which place do you own a single article from? >> i own a belt from joseph a.

bank. it's not plural. i bought a vest years ago to go with a tuxedo thing -- >> from where? >> men's warehouse. i haven't worn it in a decade but i did buy it. >> i just don't believe you admitted that. >> i did. i know you're mortified for me. i'm not mortified -- >> that was like 30 years ago when you were in high school? >> pretty much. you asked the question. >> ask jeeves on the way home that you want to stop into men's warehouse to buy something. see if he'll stop. >> he only knows where breonne is. not true. jp morgan and mr. madoff, we have news. jp morgan is nearing a settlement that the bank ignored signs of bernie madoff's ponzi scheme.

it could also involve a deferred prosecution agreement. >> does the s.e.c. have any money to sue them for totally ignoring? everybody knew he was doing a covered call strategy. right? he had $60 billion -- >> i would it a strategy -- >> he claimed. he claimed to be doing a covered call strategy. >> yes. >> the volume of covered calls that needed to be written in a day, it didn't exist. for anyone not to know it was going on. what is kind of sickening probably it was a big klein the for a lot of different financial firms who had to have an idea something was happening and they liked having the client. >> the jp morgan situation was particularly -- >> egregious? >> i don't know if it was egregious. >> allegedly. >> there were people inside the firm that had an idea. they're e-mailing each other and taking their money in certain cases out of the fund because of anxiety about it. >> the s.e.c. should have known

that. do they have money to sue -- they can't sue themselves? >> no. but maybe you could have a class-action suit on behalf of taxpayers. >> against the s.e.c. >> but i'm not sure -- actually, no. >> the taxpayers would have to pay if you won. >> can the madoff and madoff victims sue the s.e.c.? that would be more interesting. >> let's move on. the record cold plaguing problems for the airline industry. four airline accidents this weekend in addition to the cancellations and delays. we go to chicago o'hare. i know one landed on the deegan and we saw that horrible situation out in aspen with, i think, a challenger, private jet, right? >> yes. it was a rough weekend all around for the airlines. it will be rough today as well, not only here in the upper midwest but as you move toward the east coast, we'll talk about the airports most impacted today. let's look at the cancellations

today and what we've seen when you factor in everything over the weekend. the weekend total cancellations edging closer to 5700 and delays of more than 21,000 flights. those numbers certainly we expect to be going up. we talk about the airports most impacted. the upper midwest where we're seeing bitter cold following 10 to 14 inches of snow, o'hare, cleveland, hopkins, east, jfk, laguardia and boston logan. let's talk about the rough weekend when it comes to the airlines and for general aviation. let's start at jfk. the airport was shut down briefly sunday morning. that's after a delta airplane skidded off the runway while taxiing to a terminal. nobody was injured. nobody was hurt. but they did have to shut the airport down briefly. out in aspen, you mentioned this, joe, one person is dead, two injured after a business jet, a challenger, crashed while landing at aspen's airport

there. the ntsb is investigating the cause of the jet crash in aspen. the people impacted, the pilot who was killed was a mexican national. the two injured were pilots being flown up there on that plane. finally, the small airplane in new york. it made an airplane emergency landing on deegan highway in new york city. the pilot was trying to make it to one of the airports but he told the air traffic controllers, i'm not going to make it, as he was trying to reach the airports. the only option, deegan highway. remarkably he landed without incident. somebody stopped some of the traffic so that he did not hit any cars. quickly take a look at shares of the -- or the airline index i should point out. it's up 51% in the last year. a lot of people will say the airplane and airline stock, are they going to go down because of this? typically, no. you won't see an impact of shares of airlines when you have a storm like this. you need to see multiple storms like this over the course of a winter before you might see some

impact in the bottom line. as for a two or three-day incident like this, it's not good. it's not fun for the people who are traveling. but you usually don't see an impact on the airline stocks. guys, back to you. >> phil lebeau, we appreciate it. thank you. stocks meanwhile if you're watching thursday and friday got off to a weak start but hit a great close to last year. it's the weakest start since 2008. i like saying that year out loud with investors looking ahead to jobs friday. with us now on set to talk markets, david bianco, chief u.s. strategist at deutsche bank and on the economy, bob barbera. he's co-director at the johns hopkins center for economic development. did you come up on the train. >> no. i was already close by. >> you were already close by. john, i'll start with you. what's your target for the s&p. >> 1850. we're only about a percentage point away from that. >> consensus, i'm thinking is

high single digits, maybe 10%. >> right. >> and we always try to figure out how does the market surprise people? it goes up more than that or it even goes down goad forbid. you're totally flat, thinking it goes nowhere. >> the strategy for the short term is wait for a dip. when we get the dip, i think we will, i'll probably find myself advocating to buy it aggressively. i do think the s&p dips back down to 1750 in the next several months, simple reasons, valuations are more expensive than history. that makes volatility a littlette vated. . >> i won't give you any grief. you weren't one of the dippers -- guys that were going for a dip and a year and a half ago. i know a lot of them. >> i've been known as a bull for five, six years. >> we'll watch you now. >> everybody wants to see what you do for them most recently.

we're working our best. >> you could be at 2,100 at the end of the year and then you look stupid. >> i don't think that could happen. >> i appreciate that but it still could. >> if it does happen, i would look bad but the signs of such a terrific p/e expansion, driving that type of performance would be if interest rates stay low as the fed aggressively steps away from bond purchases. i don't think the fed will aggressively step away. there will be uncertainty on what rates will be with fed involvement. >> they'll stay at zero until all of us are dead, hopefully not. >> you're making two points which i would agree with. the fed is accommodative, but the fed is changing gears from the most accommodative stance. >> but the economy is finally seems to be shaking -- is it shaking off the doldrums, bob? >> looks better. part of the sell-off in bonds is not the change in the fed commentary but the fact that the economy looks better. >> no inflation still.

>> if you go back 18 months ago, saying i'll do qe, inflation goes down, hard to take issue with them. >> why should the bond yields go up if inflation isn't back? what does it peg off of, a good economy or high inflation. >> you've had a change in the expectation of the future real rate will be. it went from japan, to eventually we'll get back to a normal world and the real short rate will be 2%. that's a change, a bullish change. >> what do you see for gdp this year? >> i think it will be closer to 3 than 2, which will be a big change, very positive. remember now we came from a world where -- >> that all sounds good. >> we're positive on the economy. >> you think we're ahead of ourselves. >> think about the stock market versus fundamentals whether it be the company or the overall economy. you have to be mindful of what's

normal behavior of markets. markets don't go straight up. every year except 1964. >> this one has. >> we had a 5% to 10% dip last year. we had a 5% to 10% dip on the s&p. >> i remember the dip. >> it happened during may and june. >> it was nerve-racking. >> barely, though. >> it was the first discussion of taper. >> that's right. >> right. >> there will be discussions about that normal interest rate, which i think is the key issue for 2014. we believe earnings growth will be healthy, back to normal. p/es are back to normal, even a little bit above normal. the question for 2014, what are normal interest rates? >> i think that certainly has been the normal pattern. we've been in a world where we've been fighting the anxiety you'll fall back into the abyss and the mean expected outcome is we were japan. if you're going to go better than that, show reasonably good growth, i think ultimately it has to come down positively to

equities. >> ultimately that's why we had the near 30% price gain last year. that's why i'm constructive on the market for the next couple of years. we'll get a dip. whatever causes it -- >> even if the market goes to 2,100, you won't look stupid. >> you're calling yourself constructive and you're looking for a 1% gain. >> i'm looking for confirmation of good things which means there's an orderly renormalization of interest rates upward with no volatility in currencies or commodities. >> if we're at 1840 and we're going to 1850, why would you call that constructive? >> i have 2000 for 2015 end. when we have a 5% plus dip i'll be back telling you to buy it, most likely. >> you don't do stocks. >> i don't do them that specifically. i think if we succeeded and we're not japan and the economy's growing at a reasonably good rate with low inflation, equities do well. >> you were at my other great firm. >> yes. i was upset with you singing the praises of merrill.

we were ef hutton. when i talked people listened. >> there are firms i really didn't like. merrill was great. ef hutton was one of the great firms, too. >> yes. >> i ended up at ef hutton because lehman brothers talked me into leaving merrill. you and stiles were great. >> it was fun. >> applegate was great, too. >> back in the 1930s it was fun. >> it's his birthday today. >> i know that. i was going to order a stripper but i guess you can't do that anymore. >> we learned that in the 6:00 hour. >> i saw the policeman over there. coming up next, is the empire state about to loosen up its marijuana laws? that's coming up next. at the bottom of the hour, the top global risk for 2014. i don't think they involve weed but they might. will u.s. relations with russia disrupt the markets in the new year or will it be china's economy? we have that answer when "squawk box" returns.

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welcome back to "squawk box." new york state reportedly set to loosen medical marijuana laws. "the new york times" announcing that governor cuomo plans to introduce legislation. other states are taking increasingly liberal positions on the drug. we haven't turned into colorado

just yet but we may be on our way. when we come back, auto sales were big in 2013. the best in years. will that trend continue as we head into 2014? autonation's mike jackson will give us his latest sales figures and forecast for the new year. later in the program, pimco's mohamed el-erian on an op-ed. "squawk" will be right back. time now for today's aflac traf trivia question -- aflac! got 'em. ♪ yeah, he's clean, boss. now listen to me, duck. i have an associate that met with, uh, an unfortunate accident. while he's been incapacitated, somebody's been paying him cash. now, is this your doing? aflac?

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now the answer to today's aflac trivia question. which actor who plays a zombie killer and graced the set in october shares joe's birthday in the answer, norman reedus.

>> he shares a birthday with others as well, howie long, rowan atkinson and joan of arc. >> i'm looking at some other people. wow, these people are young. i can't believe norman reedus. that's exciting. >> he's your favorite. >> he is. >> we were talking about him this morning. >> we were talking about him. one of our producers is into it. he hasn't started watching it yet. i realize how well this guy would do. he fills this tank anyway. by siphoning the gas out of the neighbors. >> would you stop. >> i think he does. this is his world, the post-apocalyptic. >> we decided we want him on our team. he's a survivor. >> we definitely want him in our group. he knows how to cook road kill. >> stop. enough. 2013 was the best year for the auto industry since 2007. mike jackson, the chairman and ceo of autonation joins us right

now with his december sales numbers. mike, good morning. >> becky, good morning. the most important birthday of the day is joe's. congratulations. >> thank you, mining. thank you, mike. good to be above ground. that's the best thing about birthdays. >> yes, absolutely. we had a good december, retailing almost 29,500 units, an increase of 6%. but becky, you're right, you have to put that in the context of the full year, almost 300,000 units for autonation plus 11%, led by our premium luxury business which was up 16%. and why it was a flat month for the industry for december, it did bring in the full year to 5 15.6 million units. with trucks being the story of the year, up double digits. and ending with a 50/50 split

for the industry between cars and trucks. so let's turn to this year, 2014. >> before we talk about 2014, just some statistics on december. we did see some disappointing numbers from some of the big auto retailers. some of the big automakers. they're blaming weather a lot. was that a big problem? i know a lot of your stores are in florida, california, places where you didn't see the same weather impact. how big of a problem was weather? >> i don't think weather was the issue in december. if i look back over the last several months, clearly the government shutdown interrupted the business and dramatically slowed it. and by late november, the industry had to do something, so we had programs in place for black friday. we had a stupendous balack friday, which for us was up 44% versus prior year. i think that pulled some business forward out of december

and flattened the december number. that's what it looks like to me is what happened. then you have to step back and look at the full year say 15.6 million, plus 7.5% for the industry is a good year. >> what can we expect in 2014? you were very accurate with your prediction for this past year. >> yes. i think this year we'll see a number that begins with 16 million. now, i think the rate of growth has slowed, you know, we were running a double digit growth and then 7.5 last year. i think for the industry we're looking at 3% to 4% growth, because let's face it. 16 million is the sustainable trend number. and i don't see circumstances where we fly right by that. but i think 16 million is an excellent number. and the underlying forces are still there, genuine replacement

need, great financing, exciting new products and let's face it, the job situation is significantly improving. and the overall economy's rate of growth, i think, will be better this year in 2014. you put it all together, we'll have a 60 million sales year, somewhere in the low 60 million. >> you said that you had a lot of sales that really kind of sparked things, a lot of sales incentives to spark things for black friday. if you're a consumer who didn't buy a car, can you get a deal in january? >> no. the deals are different now. there's still lots of attractive products and deals but they're not the deals that were there in late november or even in late december. so there will be some pay back for that in the month of january. i think another interesting challenge for the industry this year is that over the past four years, the industry has been

running the plants to support this average double digit rate growth, which is now slowing but also to rebuild the inventory. inventories have gone from 55 billion to 115 billion, going into this year. we really don't need any more inventory. >> okay. >> so the plants are going to have to adjust for a slower growth rate and we have all the inventory we need. >> mike, thank you. >> great seeing you this morning. >> you, too. coming up, the top global risks for 2014, the eurasia group put together a list of potential hot spots for the markets. we check out some of the biggest market threats in their view, next.

welcome back to "squawk box," everybody. our headlines this morning, investors are looking ahead to jobs friday. but they will have two economic reports to look forward to today. we get the institute for supply management out with its nonmanufacturing index for december. the government is also out with factory orders for november.

both those numbers come at 10:00 eastern time. we do have some high-profile injuries and illnesses in the news as well. amazon's ceo jeff bezos had to be air lifted off a cruise ship during a cruise to the galapagos islands. he suffered from a kidney stone attack that required immediate treatment. bezos provided a comment to cnbc that said galapagos islands five stars, kidney stones, zero stars. and angela merkel, german chancellor, she suffered a pelvic injury cross-country skiing during her holiday vacation. merkel will be required to stay in bed for three weeks says a spokesman. ouch. over to you, andrew. >> i wonder if our elected officials should be allowed to participate in sports that you know are inherently dangerous? maybe that's another risk we can talk about with our next guest, the eurasia group is out with its annual list of global risks to watch.

i don't think angela merkel's skiing was on it. here with us is iam bremmer, the founder and president of the eurasia group. good morning. >> good morning. >> angela americale is nmerkel but actually germany as an ally of the united states is on the list. >> explicitly as an ally of the united states. our top risk for this year is very much about america's troubled alliances around the world. all right? >> when you say our allies you think our allies, let's go through them, israel, britain, japan, are going to move away from us? a meaningful way? >> no, i don'tp this they'reint. the u.s. economy is not in decline. the government is hugely functional. we can deal with the government we have. u.s. foreign policy is in decline. it's upsetting our allies around the world. israel, japan and britain don't

have strategic choices and canada and mexico don't have any economic choices but everyone else does. these are important countries. germany is one. france is one, turkey, brazil, south korea, indonesia. if you think about what drove a lot of american corporate growth over the last decades, it's been the ability to expand around the world in countries that are actually quite interested in aligning the standards with the united states. that's becoming more problematic. >> who's at fault? is this washington at large? is this the president? is this the function of edward snowden? what do you account for this? >> no question, snowden is a part of it. if you think about any companies dealing with big data trying to invest around the world, they're taking a hit because of that. syria's a problem. iran is a problem. if you're lockheed martin or raytheon and you want to sell arms, you know the sequester will hit you on the u.s. side. you want to sell to the turks,

saudis, emirates? those guys will be buying less from the united states. they're concerned about foreign policy in the region. >> is this fixable? >> it's only a little fixable. >> or is this the long march? >> some of this is obama. some of this is the unwillingness of the obama administration to engage in leadership internationally, a lack of interest in foreign policy. a lot of it is structural. >> you think it will hit business. let's talk about number three, china on this program, we talk about them all the time. it doesn't sound like it's a huge risk in 2014. >> china will do well in 2014. the reason china is a risk, suddenly china's actually moving. there's been virtually no substantive reform in the last 20 years. in 2014 we're going to see it, particularly on financial reform. 5 of the 7 folks in the standing committee are leaving in 2017. they're the ones focused on

financial reform. that's not a ten-year plan. it's more of a three hiv year plan. >> number four, iran. >> this is the do or die year. the deal gets done or not. if a deal gets done, oil prices are going down significantly, going to really squeeze a lot of countries around the world. the saudis and the rest. >> what's significant? >> significant, it's already going down an additional millions coming on from iraq, another 500,000 libya. even without an iranian deal, the saudis will have to reduce production to maintain a price floor above 80. if an iran deal happens, we're going well under that. >> well under 80. >> well under 80. if a deal doesn't happen, then we have additional sanctions, but we also have iran moving very quickly towards becoming a de facto nuclear breakout state. the saudis going nuclear, too. for many years iron has been we're seizing them but we can deal. 2014 is the year that happens or doesn't happen with major

implications for the energy sector. >> i realized i missed number two with emerging markets. >> we're bullish on some emerging markets. the reason for that is this year, every emerging market that is having an election, is having an election. if you look at brazil, colombia, south africa, is this is the year. all of those countries are going to underperform in terms of economic policies in the runup to those elections. after the elections hit, some will do reasonably well, like colombia, brazil. some will disappoint us. everyone thinks this is the year mody becomes prime minister. he has a government that requires all sorts of compromise with lots of little parties and government doesn't improve. india is absolutely not the surprise story. >> i want to hit two more real quick. strategic data you put as a threat. number six. what does that mean? >> one of the biggest changes in the world as a political

scientist looking at the markets has been states playing a bigger role directly in the marketplace. that's most important that we look at data. the information revolution empowered people. the data revolution empowered corporations. not just the united states but china. they are coming out arguing for more transparency you know you have a problem. it's beginning to be much harder for companies, whether they're banks, telecom companies with be to think about a global data market. >> you are not going to sochi. >> i wouldn't. >> but you wouldn't. >> i would our clients to have more of a virtual presence. >> because you expect what to happen? >> i expect first of all it will be a disappointment. they've spent more in this olympics than the last five winter olympics combined. the infrastructure is not going to work well. there's huge corruption. there's a lot of criticism with putin right now, a lot of international folks not showing up.

as a direct security risk to the olympics. we've seen terrorist organizations in the north caucuses located right there saying they wish to disrupt these olympics. they will do everything possible. unlike the greeks who can't do security but say we need help, the russians say we don't need help. we've got it all taken care of. there's breathtaking arrogance on the part of the kremlin on this issue. sochi is not where you want to be hosting olympics right now. it's unfortunate. this is the most geopolitical olympics since moscow in 1980. those are not words you want associated with the olympics. when we come back, a special rendition of happy birthday from the "squawk box" animal orchestra for joe's birthday. we're celebrating in style. plus, we'll take a look at the mortgage market with the ceo of lending tree. later, "squawk box" master mohamed el-erian, the ceo of pimco will be joining us with his outlook for 2014. we'll be right back.

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welcome back to "squawk box" this morning. apple ramping up its innovation acquisitions, buying a small company that makes a popular photography app. it's called snappy labs. it makes an app called snappy cam. the company was bought for an undisclosed sum. the app allow s users to keep taking photos in rapid succession. if you were a sports photograph he. >> the shudder what. >> button. i say button with a "d" almost. take a look at shares of apple this morning, see how people are reacting. this will be a marginal acquisition in terms of the value. it will make your iphone better camera. >> like a faster model photography?

>> that's basically what it does. you can take lots of pictures very quickly. >> which is cool, though, you'll get one that's good in all those. >> right, right. >> usually one that has everybody's eyes open. >> exactly. mortgage rates have begun to creep higher. let's get a read on how rates on housing will look in 2014. doug lebda, ceo of lending tree. these rates are so ttractattrac. >> rates are are always relative. if they're going up a little bit, they're higher than they used to be when they're coming down, people always think of where they used to be and not necessarily where they could be. >> what really controls mortgage rate, the supply and demand for money or the fed. >> the ten-year but then the spread over the ten-year is

based, believe it or not, capacity in the mortgage business. if you have lots of capacity, lots of lenders able to lend, regulations are easy, generally you'll have a very low spread over the ten-year but over the last few years, until really 2013, that spread had been so wide, because there was very little availability of people to push loans through the system. >> regulations are high, too. >> they are but now they settled out a little bit. the qm rule basically govern lenders and liabilities goes into effect actually next week. lenders have been following those standards. now it's a fannie and freddie market out there, it's a steady environment right now. the good news is we're starting to hear about home equity loans coming back. i think banks are starting to lend again and small lenders are doing well which is interesting. >> is it -- what do they call it when a price is to where it's going to go even though it shouldn't be there yet. it gets there quickly. is it possible rates come down

based on the overshot of what the fed did. >> i think there will be volatility but i think we'll have rising interest rates throughout the year. >> what's the 30-year. >> it's about 4.7% right now and it should be between 5% to 5.5% by the end of the year. >> you think so. >> i think so. >> you don't think it goes the other way. >> i don't think so. >> even though the ten-year got above 3, now it's below 3. >> i was talking 30-year mortgage rates. >> but it's based on the ten-year. >> rates have to go up from here. >> that's what people have been saying for five years. >> they've been going up for the past year or so. >> i don't know. we don't need inflation for rates to go up. >> i don't believe we do. you have the future inflation for rates to go up and future inflation, harder for banks to lend. we're talking small numbers, 4.7% to 5% is not a big deal with mortgage rates. >> do the 30-year, don't do a

7-year adjustable. >> do however long you're going to live in the house. don't borrow 30-year money if you're going to move in five years. adjustable rate mortgages are good. there's adjustables that are coming off this year. as you start to get more securitizations that are not fannie and freddie loans, you could see the market get healthier. >> when does the 30-year go away? >> i don't think it ever does. >> as long as the government is here. >> yes. i think it's here to stay now. i think it's priced so much into the market you can't get rid of a 30-year mortgage. >> when are we going to have a conversation about getting rid of fannie and freddie? >> next year. they're talking about it in 2014. it will be on the table. >> is it okay if that happens? what does it do to the availability of mortgages? >> there's different schools of thought in washington. and i think what you'll have is the government will always be involved and i'm not intimately

familiar with all the programs but they're talking about making it more of an insurance program like fdic. i think that will be fine. where fannie and freddie got into trouble is when they started owning loans and taking risk as opposed to being an insurance company, insuring bonds for repayment. >> so how much of the mortgage rate is based on what these three credit agencies depend your actual value is as a human being? >> that matters a lot. once you start rates for conforming very good credit borrowers are normally what we talk about. but then after that, it is truly your credit score. its your credit score, the loan to value ratio and the debt to ratio on the property. your credit score matters a lot. it matters more and more. >> does elizabeth warren, they

are the most outrageous actor. have you tried to deal with them? >> in terms of trying to -- >> they are -- you can't -- they just say no, no matter what. the cpfb, whatever it is, have you had experience? you know what i'm talking about? how do they run a business like that? >> here's the thing. >> who are their clients that don't hold them accountable to be better at what they do? >> their clients, part of the issue -- >> the clients are the banks. >> banks essentially get data and score data, the fico score and proprietary scores. there's credit repair agencies that have sprung up over the years who will do nothing except essentially spam credit agencies to try to get bad stuff off your credit report. so they're very skeptical about anything that might actually be wrong. >> or might be true. they don't care if it's true or wrong. >> they're so barraged with

requests that aren't accurate, that literally it will say everything on my credit report is wrong. if the credit agency -- >> frankly, the client, the bank wants them to be as strict as possible. >> they want them to be wrong. >> the good news is there's a lot of things like credit karma, we're starting something this year where you can track your credit score and help make it better and give you -- believe it or not sometimes to improve your credit score you need to open another credit account or close one that's not being used. there are stick tricks of the t you can use to improve your score and get inaccuracies off. >> having to sign up and pay experian a recurring fee every month. please sign up to get your thing for free. >> then it's forever. >> you check your own, that takes points off your own thing to even check it. >> no. that does not. >> when somebody else checks it it does.

>> it does, if it's what's known as -- >> why? >> again, it's all -- >> it's scoring models. >> here's what -- i'm giving you the data. on the scoring models if you're actively seeking credit, it's an indication, apparently that you need more credit, except if it's the same type of loan within 30 days. if you're applying with multiple places, you'll be fine. if you're applying for a car loan and aplay for a bunch of places. if somebody does a prescreen inquiry on your credit, trying to solicit market something to you, those don't count either. it's a hot button issue and the fact that people have to pay for it is difficult. >> you say button. you say it normally. >> did i say it right? >> yes. people call it a hot button issue. >> i want to say it's a hot button issue. >> it's a hot button issue. >> because of you i say hot

button issue. it's a button or a button. i can't button. >> the middle is not working for you. >> anyway, good to see you. >> thank you. when we come back, why one well-known wall street firm is cutting its rating on twitter but a special rendition of happy birthday from the "squawk box" animal orchestra coming up. we'll be right back. [ male announcer ] this is the story of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. ...and the little room above the strip mall

off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪ there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen. [ male announcer ] introducing fedex one rate. simple, flat rate shipping with the reliability of fedex.

♪ >> very solemn. that's what the orchestra deserves, i think. for animals to be able to play like that. >> it is a thing of beauty. >> it's the 12th night, too, apparently, january 6th. it's also my uncle used to tell me, it's the most important of the religious holidays, he was a priest, because it brought man into the whole picture of meeting the christ child. let's take a look -- nice to be born on the most important -- that aside, it's darryl from "walking dead's" birthday. for me, that's the most exciting thing.

why are you running -- we're running a joe montage. that's nice. >> thanks. let's take a look at stocks to watch. men's warehouse. didn't joseph a. bank already launch -- how did it go? who started? now it's men's warehouse. each company offered to acquire each other in recent months, each rejected the offer. >> this is p ac-man among pac-mn among pac-man. >> we're waiting for this thing to be settled. the interesting guy is already gone. >> you'll like how you look. >> who definitely clothed all the guys from stratton oakmont out in long island. they look like it anyway. boeing, machinists have approved an eight-year labor contract after objecting a deal. it assures that the production

of the x-77 jet will take place in washington state. twitter, morgan stanley cutting his rating. remember that, some guy mcquarry that supposedly knew. citing growing competition for online ad revenue. if you're on twitter, you do get a lot of birthday greetings. that's one thing about it. i've never had this many. i don't know these people but, you know, it's pretty nice. one person said that wing nut. what is a wing nut? is that something that goes on -- can you be a left wing nut? is bill maher a left wing nut? >> you can be a left wing nut. >> it's a birthday. they know no bounds. anyway, t-mobile is buying 700 wireless spectrum licenses for verizon for 2.653 billion in

cash. and liberty media is propose in sirius xm. >> it would have more satellites, more everything. >> it said "squawk box." he was on "squawk box." >> he's coming on "squawk on the street" later. still to come, we have to talk about janet yellen and the jobs data later this week. we'll cover it all with the chief investment strategic at ubs, mike ryan. we're back in a moment. in my world, wall isn't a street.

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the markets gearing up for its big first data point of 2014. mohamed el-erian will join us with his outlook and what he's expecting from this week's jobs report. the "forbes" 30 under 30 list is out. who you need to watch and how you should follow them in 2014. plus, a look at what janet yellen brings to the fed as the final hour of "squawk box" begins right now.

welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. we need to make up some ground here -- i don't know, the three days this week? do we need to know by wednesday, thursday, friday, monday, tuesday, wednesday. >> by wednesday. >> we need to make up some ground. maybe we'll make up a little on the open. japan is not helping. they're up about 60% last year. people think that's a big deal. but 39,000 is the high. look at that thing. there's the european markets, not much happening, at least so far. ian bremmer said oil could go below 80. >> there's a lot of ifs involved. >> if there's a deal. >> with everything that's going on with national gas, i think -- that is definitely would be a

surprise. >> by the way, if that happens, it will change the dynamics around. >> a little bit. >> well, it changes around all the things you love. >> wind, solar, all of that. >> your kale, i don't know. >> what does kale have to do with it. >> can't you turn kale into gas, seaweed? >> i don't know. >> do you remember ponz and fleishman? >> i don't. >> coal fusion. wish that would have worked. it would have been good. jp morgan is reportedly nearing a $2 billion settlement with federal authorities to resolve suspicions that the bank ignored signs of bernie madoff's ponzi scheme. they say the civil and criminal settlements would include -- liberty media aunnoing it will offer to buy out the

minority shareholders in sirius xm. the offer to make a sirius a sib s -- subsidiary gives them the libber to the pursue other deals. don't miss liberty media's greg mafey. >> more than half of the continental u.s. facing below zero temperatures. we'll have a live report from the weather channel's mike seidel in just a couple of minutes. tracking website flight aware reports at least 2,400 flights were canceled yesterday. there were also a number of airline incidents this weekend, a delta plane slid off the runway and into a snow bank at jfk after landing. normally, it caused the airport to temporarily shut down. then there was an american plane

made an emergency landing in kansas city, officials say the stop was made after a flash drive was found in a bathroom. the passengers and crew members were evacuated. and then a small plane landed on new york's major deegan expressway. this is an incredible story in what many are calling a miracle. the three people on the plane walked away with no life-threatening injuries. the department of transportation employee stopped traffic to make way for the plane. it was just such -- ever try to make it to laguardia, they couldn't. then they land on the highway. also, a small plane crashed at the airport in aspen, a private jet went off the side of a runway, flipped over and burst into flames. one person was killed, two others were injured. wall street kicked off the new i don'ter in negative territory for the first time since 2008. this week is big as we get ready for the december jobs number from the government. joining us now is mike ryan, chief investment strategy at ubs and john riding, the chief

economist and founding partner at rdq economics. >> the first two trading days were not strong days. does that worry you about what this year has to bring. >> i wouldn't make too much of it i think it was a hangover from the runup we had in 2013. i think we'll see the accumulation going forward, it will validate the fed's move to begin tapering. i think that will body well for corporate earnings. >> is that something that moves the market at this point? or did the market already get there. >> i don't think that alone will move the market higher. as we continue to see more and more evidence that the economic recovery process is broadening and deepening as we see the validation through the corporate earnings cycle, they can push stock prices higher over the course of this year. >> how much higher? >> we think we'll see single digit gains this year. we're not going to see a repeat of 2013. 2013 was about the rerating of stocks on the absence of bad news. we'll strug this will year to

see that gains will be made in the markets coming from those areas where it ill with be based on the economic improvement. >> you agree? you think this economy, the improvement that we've seen continues this year? >> i think so. i think the second half of last year now looks like we'll average somewhere around about 3.5% or so gdp growth. i think that momentum carries over into 2014. at the end of last year you had housing, manufacturing. you had strengthening consumer. you started to have a pickup in business investment. all of these to me are positive cyclical trends. finally after 3 1/2 years of statistical recovery, beginning back in the middle of 2009, people have finally buying into the economic recovery. and also a lot of capital equipment, consumer durables like autos have worn out, have a

replacement cycle demand. to me, all of that is coming together. profitability is high and companies have an incentive to invest here. >> john, we've thought this before in some other years past over the last five or six years, maybe that would be the year we broke out. what's different this time around? >> i think you're right, becky. 2011 looked like that and i think two things came along. the first is we had the supply train disruptions following the tsunami and then the nuclear problems in japan. and that really hit manufacturing which looked as promising as it looks at the present time in the numbers. that was one setback. the other setback i think was the fed's qe 2 which sparked a big bout of commodity price inflation and that hurt u.s. consumers. now we're going the other way. you were talking minutes ago or so for the potential for $80 oil this year. that could be the positive surprise for the economy. prices fall but it's a benign price fall. that further boosts consumer and

income spending power. that's a positive that could be out there. >> hey, mike, i've heard a lot of people say they think the industrial sector is really going to lead the way, that that will be one of the strengths that this market will see along with technology. would you agree with that? >> i would. >> this notion that we've had this lag capital spending cycle. you mention this as well. we've been waiting for this year after year, quarter after quarter. i think this is the year we see a change of capital expend tourtourexpe expenditures. lastly and most importantly, we're getting positive clarity. that bodies well for capital spending cycle. the two biggest beneficiaries will be the industrials and technologies. >> will the other beneficiaries be the people who are looking for jobs? is that the thing with capital

expenditures that jump starts job creation. >> you've hit the nail on the head there. in fact, if you look at the single variable that correlates best with employment growth, and that's capital spending by u.s. companies. so when you get that capital spending cycle, you have not only capital -- it's not replacement to people by capital. it's people and capital. and the capital spending definitely leads the way there. that correlates far better with employment growth and gdp and consumer spending. the employment picture has been fairly good. we've averaged close to 200,000 jobs. i think we get something close to 200,000 jobs on friday for december's number as well. but if we have a stronger capital spending cycle, the potential for that number to run at 250,000 or 300,000 and that would make some real inroads into unemployment. >> let's hope for that. john, mike, thank you both for joining us today. >> thank you. >> thanks, becky. coming up, getting ready for

another round of seriously cold temperatures across much of the country. a winter weather update is next. and a confirmation vote for janet yellen set to take place today. check out the "squawk box" market indicator as we head to break. [ man #1 ] we're now in the approach phase.

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welcome back to "squawk box," everyone in in our headlines, the u.s. coast guard is sending a heavy ice breaker to help free russian and chinese ice breakers stuck in antarctic ice. the polar star is responding to request for assistance. the ship is expected to arrive on the scene of the two ice breakers on january 12th. fitting for a cold weekend, disney's "frozen" retook the top box office spot with $20.7 million in tickets this weekend. >> good movie. >> did you see it? >> i did. the boys loved it. >> "the marked ones" debuted in second place. the near blizzard snowstorm that battered the northeast may have tempered the weekend's box office business. >> a deep freeze gripping the midwest and getting ready to affect much of the east and

central for a record low temperature, heightening fears of frostbite and hypothermia. mike seidel is in indianapolis and joins us with a weather update. he's in the snow no less. good to see you, mike. >> the snow is the least of my concerns this morning, andrew. the wind chill -- the air temperature is down to 13 below zero. it's dropped another 8 degrees since we came out here this morning. the wind chill 41 below zero out here. you can get frostbite in about ten minutes. there's plenty of snow on the ground. yesterday, we had our second snowyest calendar day here in indy with 11.4 inches but it was 31 degrees. it was a relatively balmy day khmerred to this. last night, the temperatures fell like a rock with those gusty winds and temperatures continue to fall. today's highs will stay basically where they are right now, about 13, 14 below zero. if that was the actual high, it would be the coldest on record for a high temperature but

unfortunately at midnight we were warmer than that. downtown is deserted. because the mayor has issued a travel ban. he issued that late yesterday. doesn't want anybody on the streets except emergency vehicles or people seeking shelter. they'll re-assess that today. meanwhile, trying to get to chicago, forget about it. 65 from the lafayette to gary shut down. i-94 across the top of the state is shut down. o'hare, another horrible day. they've had eight days in a row of this. they've canceled almost half their schedule today, same yesterday. temperatures will stay bitter cold for a couple days. we see a nice recovery, though, by the end of the week. andrew, we'll send some of this your way. it won't be this bad but it will be much colder by tomorrow. >> not looking forward to that. joe, you may get a sweater out of it. thanks for that report. try to stay warm if you can. coming up, the "forbes" 30 under 30. the up and coming names you need

to know in the business world. welcome back. how is everything? there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen. [ male announcer ] introducing fedex one rate. simple, flat rate shipping with the reliability of fedex.

of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. ...and the little room above the strip mall off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did.

in a little dorm room -- 2713. ♪ this magic moment ♪ welcome back to "squawk box," the "forbes" 30 under 30 list is now out. "squawk box" is the first show to have the list for you. take a look right here. randall lane is the editor of

"forbes" and he's here to talk about the list. we have a couple of people behind you. i don't know if we can show that on the screen. you decided snapchat's evan spiegel is your number one guy. he's your cover boy. >> he's our cover boy. >> here's my question. so this guy turns down this outrageous deal. >> right. >> right, for $3 billion. not enough money for me. >> right. >> if in a year from now -- do you have any anxiety that if a year from now, this company or others on this list go out of business or bankrupt, something, what's -- >> that's the great drama. he's 23 years old. du zuckerberg gave him a $3 billion in cash. he and his partner each own 25% of the company. he'd have $750 million.

he said i'm not interested in short-term gain. that's almost a billion dollars cash when you're 23. that's a new standard. >> if nothing is happening in a year, "forbes," egg on their face. remember "forbes" had them on the -- boy, don't they look silly. >> one of the scary parts of doing a list like this. >> no one remembers what "forbes" did a i don'ter from now. >> we don't necessarily think they made the right decision, but this is a great business drama. will this wind up being myspace or twitter? instagram when they sold for a billion dollars, everyone is like unbelievable. instagram now would be worth five, ten times. >> is miley in there? >> she is not. >> you didn't see her twerk? >> i missed the twerking. we're looking at -- we're looking at business. we're looking at -- >> you have a --

>> bruno mars. >> bruno mars. >> katy perry. >> bruno mars is doing the super bowl halftime show, first person to do that under the age of 30. >> justin bieber? >> he's a huge venture capital investor. we feature that. bruno mars did a soundtrack for the "30 under 30." if you download it you can listen to bruno mars' songs. >> miley is here. >> miley was not the callout. >> as long as you have her. >> who do you think of all of these people from pure financially, if you look at the bank account, cash, i don't want paper-based valuation, do you think has been the most successful financially thus far? >> the most financially successful in the three years we've done this, there are several billionaires. we have -- to be a billionaire

under 30 is not seen -- think about this 20 years ago. the idea that somebody under 20 could be a self-made billionaire? so you have zuckerberg and the dustin maskovitczs. the amount of wellen being created by people. it's a tremendous paradigm shift. >> who's that? >> do you remember that guy, trip adler. >> i don't know. >> no. >> come on. >> tripp adler is important. they're making money. they made the all you can eat book model. he says they're not raising more money. they're profitable. he claims they have an 80 million user base. >> the reason zuckerberg is not

on, he was in the first class two years ago. >> you gave it to kelly osbourne. what was the thinking there. >> we have 30 people in 15 categories and judges in each category. michael eisner helped judge entertainment. >> is lourd the youngest? lourd is 17. >> i want to know how much campaigning goes on. >> we had thousands of people, tens of thousands almost apply for this list or try to lobby us. >> kelly evans. >> kelly evans from cnbc. >> there you go. >> media. >> she's number two. >> they're alphabetical in media. 15 categories, 30 people. arianna huffington was one of the media judges. we have big-name judges who are helping us. we're not just picking it oust the air.

>> i thought you put arianna on here. i think she's 31. >> she was a judge. she was a judge. >> when you think about the industries that all these folks are from, obviously tech is the hot one. is there one in here -- i think it's interesting there's a lot of young people, you have a list here of energy and industry. >> that's right. >> are there other ones here where you think there's a guy or woman that will be more successful that we need to know about? >> outside of -- >> outside of tech? >> yes. >> energy and industry is interesting. we have a guy who started ascension air, which is he's trying to build the net jets of prop planes. these are ideas. this guys with a pilot when he was 12. these are ideas that are coming out that, you know, again, it's this technology. this is a generation of digital thinkers. where for the first time, despite the fact that all of these enjoy your birthday, of

course, when none of us are getting younger. these are people who grew up thinking outside the box and are not relying on a corporation. they're not coming in here thinking i'll get a job at ipm and take care of me. they are thinking from the time they're teenagers how am i going to make my nut? how am i going to start something? it's a different mindset. >> i think we'll be seeing the big boss man, mr. forbes later this week right here on "squawk box." >> good stuff. >> thank you for bringing us the "30 under 30." >> for sports guys it's easy to be under 30. >> yes. >> if you're over 30, you may be done, depending on the sport. >> we have maria sharapova. she made $29 million last year, 23 million was off the court. >> shaun white. >> there's a difference between people who make the money and people who put money in their

pocket with their brain. >> now you're talking about us, pure brain power here. coming up, market master mohamed el-erian, the ceo of pimco joins us. as we head to break, futures now up 40 points. ♪ [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up.

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welcome back to "squawk box." in our headlines, the price of bitcoin is back under $1,000 again. among the reasons for the recent surge, word that zinga may start accepting the currency for its online games.

the automaker beating its annual sales target after tensions eased in a territorial fight between japan and china. treasury secretary jack lu is on his way to europe. he witnessing visiting france, germany and portugal and tolding discussions with his international counterparts. the ft reports that he is expected to renew pressure on germany to boost domestic demand and embrace a deeper banking uniwron. the senate meantime is expected to vote this afternoon on the confirmation of janet yellen as the next federal reserve chair. steve liesman joins us with more. this is expected to be a shoo-in at this point. >> after months of uncertainly, summer, yellen, your mother, your daughter. anyway, getting the nomination and getting approved may be the easy part. the senate looks set to approve the rise of the vice chair into the chair spot today. yellen will take over a fed that is in transition at a time when the economy looks to be in transition at the america economic association annual meeting. three fed presidents offered thoughts on the road ahead.

>> i think there's a lot of uncertainty about how the policy exit will occur with a large balance sheet. i think there's no question that there could be unintended consequences or things might develop in a way different than we expect because we just don't have experience with this kind of episode. we have never operated at the zero lower for a long period of time. we've never operated with a very large balance sheet with trillions of dollars of excess reserve in the system. >> here are some of the things that are out there. changing the main tool from qe to rate guidance. that's the main thing ben bernanke said we're on course to do. does that mean if the economy were to weaken they keep reducing qe but give greater forward guidance? the unemployment is too high. the fed is equal parts regulator and monetary policymaker. that's a new change for the federal reserve which used to have policy making in the

forefront. what's clear is the research has just begun in ernest over what happened in the financial crisis and why growth has remained sluggish. you may have made up your mind, the economists are just now studying it. bill dudley even said the fed isn't sure how qe works. and there's a lot more that we don't understand. >> i think there's a lot we don't understand about what happened over the last six years. we're not done with this. i think we have to be careful, both as policymakers but also as economists to not act or think in terms of our research that we know what happened. we have it all figured out. we've solved it or we're close to solving it. >> yep, note that was stan fisher. he was moderating the panel and had very little to say about anything. ov overall, pretty uniform optimism out there. some questions to whether this

may mean a faster fed response. there's a debate about the sluggish growth, whether it could last a decade or so. >> they're all arguing counterfactuals. i was reading through some of the debate points back and forth. you could take both sides. >> 11,000 of them. >> 11,520. >> at the a.a. meeting. >> is it because they're always wrong? 11,000, why do you think? >> because the economy is so uncertain they drink so much. >> i'm ben b. -- >> i think you said a.a. meeting. >> you're so quick, joe. it's really good. no, i looked it up in your script. it's aea. >> they need a 12-step program to get off the idea that they

entirely control everything we do in our life and economy. it's all based on their shoulders. >> all of the fed presidents -- >> first admit there's a higher power. >> they have a lot of making up to do. one other thing, i was surprised to see rogoff and reinhart were up there. they are prominent the. their work and credibility has not suffered at all. the mistakes that were made, were not that big a deal and they're out with new research basically showing there's a chance of a double dip with some of the rebounds from financial crises. and their work remains as highly regarded as it had been previously. although the critics are out with another paper that i haven't read yet. challenging rogoff and reinhart to a debate. >> on the debt thing or on the eight years it takes to get out of a financial crisis thing?

they got something for everybody. >> the whole thing. they are out with a new paper. >> you can blame everything on the depth of the financial crisis. and conservatives like them because they say debt causes slow growth. >> i talked to one guy that is up there among guys you would know but it has to remain off the record. i said, what about rogoff? >> i said that to you. >> you're not an economist. >> in my own mind i am. >> that's true. >> preeminent. >> eventually you will be. eventually you will be. >> that was a report again. >> it was a report. i wanted to get -- >> i was able to look into it. >> i like your alvarez guitar. very nice. sound goods. >> i think i have a smaller one that -- see, i had to play the big one for that thing. >> i have an alvarez.

when you get to be a better guitarist, you can get a martin. >> those are two grand now. >> they're money but worth it. >> up next, we have to get to mohamed el-erian from pimco. shares his outlook for 2014. find out which asset classes might outperform. bitcoin, back above $1,000, because you can use is on zinga, seriously? i don't know why that would move on anything. your tv powered by ? natural gas? nuclear? or renewables like solar... and wind? let's find out. this is where america's electricity comes from. a diversity of energy sources helps ensure the electricity we need is reliable. take the energy quiz. energy lives here.

welcome back to "squawk box." take a look at the futures, see how things are setting themselves up on this monday morning. we have a mixed picture. actually could be good by the time things may turn around on the nasdaq. dow opens up 40 points higher, s&p 500 with 3.5 points, the nasdaq off 2 points. we'll see if that swings around. let's look at stocks to watch this morning. men's warehouse is now launched a cash tender offer for rival joseph a. bank. each company attempted to acquire the other over the past few months in that back and forth pac-man game. those attempts have been rebuffed and we'll see where this thing ends up after today. i imagine we'll get another notice from joseph a. bank saying not so interested of course they probably are. also, pet smart has been downgraded by deutsche bank to sell from hold.

the move is based on slowing sales trends. goldman sachs has added solar equipmentmaker solar city to its conviction list, setting a price target of $80 per share. th and mattress maker under pressure, select comfort says sales trends fell below its goal during the holiday season. it is wall street's first full week of trading for 2014. it will a busy one, full of economic data and all the important jobs numbers coming out on friday, giving us outlook on all of this, what the markets will do with the fed, the economy one of our "squawk" masters, mohamed el-erian, ceo and co-cio of pimco. good morning. >> happy birthday, joe. >> thank you. >> i knew you were going to go there first. >> he was also tweeting about the orchestra. >> and the bengals. >> the bungles.

>> you're doing well. let's talk first about the fed if we could. and what your expectation is for the rest of the year. what's priced in and what's not? >> i think what's priced in, andrew, is that the fed will get out of qe by the end of the year. we'll see gradual reductions of call it 10 billion per meeting. that is the baseline they've commute kate e communicated to us. that is priced thin. what is not priced thin is what comes with the much more forward policy guidance and rates that will stay low much longer than what the market anticipates right now. >> so, given that, where are you on stocks and where are you on bonds? for those who are playing at home. >> so, andrew, the vast majority of people that come on your show are looking for high single digit, low double digit returns for this year based on following. growth is getting better. the fed is involved in supporting the markets. the rotational flows will

continue and politics is getting a little bit better. we would say yes, yes, yes, yes, to all four things but with the following qualification, that have implications on how you position. one is don't underestimate the change going on in the fed in terms of the policymakers we just discussed. sec, evaluations are high and thirdly, there's been dispersion in emerging markets. we will call for more exposure. we would call for fading some in the u.s. we would call for front-end rate and credit exposure. we'd call for more differentiation than much of your guests have said before. >> differentiation makes it more challenging. most people who come to the table said they think this will be a great year. i don't know if it's going to be a banner year like last year but

it will not be a bad year. is there anything to worry about than just about everyone saying that. >> you want to worry that because positions reflect what everybody is saying and, therefore, the market is long, the equity beta in particular. you have to take technicals into account. i am also with joe. it is unlikely we'll end up with a high single digit year. either we have to get a bigger move upwards because the fundamentals validate and push up valuations or we'll get a disappointment. i'm more with joe like i was a year ago, we're likely to see much higher one way or the other than this low single -- sorry, high single digit number that most people are suggesting. >> joe? what would you like to ask? you have nothing to ask mohamed. >> nothing. >> you've got nothing. >> nothing. mohamed, one thing you were

consistently talking about was the wedge. i order wedges now. bleu cheese, they're good. you stick by that? the wedges coming out, have we built up the underlying economy to support the valuations at least where they are now? >> so first, a wedge is definitely there. you need only look at how -- >> still? it's still there? >> look at how the s&p and japan has done relative to other markets. at 29 percentage points difference between the s&p and emerging markets is very, very large. and you can explain that by the impact of qe, not only on asset prices but also on the behavior of companies. remember, companies in this country have also rised 750 billion in share buybacks. that's about 6% of the initial capitalization of the market last year. so qe has had an impact. yes, there's been a wedge. yes, that wedge needs to be validated by fundamentals. yes, fundamentals are improving

but we're not yet velocity. >> last week i was saying that the question becomes so many people, including i think becky and others were saying they got out of bonds. what percentage of your portfolio, i know it's an age thing and everything else, right now should be in the bond market? >> so it depends on what else you have in there. we are of the view that you would not be surprised that a diversified portfolio is the best thing. where you is a deflection point, where you have a "y" or a "t" or wings. if you have bond exposure, concentrate it on the front end. that's what's being anchored by the fed. interest rate curves will be subject to a lot more volatility. >> emerging markets, 2014? >> yes. the extent of underperformance of emerging market assets, not just equity. you talk about credit, currency,

local rates, has been significant. some of them look very attractive. look at mexico right now. look where that is being priced well into its fundamentals. emerging markets are selective pockets of opportunity. that's part of the differentiation theme for 2014. >> i read a piece over the weekend. this is about puerto rico, bonds in puerto rico. you know what i'm talking about? >> go on. >> this is going to become one of the great short trades of the year. where are you on that. >> our team that's been following is very carefully has been warning about puerto rican exposure. they are going through a very tough per in terms of stock of debt and income position. there is likely to be a restructuring ahead. people should be careful. the key issue, we're going to discuss this in our investment committee today, the key issue is to assess the contagion effect of puerto rico and other muni exposure and be in a position to take advantage of

what is likely to be good assets at low prices due to contagion. >> tell us then on the contagion fact factor, how far does it go? >> this is an asset class that's had difficulty attracting flows in the last few months because of both puerto rico and detroit. you see it in there they're trading. we'd say wait because there's likely to be more contagion ahead. at that point, some of the geos in the good quality states will be extremely attractive. >> the last question i have for you relates to detroit, the implications on 2014 on other municipalities that will think maybe they should declare. >> that's an issue we're following closely. doit has yet to play out fully. this whole issue of legal rights is now in play. that's something that's adding to the contagion. >> i had a question for you, too. earlier today we had dick bove on. he threw out a statistic. back in 1952, 88% of the world's

convertible currency was the u.s. dollar. he said today that number is only 18%. what does that tell us? >> so i think you need to make a difference between what's convertible and what's reserve currency. he's right. a lot of countries have moved to convertibility. that's been part of this great washington consensus. make your currency more convertible, open up the capital account. he's correct in there. however, if you look at what reserris the reserve currency, that's still the dollar. you cannot replace something with nothing. >> what about bitcoin, which we've been talking about an awf awful lot today? i know it's convertible but if has supporters. >> because it's volume tight it's not a proper currency. it's an investment, think of it as a commodity but because of its volatility it cannot serve

the functions of a reserve currency. >> give us just a prediction of bitcoin. five years from now, will bitcoin exist. >> it wilin one of many different forms of payments out there that facilitate and lower the transaction cost of me and you transacting over the internet in particular. so it will be there among others but it will be not a rye serve currency. >> we leave it there. happy new year, mohamed. >> and to you. >> birthday boy, you want to say something to your friend? >> no. we're friends in misery, mohamed, the jets have different problems, i don't know. the bengals, that was just -- >> joe, anybody but new england. >> i like bob kraft. i like brady. i have to different with you again. i'm sorry. >> yet again we differ. >> they are arch enemies of the jets. is it andy dalten?

did you see how the offensive line collapsed? it wasn't even all his fault. it was that fumble at the 2 is what did it. >> i know. >> with that running back. >> i felt for you. >> i'm over it. i'm over it. quite a birthday present. thanks, bungles. come back, count down to cramer is on. we're going to catch up with jim at the new york stock exchange to find out what he's watching this week in the markets. plus, spots on the jpmorgan story "the new york times" this morning. that and more right after the break. ♪

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let's get down to the new york stock exchange. did you see both games? all right. so, who -- am i feeling worse than you? i think you're -- i would rather have what happened to me. just where it starts happening and i go, you know, i've seen this before. i can go do other things. i can watch some college hoops. where as you, they teased you until the last minute and then it was just a dagger. which was worse? >> i feel like that we, when you see one of those runs where you know that new orleans has the ball and there's six minutes left and you're not goin to get the ball back, you have to let

them score a touchdown. this was a terrible six minutes. we sat in the box and it was just a house of pain. where as your team, your team gave it up. people have been underrating the chargers the whole way. they're the hot team. so don't feel so bad. we just gave it up. we were at home and we had the game won and we didn't and it's going to be a long time before anything good in philadelphia because it's the sixers, the phillies and flyers. >> but you got a great coach know. i've even like the eagles now. three days, do we need to go positive by wednesday to for the starts to align if a good year? >> i think that we're, if you look at the charts, i spent this weekend a lot looking at the charts and i was kind of amazed. if we did have an amazing ramp into the end of the year and when we come down, maybe just a percent or two. you'll have seen most of what happened in the last two weeks of december go away and then i

think we'll just be about -- by the end of the week, we might be there. i want to see the unemployment number. >> so, everything's getting better, the economy. is it in the market or is there more left for everybody? >> i think it's not in the market. there's a good article in the "wall street journal" today about how it's not in the finals yet. people saying they're not in the financials. 6% of the stock has been retired. most of where it's come from are the industrials. they've just been acting okay, but if buyers come in, they have to go higher. >> villanova played well. >> that's our hope. >> i got colorado. beat oregon. did you see that? >> yeah. you know, i was watching kansas yesterday. there was so much to watch. we got to congratulate the niners. >> wichita state still under,

i'm back to this. fastball is over. >> you have to be. it's time. >> thanks, jim. >> happy birthday. >> thank you. coming up, the stock of the day and dennis rodman back in north korea. "squawk box" will be back after the quick break. and ah, so you can see like right here i can just... you know, check my policy here, add a car, ah speak to customer service, check on a claim...you know, all with the ah, tap of my geico app. oh, that's so cool. well, i would disagree with you but, ah, that would make me a liar. no dude, you're on the jumbotron! whoa. ah...yeah, pretty much walked into that one. geico anywhere anytime. just a tap away on the geico app. there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order.

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♪ the days of trying to wait it out until 9:00 without anyone saying anything, twitter, facebook. >> oh, look. look at that. >> cupcake. >> thank you. >> where's the candle. >> stock of the day is twitter. social microblogging site. growing competition for online and revenue. all right. well, when is yours? what sign are you? >> in february. >> right on the cusp.

depends on which magazine you read. >> no kidding. >> capricorn. >> i get to choose my own adventure. >> i'm going never going to remember this. just like this happened today. so, you're coming up, oh, it's going to be big. >> that does it for us today. happy birthday. >> thank you, thank you, thank you. >> right now, time for "squawk on the street." good monday morning on this first full trading week of 2014. jim cramer, david faber at the new york stock exchange. futures are higher on this very cold and big week for news. a possible janet yellin confirmation, fed minutes later in the week. ten-year yield still in that range. still some auctions of ten, threes and 30s and asian markets