half the price which is extraordinary. >> that's an interesting call because a lot of people have come on and just said the industrials over the last couple of weeks. >> that's why they are 20 times earnings. >> it's been a pleasure having you here. make sure uf joyou join us tomorrow. we're actually early to. "squawk on the street" begins right now. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quinntinia at the new york stock exchange. welcome to the official start of earning season as alcoa reports tonight. a ton of news from retailers. chris christie speaking on the bridge controversy in a couple of hours. the ten year is one to watch. jobless claims were in line and janet yellen with an interview in "time" magazine. and europe and the ecb and the bank of england were unchanged.

drag draghi's press conference begins. stocks set to open in the green this morning after jobless claims fell by 15,000 ahead of tomorrow's big job number. plus, macy's says it will layoff 2,500 workers and close 5 stores in a move that could save the company up to $100 million a year. shares are up this morning on that news. while macy's in the green, it's been a rough morning for some of the other retail names, family dollar, bed bath & beyond expected to open well to the downside after third quarter earnings miss. while t-mobile is still only the fourth largest carrier in the u.s., its ceo making a splash at this year's consumer electronic show and we'll tell you what he had to say about t-mobile's fourth quarter and an incident at a party for at&t. a lot for wall street to digest with new labor on the data front setting the stage for tomorrow's big job numbers. jobless claims by 15,000 to a seasonally adjusted 330,000. and the bank of england and the

european central bank standing pat on key interest rates. mario draghi said they expect rates to remain at present or lower levels for an extended period of time. would had the euro yesterday at the lowest since december 5th. he said there's more instruments to use, but housing is overheating and the threat of deflation everywhere else. >> i keep getting better reports and better reports. now, i know it's country by country and the unemployment rate in italy is frightening. i mean, you would just say if it were our country, you would say we're in a great depression. they have the same unemployment rate that we had in 1932 in this country which is kind of interesting, so there's still more work to be done. in the meantime the american countries that are there say it's a trough last year. >> among the averages here only the nasdaq has managed to put two days together up in a row. you mentioned the word soggy tape earlier in the year. are we still there? >> i think people want to see

the number tomorrow. we came in really overbought. i know that's a technical term, but basically said the market had gone up so much in the last few weeks that we almost had to have some profit taking. it's been true to that. i think there's a nice rotation going on. the banks have held up very, very well. there were a bunch of downgrades in the regional banks in the past two days and the bank stocks were up. a bunch of downgrades to the industrials and what did they do? flat to up. so, i don't want to be sanguine because obviously the market's been going down, but i know this is somewhat typical after a big run. and it's been so long, we've had such great januarys in part because we've usually had washington screw things up. washington didn't screw things up in december this year. >> we continue to be domestically focused because there's concerns about asia, slowing growth and the markets not doing particularly well and we go over to europe and the bank of england and how long they can keep rates lower, how much should we be paying attention to the left of the world still?

>> i watch the day rates to ship business to china. it's been bad now for four weeks and that's not what i want to see. it seems like china's had to ratchet back down. i'm not sure because copper stays in there. we'll hear from alcoa tonight. they'll give you aluminum forecast and it's a tremendous china and asia look. i still think the international companies that are based in america will have good numbers, but you're right, i think the housing pull remains stronger than i would think. a lot of good pieces lately talking about house how housewares are good. you mentioned alcoa tonight, always provides a nice playbook for the quarter. >> right. >> they are agreeing judgement now to pay $384 million to settle charges with the s.e.c. and the doj related to charges of bribing foreign government officials. alcoa and its subsidiaries has been charged with violating the foreign corrupt practices act, something, david, we see big

companies run in to which do business around the world. >> the most notable is walmart in mexico. we'll see, though, that's still a developing story, if you will. you know, companies say doing business in certain parts of the world if you want to do business, it makes it very difficult for us. at the same time they're held to u.s. law and there is the fcpa. >> a little background on this, clinefield when he came in recognize it was a problem and immediately turned it over to the authorities in 2008. they've taken a little more than $100 million charge for this. it's going to be paid in a series of installments, five installments over four years, i don't think it will hit the quarter. if you peruse the research, the sell order did not include this as a risk factor. obviously it's something that's been going for a long time before claus came in. it will be addressed tonight, but i don't think it's as material as it sure sounds because of the charge and because of how many quarters that it will be paid over.

let's move on to retail and talk a little bit about macy's. the company is cutting 2,500 jobs, about 1.4% of its u.s. workforce, that's part of an effort to reduce costs. the retailer said it will save $100 million every year. and macy's reporting strong holiday season sales, they were up a better-than-expected 14.2%. macy's, bueno. family dollar no bueno. i'm going to speak in spanish in honor of your mexican restaurant. >> thank you, soft launch, daeff david, to figure out which dishes. it's right next to the "f" stop on carroll. >> saw a picture on twitter last night, of the bar? >> i'm trying to figure out what is -- >> there it is. >> there it is, holy cow. >> i can see myself seated there drinking margueriaritmargaritas. >> it's custom margaritas and

mezcal. we are actually using -- a little far away. >> back to mailsy's and family dollar which by the way is going to be a real loser this morning on worse-than-expected guidance. >> family dollar was as bad as macy's was good. the release is abject. they threw themselves on the sword and a lot of category. tobacco is doing well, thanks a lot. dollar general is doing quite well. so, this is a winner/loser story. mac macy's winner. why is lundgren so good, i think, ceo? he recognized very early on that the internet would be a major o with pbh and bf those are the biggest players. so, bed bath i think does have no internet strategy. bed bath has no internet strategy and you need one in order not to be amazon.

>> both family dollar and bed bath are probably going to open down 10%, but that will be a new record for macy's here. comes in november, december of four plus. they do guide higher than expected. stern ag takes their target to 62 and jpmorgan takes their target tozy. they call it the top executor in the space. >> and bemo is making a very big hold to buy. this is a company that is a terrific allocator, the cfo, she's one of the best and recognized in "the wall street journal" as one of the top three. only sells at 11 times 2014 earnings, so the more they buy, the better. >> yeah. on family dollar it should be pointed out with the stock down as much as 7 1/2, 8%, there was a bit of a premium take over because there's continued chatter about consolidation in dollar stores, and that dollar general might be an acquirer. they no longer have any of the

private equity firms in its shares who might looked to scan for a potential deal. that being said, i can't tell you that there's anything going on at this point, it's just continued chatter. but when you see a quarter like this, you take out the takeover premium which may being done and it's not getting penalized as much for lousy guidance. others say let it settle out and maybe you do get a conversation between these two. it seems that family dollar needs something. and the coo is stepping out. >> the coo is gone. i think it's interesting because he left to pursue other interests. >> yes. >> there's a lot of other interests. >> he may want to open up a mezcal bar with me. >> he may be at your bar? >> we don't open that early. >> and also somewhere internally consumables as you said were up. >> yes. >> apparel was down. electronics were down. it's almost as if the consumer is still living hand to mouth to some degree. >> yes. but, remember, family dollar is one of those places like it's raining on the family dollar of the street and it's pretty sunny

at dollar tree. >> what accounts for that? >> well, why don't you go to your family dollar. i go to two of them versus my two dollar trees. it's night and day. i feel poor when i go to my family dollar. i feel smart when i go to my dollar tree. >> interesting. >> i think you just said it all. say that about sears, too. >> i don't go there at all. >> you don't go there at all. >> no. i don't have that kind of time. >> right. you don't need tires? >> it does bring us to the upgrade at jcpenney at piper to overweight. price target of 11 bucks. they said yesterday's big reaction was an overreaction to the press release and in their words the real message is being messed, jcpenney said they would do to increase traffic in a mall-starved environment. >> the kansas city chiefs won two games last year and they don't make the play-offs this year, they cannot survive the first round. they are a wild card when i got macy's delivering, delivering, delivering, and still i think

taking share from jcpenney. >> costco was up three and we haven't mentioned pier one, too, another disappointing quarter, one three, the estimate five. >> the last quarter was good. i'm a little surprised there because alex has delivered. this time he didn't deliver. costco exgasoline, 5%, so people going to see that stock is up. they are delivering machine. i got to check out costco on saturday, westbury, long island, for a book signing. >> you'll be out there. >> i got a restaurant. i got a book. come on, man! how about a clothing line? >> i would stay away -- brione, look again. >> i don't think you got that at a family dollar, gym. >> costco maybe. >> no dollar general nor dollar tree for that matter. >> or sears. >> but the dollar tree candy aisle, the best place to this get it. >> it's good thing that the costco's are so big to accommodate the line that will be there. >> how did you know it was so -- because of the costco liquor, it is the number one producer in

the east. >> i did -- i am reading your book before bed each night and it's a very nice job. >> thank you. >> walking through sort of the basics of how stocks even move! >> i talk about how i got to goldman stocks how does the stock go from 5 to 10, by 50,000 stride-rite and take it to ten. >> you watched it happen. >> that's it? yeah. i do point out that apropos of family dollar, particularly of family dollar, there's a moment in every conference call, people want to trailed off the headline. there's a moment they give you the outlook and it tends to be after the verbiage and the "q" and "a," and at bed bath, no "q" and "a," and you come across that's why it's trading. those of us at home who trade offheadlines, you don't have the full story until the one paragraph before the "q" and "a," and i talk about it in the book. t-mobile being kicked out of

the at&t party at the consumer electronics show. more from the nyse in a moment.

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better-than-expected 1.6 million customers in the fourth quarter. the carrier also promising payments up to $650 for people who wish to switch to the t-mobile from its rivals. meantime there's still a lot of buzz surrounding john ledger beingcorted out of the at&t party at the consumer electronics show. here's what he told jon forte yesterday on the "closing bell." >> this particular day all i can tell you is the humanity that surrounded me and escorted me out. i'll give you one fun line. i said to the woman, are you sure that at&t wants to throw me out? she took her little mike and she said, yes, in fact, i've talked to the ceo and she wants you to leave. so, i'm not sure what that was. >> i don't know if there's anyone else that could have made such hay out of this event. today, picture in "usa today," of legere with the shirt that said "i just wanted to listen to mclemore." >> this guy is a genius. we all know him from a previous

live, global crossing, he's a one -- >> a one-man wrecking crew. >> yes, he is. yes, he is! he's remarkable. and do you know what the numbers are great. he's done this guerrilla war against everybody. david, don't they just want to take this guy out to the back alley and give him a beat-down! >> they may want to do that at at&t. they are being very aggressive on price, of course, this latest offer to basically get you to come and trade in, they'll pay all the fees more or less that you would have to incur to stop your plan with an at&t or verizon. but they're still number four. they have bought a good deal of spectrum. the latest being that deal to acquire the 700 meg from verizon i think for a total consideration exceeds $3 billion. but eventually they may run into some spectrum constraints. eventually they may run into network constraints, and soft bank/sprint are banking on that in the hope that they'll be pragmatic in considering coming to the table and really

discussing getting together with them to create a viable third competitor to at&t and verizon which we still really don't have, when you consider post paid, which is the key, they're not there. none of them are there and that's the argument they'll make to the s.e.c. and the doj if, in fact, they get a deal if it will be allowed. >> sprint has a lot of spectrum. >> a lot of spectrum. interesting to note there was a downgrade to sprint. you know that as well. >> too much too fast. >> sprint trades ten times 14 -- >> it's got the halo, halo. >> and it's not going to have a good first half for this year. >> how about the fact that dan hessy the ceo of sprint put them on the map with that terrific ad campaign where he was very distinguished walking down the street, notre dame grad. and then leger comes in like the vietcong and says, listen, we are guerrillas of the first degree and now that works! what does it say about ceo pitch men! >> it's interesting. in this case they really needed a guy like at that m. tobet-mob.

i don't see it. >> trying to get people to leave their carrier accord to t-mobile's research, 40% of families don't do it because they're nervous about the break-up fee and in t-mobile's case they'll write a letter for you to present to your former carrier giving you the reasons why you're leaving them. >> this guy is just shaking up an industry, one man, one company, that you have a lot of firepower. they better merge, daeffed, or i'm going to start taking numbers down of verizon wireless. part of verizon now. >> we'll see. that's still the big question mark transaction we'll call it the first half of this year whether they give it a shot, being softbank getting deutsch telekom to come to the table, already, not even coming to the table, agree to a structure. >> right. >> by which they would do a merger, take on the risk, of course. figure out some way to structure it so that deutsch telekom would feel comfortable with that.

they own 66%, 67% of t-mobile. cisco did ces. i think we have a full screen if we can show it to you. mobile data and their protections and why we're talking about all these things and why spectrum is so important. look at that number. look what they expect, 66% compounded annual growth rate in terms of what people are going to be throwing around on their mobile phones. i don't even know what the number is it's so big. >> boy, have you ever looked at your kids' bills? >> yeah. >> it is extraordinary. >> basically you got everybody watching a youtube video at the same time in the world. >> yeah. one time verizon called me, listen, do you know your bill? i thought it was a nice heads-up. there were consequences. but i do think that we have always felt this to be a fabulous thing and then sprin came up with the first plan. david, what is capitalism doing? carl, it's not fair to the shareholders. you're supposed to get in a room and fix your price. these guys are in a real war!

>> they tried that before. >> the airlines did it. remember the great brannif case. this is unfair to the shareholder. these guys are actually doing things that could hurt gross margins. >> t-mo really exceeds. >> you got to be careful. >> this is a great story. everyone in america has a huge cell phone bill. >> all have a stake. all have a stake. >> yes, we do. >> less than 24 hours to go before the big jobs report. and "mad dash" is next. and take a look at futures there's so much we haven't even gotten to. >> we're getting to it. >> another sell on twitter. the ford div hike, and an upgrade of mcdonald's and a downgrade of exxon. we'll get to it all when "squawk on the street" comes back. ♪ go on and take the money and run ♪

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♪ i like the way you move i like the way you move ♪ ♪ i love the way you move we have six minutes to go before that opening bell. time for our "mad dash" on this thursday. you want to start with riverbed? >> yeah. riverbed gamblers, elliott saying i'll pay 19. citi said the strategic buyer could pay 25. a lot of the analysts are scrambling. jeffries goes sell to hold. why? because people wrote the company off. not feeling they are doing it right. they downgraded today. david, technology activism? >> well, you know, jesse kohn is the young portfolio manager over at elliott who has done this many times before. he's got a pretty good track record and they give him a lot of leeway there, does paul

singer, of course, the man who runs elliott. they own about 9%? >> yes. >> they've done this before. you look at them, do they follow approval? sometimes they do follow approval either in purchasing the company or certainly helping to get it purchased and sometimes participating with another firm or a potential buyer even a strategic. so, we'll see what occurs here. 19 bucks they say is a fair premium they want to own it at, but citi's call is an interesting one saying, what, 25 they can see as high as. >> in play. what's interesting here, david, i think people have to recognize technology balance sheets are not leverered. they are not running hand to mouth anymore. a lot of the companies are overcapitalized they ran out of a lot of things to spend a lot of money on, but they took a lot of money in. i wrote off riverbed myself. i'm surprised it's back. i'm surprised anybody really wants it. >> what about twitter? >> twitter, another analyst -- look at that, the stock is up. i love this, david, twitter hasn't reported yet. >> no. >> what's going to happen?

they're going to miss estimates. twitter says the return on investment for advertisers, the advertiser they polled, nowhere near what you get for facebook. >> cowan says. >> yes. what's really interesting about this, david, this company is becoming a hated company by analysts. >> that's happened in the last couple of weeks, hasn't it? hate, is that too strong a word? they do like it, love it. >> sell? how about a hold? ad buyers they say are seeing a returned on investment. linkdin has a better return on investment. >> does anybody care what the analysts have to say? >> no. a lot more news to cover as well. "squawk on the street" back right after this. i'm beth...

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♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. you're watching cnbc "squawk on the street." live from the financial capital of the world. the opening bell in about half a minute here. a lot happening. so many analysts' calls that we haven't gotten to, jim. mcdonald's gets slapped with a downgrade at wells and morgan

stanley says it's overweight. >> they say don't count these guys out. i know you know mcdonald's you always feel some day, right, it's going to get it right? >> they say structural advantages will begin to help but they do point out the top line still very challenged even as those comps get easier and easier. >> yesterday wendy's, wells put a sell on it. i continue to think that wendy's represents as good a buy as it does to eat there. >> there's the opening bell. a look at the s&p at the top of your screen. at the big board state street global advisers and launching three new spdrs. and microsoft xbox fitness a new online service making the most popular fitness videos interactive, we'll talk more about that in the 11:00 a.m. along with that mcdonald's call was a cut of yum. a downgrade of buffalo wild valva valuatio valuations, names that you know. >> i disagree with yum.

i believe in david novak. i think there is a real turn in china. i know there's a lot of chatter whether it's real or not. in novak, i trust. buffalo wild wings has been remarkable. mcdonald's tried its wing initiative and everyone thought it would hurt buffalo wild wings, just the opposite. betting against sally smith a terrific ceo at buffalo wild wings has proven to be a sucker punch so far and i'm saying if this stocks gets hit too badly, you ought to come in and buy it. >> cowan is the latest to put an underweight or sell on twitter. they initiate with an underperform and price target of 32. survey says, where do you get your best roi, 5% said twitter. 60% said facebook. >> i thought this was an important call. a lot of people when i speak to execs, they say, we use twitter. how do you use it? for free! get a little word-of-mouth. facebook go back to what, really, go back to what domino's

has done here, okay? you go look at what domino's has done in terms of the facebook, click facebook now pay facebook. i mean, domino's has done an incredible job using facebook and i think that that's the poster boy for how well it can help your business. >> not impacting the stock, of course, it's up 73 cents right now. as we head earlier in your "mad dash" it's not clear that people pay any attention to what all the analysts are doing as negative as they may be getting or maybe they are paying attention to the power of the platform they are seeing over time. >> it speaks to pepsico and speak to espn, companies that are really doing a lot with these products and they know, i mean, espn, you follow them on twitter, i mean, they get maximum exposure on twitter. what does it cost them? i don't even know. in the meantime yelp my best indicator and the key to this market right now, david, continues to go higher. >> up sharply yesterday. >> wow. yelp is -- >> it was said. >> jeremy stoppleman has a fabulous business and anyone that owns a business knows that

this is the yellow pages, you got to pay them, and then when you get the word of mouth -- you get bad word-of-mouth, do you know what's incredible? it means you're bad. >> what? >> you got bad word-of-mouth to promote every single venture that i've got and it's, like, oh, get that off! but you can't. and you can't just tell people would you please say at the inn and bump that one down with great reviews, because, no, it's organic. >> retailers are really barbelling the s&p. macy's is the very top gainer up 7% after a 50% gain in the past 12 months and then all the losers, bed bath, family dollar, elle brands. all that we talked about at the top of the show. >> howard schultz talked about how mall traffic was down, and bed bath is not a mall-based store. bed bath gives you a truncated conference call. but you felt no conviction whatsoever, they do buy back a

lot of stock but i listened to the conference call and i said, i don't know, i don't have a case to own it. elle brands, victoria's secret was hot. >> several quarters of comps. you had to go back a long way to get negative comes at victoria. >> i've not shopped there. >> they treat male customers differently, because they know males want to get out of there quicker. >> the red panty sells much better than the -- okay. i just know this anecdotally, not empirically, but i know that they were -- we were talking about -- never mind. >> i love it when you get flustered like that. >> i'm not going anywhere with that. >> i was all ears. can i mention shares of mckesson, yesterday there were reports that they would reach a deal to complete the acquisition of the german company where it had opposition from elliott and today we get the press release saying they made their best and final offer increased its price to 23 1/2 euros and will be

buying convertibles owned by elliott as well. convertible bonds there. the stock's up again. to our point, this stock went up when they announced the deal. went up when the reports -- and then elliott came in and bought 25% and it was unclear they'd be able to close it out on the back end. up again. up again. >> cardinal health, mckesson, when you talk to the hedge fund managers, they tend not to own these stocks. when you talk to the mutual fund managers, here's my health care portfolio, mckesson, these are all the companies that cut the cost of owning pharmacies, express scripts, too, and this, mckesson has been a -- i know the ceo is highly paid. >> yes. >> and i know that's a very big issue. >> but he's highly regarded. >> he's worth every penny of it. >> dish to keep an eye on. we haven't seen a press release confirming this but the reports say dish is not going to compete or should say not going to follow through on its efforts to acquire light squared out of bankruptcy.

this goes back to spectrum. conversation we were having earlier. and they have a lot of it at dish, but apparently they're not going to include the spectrum that would come with the light squared acquisition. the stock down a little over 1 1/2 percent. they may be the only real entrant in the age block of any size auction that will be taking place in the not too distant future. >> lost in the whole shuffle it's been a remarkable stock. >> it's been an incredible stock. >> remarkable stock. >> it's had a great run, no doubt. the value of his spectrum is going up. they are in the other business, too, aren't they? delivering actual tv to people. >> this directv, comcast, parent company of us, adding basic cable. i mean, what do people do? people just watch tv. right? especially because it's cold. they watch movies. they shop online. do they ever leave their houses anymore? look at mall traffic. i'm wondering. do people ever leave their houses? >> good question.

>> a big piece in "usa today" about fast food. january sales typically 3% below average because you're coming off of christmas. you're worried about your gut. you're worried about your wallet and it's cold. tough time to launch a new restaurant, by the way. >> the number one book in that category i was hoping number one is some diet book. number four, not bad. >> no. but the tequila will warm your insides in a nice way. >> stay away from the kind that has sugar in it. we don't mix with anything less than 100%. >> nice. >> ford will hike to 12.5 cents a 3.2% yield after mulally said he'll stay. >> alan promised this to a lot of people and now that he's fully back in the fold of ford, people will look at it. but i didn't like the china numbers. something's the matter with china, i just got the baltic freight again. copper is down four cents today. it's just not panning out. it's the negative in the soup.

>> yeah. >> then before we get to bob, this valuation call out of citi on exxon, downgrading it to neutral. but upping their target to 108. >> isn't that exciting? thank you for pointing that out. i never take a lot of interest in a downgrade where they actually raise the price target. remember, this is warren buffett's stock, and that firm will never get another share done with warren buffett. just kidding. but you don't cross buffett. you don't take a buffett stock and you go to buy a hold unless it's a rosenfeld stock, right? because she crossed it. >> yes, she did. yes. irene. >> she crossed buffett. >> she may have other issues coming her way, who knows. she has a large investor there. >> and downgraded today. not just because it's the most stupid name in history, also maybe because it's got full valuation. warren buffett, exxon downgrade. what is the world coming to? >> i know.

it is the worst-performing component on the dow right now at least. >> have you ever heard, by the way, some people, you know, jim mcnerney at boeing, he has a 20-year plan, you talk to him, wow. did you know that exxon has a 50-year plan? i am not kidding. in the year 2525, exxon will be there and twitter's going to have earnings. mcnerney is a serious guy and he only goes out 50 years. >> but not amazon. >> let's get to bob pisani on the floor. >> happy thursday. health care's leading the way. they're the big winner, health care and financial. retail, macy's is the big winner. i'm disappointed on the retail sales and the guidance. let's do the guidance. you saw what was going on here, bed bath & beyond, cut their guidance. cygnet had comp store sales up 5%. they still cut guidance. they said additional discounts was necessary. pier one cut the full-year

guidance, the ceo said extremely disappointed with december sales results, of course, partly they blame the weather. american eagle cut guide anticipates. family dollar cut guidance. i'm thinking december comp store sales have to be better. 50% off, we got to get them in the stores, at least the sales numbers were a little better. but not really, zumi's, below expectations. cato missed. it wasn't all bad, bless costco, they did all right. they come through. haverty furnishings up 9.5% above expectations. some home furnishings areas, not pier one, others continue to do fairly well. 50% off sales. the consumer net worth is near record highs. the job market is an improvement. don't you think you'd at least get a little bit better same-store sales? i kind of thought we would. we all knew the numbers would get cut because the margins were going to get cut, but sales, you think they would have got more people in the store with 50%

off. mean let's go to macy's. kudos to them. not the guidance. i'm talking about how they are managing the changing retail environment. how they are consolidating stores, consolidating regions. they're investing in systems to manage how they move around merchandise more. all of this talk about job layoffs, 2,500. some articles i read implied they were having trouble. they're not having trouble. they're the big innovator in this space. did anybody read the press release where they said we're laying off 2,500 people but we are continuing to ad positions in other parts of the company. we're investing heavily in the online store and investing direct to consumer. it may be a net neutral in terms of the layoffs they're announcing and all about this about closing five stores. some people implied it was signs they were having trouble. did anybody read the rest of the report? they are adding five new stores. this year they are closing five underperforming stores.

they announced they're adding five new macy's stores and they're adding three new bloomingdale's stores, but you didn't see that in any of the headlines. they are always emphasizing the negative. this is turning into one of the great retailers out there. i think the management team is fantastic over there. in the meantime, we've got the first five-day indicator for those that follow these things for what it's worth, the s&p was down 0.06%. some of the big gainers last year are some of the guys down the worst this year, game stop, netflix, best buy, microsoft, time warner, all these guys had huge gains this year and yet they're the biggest decliners so far. there really is such a thing as profit taking guys, it really does exist. i know, jim, you made big comments on macy's, they have a big store in downtown philadelphia and i go there often. the salespeople are talking to people, they are training their people. i can see the difference just on the floors. i love macy's. >> i do, too.

i love the one in times square. it's very, very exciting. my dad worked at gimbles and you know the wannamaker intention was always there, bob. you look at macy's, where they are opening stores, thank you for saying that, opening in growth areas like las vegas and florida. lundgren has not unveiled his strategy for off price like the rack at nordstroms, sachs, that's going to be the next leg. look out, when they do off price, they're no longer going to be able to dump it to everybody. they're going to keep it themselves. a lot of places -- >> you and i go to herald square and heck check it out. >> the perfume section is problem probably the most lucrative. perfume is 400 bucks and it's water and some smell. that's a business we ought to get into. that chanel is a very smart company. >> yes. >> a couple of brothers. >> cramer, instead of ck 1 it could be jc 1.

>> they do spritzing over there. >> they hit you. >> they hit you. >> yeah. let's move from perfume to the bond pit, shall we? rick santelli is at the cme group. >> there's a good aroma down here, david. good morning. if i look at what's going on so far and not very far into 2014, i think there's one word that the fixed income boys and girls at trade would use and that is flat. okay? let's look at some two-week charts, and remember, right in the middle of that is the beginning of the year. let's look at 2s to tens and i formally don't look at twos to tens. what's the point? you know, draghi made the promise this morning and ben made the promise and yellen will make the promise to keep interest rates as low as we can for as long as we can. but with short maturities it isn't necessarily doing what they think. twos to tens has flattened nine basis points since the beginning of the year from a 264 to a current 255. open the chart up for a year,

and, yes, it's only a little nib at the end, but look what happens when you go a little bit more down the curve. look at what happens fives to tens. same dynamic if you look at the two-week chart it flattened eight basis pioints since the first of the year. a big different story this year and the big story is we're about ready to test the flattest fives to tens since september. this is a very important point to concentrate on with regard to the efficacy of central banks. now, if we switch gears but still stay on central banks, look at the dollar index this morning. the dollar index this morning really looking pretty good. why? well, for the same reason interest rates broke before the 8:30 eastern number. it's because of this chart. the euro versus the dollar. drawi draghi promising to keep rates low and the euro wasn't celebrating that and it had an effect pretty much bigger than initial claims on all markets. carl, back to you. >> rick, thank you very much. rick santelli in chicago.

when we come back rick's live interview with tom coburn of oklahoma and we'll hear the thoughts of on janet yellen becoming fed chairman on the cover of "time" magazine this morning. "squawk on the street" coming right back. aflac!

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[ male announcer ] even more impressive than the research this man has at his disposal is how he puts it to work for his clients. morning. morning. thanks for meeting so early. come on in. [ male announcer ] it's how edward jones makes sense of investing. take a look at what airlines are doing today. these are some big moves on some of these names. united gave an update last night

saying that unit revenue for the latest fourth quarter will be up two eight to three eight, driven by demand, driven by prices. deutsche is out with a note saying a lot of the positive factors from 2013 will carry over to 2014. >> this is, again, my pick for winners in the group, of the sector. i hated this sector and then last year in the winter i went positive on it because i think the consolidation is remarkable. you are seeing -- remember the old days when you get storms like this you used to see the companies lose hundreds of millions of dollars. i mean, this is the -- even the ones that aren't well run, united continental doing very well. delta and aal the new amr, amr could be a double. i've been saying that now since it was -- >> still. even from here, you think it could still, aal? >> once the justice department said, list aren, we favor higher prices for people who fly as opposed to lower prices for people who dial, it's a

remarkable industry. they are going higher. make fortunes, bill miller. >> it is all going higher. >> amr is the first stock i recommended in goldman sachs and in 60 days it went from 60 to 30 and this is a different airline business, wow. they consolidated. every plane is full. you get charged for walking down the aisle. >> they are keeping capacity under control. >> yep. >> they are generating cash flow, earning their capital. >> i never do. >> never. >> they just don't charge you for the dewars and i could say negative things on air about it but i take it back. >> we want to know what will happen later on at 11:00 a.m. eastern time, chris christie will hold a news briefing on what has been dubbed as bridgegate, they closed access roads to the george washington bridge in a dispute with the mayor of ft. lee, new jersey, for not endorsing him. we'll bring you the presser when it happens live.

stick with us. it's not just a local story it's on the cover of every national paper in the country. >> it's a personal story, right? sometimes when we want to go over the bridge, it takes forever. >> absolutely, yes, on the first day of school back in september, kids on buses, it's a very potent political story. >> the headquarters being in englewood, close to new jersey, many of us are well acquainted to the delays. >> an hour late to the restaurant. awf awful. >> there wasn't anybody trying to create a problem. >> how do you like how powerful christie is, suddenly it's christie gate? i mean, give me a break. did he know about it? did he order lane closures? >> that's the question. >> come on. >> you don't think he did. >> you think it's the plumbers in watergate? >> the e-mails are pretty incriminating of his staff. >> he does say he was misled and his staff will pay the price. >> i don't know, look, this one's so hot because we're about a mile from -- >> yeah. we all would have been stuck in that traffic. >> you got that right. >> nasdaq, by the way, has gone

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let's get 6 in 60 with jim. stick stocks in 60 seconds. an upgrade of a name you like. >> jeffrey said johnson, johnson has the great pipeline, i gree with it. >> deutsche cuts arm holdings. >> this is the revolution, people are saying arm holdings, be careful of a new resurgent intel that's taking -- no longer taking names and they're just kicking everybody else, no prisoners either. >> another smack-down of deckers. >> i want people to tweet me a picture of your line at a deckers. every place has a line including midtown. >> bernstein's says they like rbs. >> so do i. this is a break-up story and sell off a lot of divisions in the united states. >> price target for thermo. >> this is another growth stock that keeps going higher. smart funds in it. >> and baird ups val psparvalsp. >> i hathese are housing plays t

also industrials. >> dupont having a nice morning. >> dupont upgraded and i think coleman is doing a fantastic job. >> how about tonight? >> alcoa, we're going to ask about the foreign corrupt practices act which i think was not -- was not talked about that much but we're really interested in his read on the economy worldwide and how well the turnaround 52-week high today. >> do you think is the official, unofficial start of the earning season or is it jpmorgan? >> it's alcoa, it doesn't matter. klaus gives you a breakdown market by market by market. the reason why it matters so much because if you see changes in commercial construction and in aerospace, you see changes in cans, it tells you what's going to happen 2014. smart guy. >> we'll see you tonight, jim. >> thank you. >> 6:00 and 11:00 eastern time. a slew of news in the retail sector. what does it say about the state of the consumer?

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welcome back to "squawk on the street." the roadmap begins with the markets and jobs. one day ahead of jobs friday, jobless claims fall to the lowest level in a month. what does it mean for the markets and tomorrow's employment number? plus, retail stocks making some big moves today. we'll get a check on the american consumer with a retail vet and former retail ceo. and is colorado facing a marijuana shortage already? we'll head to denver with jane wells to find out. jobless claims fell more than expected. ahead of the big jobs number tomorrow how should you position yourself? we have the chief economists to deutsche bank and barry naff is the chief equity strategist for barclays. gentlemen, welcome. i want to start with you, joe, when we saw the adp number came in you raised your estimate upby 50,000. how are teeing up for this number? >> adp we found it to be the best. it was better than expected.

most of the economic data has been better than what we thought. gdp in the fourth quarter two quarters maybe 4% growth. it would seem to me that stronger employment will be consistent with that. >> adp is normally a head fake. you think we're out of that slump? >> i would say no. adp is better than a coin toss. i wouldn't say -- it's given head fakes and i've looked stupid a few times, but i'll put my number with adp. >> right now the dow is up 21 points, the market's been flip-flopping all year and psychological it's hard to figure out where we are. but what are you looking at tomorrow and where do you think we go from there? >> well, i think the key to all this is that really everything that's happened since the fomc meeting at least in terms of the treasury market is all we really did was pull that first rate hike forward from june of 2015 to march of '15 but where the market continues to be vulnerable the pace of rate hikes once it actually gets started. the market is in essence pricing in 1% per year from 2015 through

2018. that would be an incredibly massive rate of removal of policy accommodation to use greenspan-speak and that's why we think the market's vulnerable around the five-year note. and you could get much tighter financial conditions. so, were we to get a joe type of number tomorrow, then that part of the market's at risk. that would permeate out through equities and obviously you've been seeing that in things like emerging markets as well. the market's definitely vulnerable to tighter financial conditions. i would further add if you look at the minutes yesterday what struck me was they were somewhat behind the curve in the sense that we thought there would be three sources for stronger growth next year, consumption. they had that part right. stronger capital spending. they were pretty mixed in their commentary around that, and housing which is getting a second leg as mortgage credit loosens. they were way behind the curve on that. and so the evidence since then has been pretty powerful and we do think the market's vulnerable

to a pullback related to tighter financial conditions, so a strong report tomorrow. long-winded waying of saying that good is going to be bad tomorrow. >> even though there was some risk that tightening mortgage rates could hamper the housing recovery. >> that's mularkey. >> barry's right the five-year part of the curve is very vulnerable if the data turn out to be stronger which is where i think the momentum is going and i still can't for the life of me see how the fed could be so slow to hike that when they hike they're only going to do go as incremental as they say they are. the average hike in a year is 200-plus basis points, whatever they go, they're going to go a lot. however, where i may disagree with barry is there's a lot of money parked in money funds. and we've yet to see the great rotation. i believe a 4% ten-year as i'm calling for this year will actually be very positive for stocks. >> barry, you said the other day on "squawk box" you think that

if people didn't put their money into the market last year that they haven't missed out on the rally, but your target is 1,900 for the year for the s&p and we're at 1842 right now. it doesn't seem there's a whole lot left to gain. >> i wouldn't misinterpret all of this, what we're saying is when the fed starts to normalize policy you normally get a policy-related pullback that's never the end of the bull rally and it's never the end of the economic recovery. so, i agree with joe depending on what your time frame is. the first half could be difficult if financial conditions tighten and the five-year part of the curve gets hit. the pace of hiking, you know, gets -- accelerates a little bit. and longer term we're definitely still positive. we forecasted positive returns every year. we think that will be the case this year as well. we think it could be a little tough over the next quarter or two. >> for tomorrow you went to 250. >> 250. >> important to you to be high on the street? >> no. i just want to be right. but the scary thing is, the

scary thing about these data and i'm getting myself into trouble here, if you look at consensus at 190 and my number at 250, it's statistical noise. >> i want to come back to the idea of a 4% ten year this year being good for the market and understanding why exactly you believe that's the case. >> it's the case, david, on a couple of factors. for 4% ten years we're getting good earnings. and 4% tens could still be very low in an environment where normal growth would be well above that. three, people have to put their money somewhere and it seems to me that if you're in an voicht where you are overweighting equities versus bonds you are starting to get the great rotation trade into stocks when people actually take further capital losses on their bond port foalios. >> because they've been getting hit. >> they've been getting hit. >> and certainly a lot of moves left to happen this year. but a lot of people will be sitting down with the profile of janet yellen in "time" magazine. have you had a chance to read it. >> no. what does it say? >> it talks about her childhood

growing up. she points to 5.2 to 5.8% unemployment as the full employment picture. so, we'll see what happens there. >> she's tough. she's very bright. she's going to be tested at some point by these markets, so hopefully she'll come through. >> we'll see. barry, joe, thanks for being with us. >> thanks for having me. the s.e.c. is charging aluminum giant alcoa with violating the foreign corrupt practices act. morgan brennan is at hq with more. >> news of the settlement came out this morning the s.e.c. and the doj charged alcoa with more than $110 million to officials in bahrain through one of the company's subsidiary businesses. the s.e.c. saying alcoa subsidiaries used a london-based consultant with connections to bahrain's royal family to maintain a key source of business in that country as part of the settlement alcoa paying $384 million to settle both cases and alcoa world alumna

will plead guilty to one county of violating anti-bribery provisions of the foreign corrupt practices act. this will rank as the fourth largest fcpa settlement with the s.e.c. delash s.e.c./doj. the finding didn't name anyone at alcoa in the charges. we did reach out to alcoa for comment. the company has yet to respond with a statement. how's the stock reacting? well, take a look. investors not reacting very much to the news right now. so, of course, all eyes are going to be on alcoa when the reports fourth quarter earnings after the bell. as part of this settlement alcoa saying it will record a charge of $288 million when it reports those earnings later today. the aluminum producer had a string of better-than-expected earnings in the last three quarters despite weak aluminum prices, so it will be very interesting to see how this settlement is going to impact the company's financials going forward. investors were starting to become more positive on the

stock, better -- it's been up better than 30% over the last three months. >> all right, morgan, $384 million payment. the stock down 2%, so certainly no small feat there. thanks for that report. in the meantime, we want to send it over to dominick chu for a quick market flash. >> when is the last time you saw a $70 become $220 in a matter of seconds? intercept pharmaceuticals shares more than tripled after it said its liver disease drugs showed positive tests. they develop orphan drugs or drugs meant to treat rare diseases or conditions. the stock which has a market cap of $5 billion is up now more than 700%, carl, over the past year. >> thanks so much. retailers are some of the big movers today. macy's getting a nice pop. a record high. while family dollar and bed

bath & beyond trading lower. we'll talk to steve odland about it after the break as the dow has gone mildly negative. back in a minute. the conversation about her mortgage didn't start here. it began on her vacation in europe on the day she arrived in london. someone set up a bogus hotspot, stole her identity and opened some credit cards in her name.

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superior service, best selection, lowest price, guaranteed! ♪ your ticket to a better night's sleep ♪ shares of macy's trading sharply higher on news the retailer is cutting jobs while raising profit outlook for the year on the day the stock is up 6.5%. courtney reagan has more on the move.

>> analysts had forecast that macy's two win the holiday season and early signs that are pretty much confirm the forecast. the department store surprised the street releasing holiday sales after the bell on wednesday posting a gain of 6.5%. macy's reiterates its 2014 full year guidance and provides guidance of 440 to 450 with comps growing 2.5% to 3%. they note strength in handbags and coats and cold weather goods not surprising and dresses, men's and homes and juniors, kids and watches weaker for the season. the retailer announces job cuts of approximately 2,500 along with other organizational restructuring and all of it will total an estimated $100 million in annual saves beginning this year. wall street bidding shares up 7% early in trading adding to a strong year of gains and outperformance among peers.

increasing their price targeting for macy's shares, boit bank and bmo and jpmorgan increasing the earnings estimates. same store sales costco surpr e surprised the street. the strong numbers actually enmore impressive considering the difficult holiday season. l brands formerly known as limited posting disappointing comps and sharply lowering guidance well below consensus. gap after the bell today. and family dollar narrowly misses but the guidance sharply below expectations garnering a downgrade so far this more than. carl? >> we're getting american eagle lowering q-4 estimates and holiday comps down, too. thanks so much. >> thank you. talking more about the consumer and whether the latest read, steve odland is the former ceo of auto zone. good to have you back. >> great to be here, thank you. >> we know the calendar was

weird and mall traffic was challenged, but what explains this confluence of family dollar and best buy and american eagle? what is going wrong? >> total retail sales were up 2.7% this holiday season. the good news is that was a growth rate. but the bad news is that this is the weakest growth that we've seen since 2009 at the bottom of the recession. so, it was a tale of two cities. the happy cities contained the electronics retailers, the online retailers which were up 10% on the strength of mobile apps, and the luxury good retailers. the unhappy city where the main line retailers, the mass merchants, basic clothes, basic goods and so forth. so, you've got this dichotomy of performance. i think that 2.7% sounds good but you remember the gdp level for the third quarter was up 4% which was strong but it turns out over half of that was inventory build for this season. now if you have a big build in the third quarter of inventory,

a lower than expectation retail season, then you've got too much inventory and you'll have trouble here. i think what you should see in january are a lot of liquidations and you'll have some carryover here on the employment figures to deal with that. but people are going to have to then take the jobs out after that. >> well, you mentioned the job market relatively okay. we know that the households have deleveraged and foreclosures are down, delinquencies are down, the housing prices are up. why is the consumer still reticent to at least go all in? >> there's a lot of uncertainty here. if you look at the amount of cash that is sitting on the sidelines in the consumer sector and the business sector, there's trillions of dollars of cash. this is unprecedented. and the reason that people don't invest their cash is when they're uncertain. they don't know. and i think it comes back -- we have the committee for economic development has been focused on this. it comes back to government policy. you don't know what the tax policy's going to be. you don't know where health care is going.

you don't know where your cost of labor is going, so you've got this huge debt buildup, $8 trillion in debt in the last five years alone. debt levels will have to be adjusted through some sort of policy and everybody's sitting on the sidelines worried about it at the time when, you know, jobs are not strong and, you know, the consumer is not really strong. other than the certain areas of electronics, luxury goods. >> you mentioned the shift from brick and mortar to online shopping. you say it makes you question the longevity of the players. what do you mean by that and who are you talking about? >> look, i think when you look at the pure online players like amazon, growing like crazy, it has, you know, and then you look at the people who have been successful, the traditional bricks and mortar people like target who have been very successful online, they have developed specifically online offerings, they've been very competitive in price points, they've got mobile apps out there. it's the people that haven't done that really have to worry. because you've got just infin it in assortment online and you

have the lowest and best pricing. what you have to compete with in bricks and mortar, then, is the experience so, you know, you've got to get the right assortment, you've got to create an experience that differentiates you from pure online retail. >> there's a number in the shoppertrak data from yesterday which has a lot of us scratching our heads which is saying 90% of purchases are still made in stores. how does that work when traffic is down as much as it is and here we are questioning the longevity of some of these retailers? >> you look at the negative double-digit store traffic numbers this season in bricks and mortar, that is really worrisome. even because, you know, look, the numbers were up, right? they were up 2.7% driven mostly by these, you know, what we've just said. that means that in these, you know, in the basic goods and in the mass merchants and, you know, the kmarts, the sears and even walmart was struggling with traffic this season. they've got to really look hard at what they're going to do

here. but i think you'll look at a lot of clearance in january. >> some consumers might actually appreciate that but we'll see what the investors say. thank you for being here. when colorado started selling recreational pot at the start of the season, hundreds of people lined up for their chance to buy. you could be looking at a pot shortage. yes, colorado could very well be running out of pot. you'll want to stick around for that story after the break. aflac!

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welcome back to "squawk on the street" i'm scott cohn in the cnbc newsroom with an update on jeff skilling, he got a ten-year reduction in his prison sentence last year. as of today he's serving his time in slightly nicer accommodations, he's arrived at on the grounds of maxwell air force base in montgomery, alabama, there he joins 800 other inmates that provide support services for the base. he's 60 years old. the federal judge who originally sentenced him to 24 years in 2006 agreed to reduce the sentence after skilling agreed to drop his remaining appeals and turn over some $40 million in restitution. time off for good behavior,

skilling could be out in 2017 after serving a little over ten years for conspiracy, fraud and insider trading in enron's epic 2011 collapse. carl? >> a case you know well, scott, scott cohn back at hq. for a little over a week people in colorado have been able to buy recreational marijuana and now the demand is so high, we could be facing a pot shortage. jane wells heard about it and raced to denver to get the real story. good morning, jane. >> reporter: they are calling it reefer sadness. the first store that opened, everyone knew that pot would be popular, but perhaps they didn't expect it to be this popular. you are looking at video from new year's today at 3-d cannabis center. long lines. it was crazy. they actually had to shut down two days this week to restock and over at the river rockwellness center where they sell medical marijuana they are not going to sell rec creational

pot until next month. >> colorado is running out of pot, that might be the headline, but as you see around us there's a lot more behind us. it will take a while while for the supply to meet up with the demand. it might be three or four years. >> reporter: really? >> it is a question of infrastructure. we need to build green houses. we have to build indoor grow rooms. it's a very expensive proposition. we don't have access to traditional banking and so actually finding the financing to capitalize the businesses and increase the infrastructure has been very, very difficult. we have to go to private equity. we have to go to venture capital. >> how much are prices going up because of scarcity? >> about 200%. >> reporter: after i talked to arbela's he hopped a plane to connecticut where he's applying for a license to sell medical marijuana there. this is a business growing like a weed but without traditional financing it is unlike any rollout you have ever seen. and, guys, i will be back next hour with pot tourism including

one tourist a university of texas, san antonio, finance major, who is looking for a potential career here after graduation. back to you. >> jane, you know, in some of these reports we've seen that because of the supply and demand issue an ounce of pot for consumers is now going up to about $400. are consumers still paying that? >> reporter: that is absolutely the case. yes, they are. they are. and that is without tax. right here at this dispensary they're selling it up to $50 for an eighth of an ounce and plus a 21% tax on top of it. i was very curious if it would turn people away. i spoke to many customers here yesterday, most of them from out of state and none of them complaining about the price, at least not now. >> and new tourism industry indeed. thanks for that, jane. we'll see you next hour. >> reporter: you bet. and straight ahead, gary kaminski makes his triumphant return and hear what he has to

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the second time this week the dow got a nice pop at the open but has gone negative. >> carl, how about another biotech company, biogen is going

to develop medicines for blood disorders. biogen will pay $20 million for sangamo if certain test goals are met, both companies are up on the news. but sangamo is up big move because of the diseases and their cures, carl, back over to you. 10:30 on the nose on the east coast and let's get to sharon epperson for inventories on nat gas. >> the latest report from the energy department said natural gas supplies in the last week fell by 157 million btus -- not btu, bcs, billion cubic feet. 157 decline is the number here from the energy department and that is greater than expectations. a lot of analysts were looking for a decline somewhere around 150 billion cubic feet. we are looking at natural gas futures prices that have come off the lows of the session. we saw the low of $12.04 a

significant drop from last month when natural gas hit a 2 1/2-year high above the $4.50 mark. keep in mind we are looking at temperatures that will finally start to warm up a bit over the next week or so. that is what traders have been focused on in terms of the weather forecast going forward and that is what has contributed to some of the weakness here in natural gas. but next week once again they are looking for a very big withdrawal from storage. somewhere perhaps even greater than what we saw last month which was the highest that we've seen for the year, that was 285 billion cubic feet, so, again, we could see a big withdrawal next week and right now we saw a slightly bigger-than-expected withdrawal and we are looking at prices around $4.18 off the lows of the session. back to you. >> all right, sharon, thanks for keeping us up to speed. new data on the labor front setting the stage for friday's big unemployment report. jobless claims falling last week by 15,000 to a seasonally

adjusted 330,000 the lowest point in a month. senior economic reporter steve liesman has more on that. steve, over to you. >> better news coming in at 330, a bit better than expected with the forward moving average to 349 and that reflects the rough weeks we've had in the past. jim o'sullivan saying the latest weakness not much significant for tomorrow's employment report because it's not the reference week which is the 12th but it is encouraging for underlying trends. bmo said the expiring of the long-term unemployment benefits as well as the freezing power outing weather may weigh on claims over the next while, so don't be calm about that. there's been a lot of volatility in the claims recently because of weather. and it's just difficult to adjust the numbers for the hiring and the firing that goes on around the holidays. but other jobs data have pointed towards optimism. the three-month moving average for adp up at 224. we got the strong number yesterday. both employment indicators in the ism, services and manufacturing, have been on the rise in december. and nfib yesterday afternoon we

reported the best jobs numbers since 2006. gdp also suggests improved job growth and the challenger survey this morning the lowest total jobs loss since 1997. john challenger this number putting the number in some context -- >> we haven't seen cuts this low since, like you'd said at the beginning, back in the late '90s before the dot-com crash. layoffs were very low. the economy was really rolling. again, think about that. that's a '97 number. >> we should have -- do we have that yet? there we go. what that chart is showing you, the three-month moving average from adp, where the government report will go. it got lower before the government did. let's say it's on the rise and let's say the government follows it and all the job numbers will be tomorrow when the government publishes the december jobs report. looking for 200,000 and the unemployment rate to remain unchanged at 7%.

carl? >> nice preview of what we might expect this time tomorrow. thanks again, steve liesman. the markets are mixed following the jobs numbers and our next guest saying for the first time in three years things are normal. and we welcome in gary kaminski. great to see you back. >> a great reunion. >> normal, it's been a while since we said that word. >> it was really the first end of the year maybe going back to 2006 where it was normal. normal meaning that you could prepare for 2014. obviously having a great s&p last year puts you in a position where re-engaging with clients, thinking about things normally. when i think about normal, i sort of wrote down a couple things here and that is what is the baseline outlook for the s&p 500. 2% dividend yield and probably 6% to 9% earnings growth depending on whose model you want to utilize. when you think about expected total return, somewhere in the

neighborhood of 8% to 11% in the s&p 500, that's the historical norm of 10%. what does it mean? it means there will be certain competition for asset classes. a lot of clients and municipal bonds will be attractive and after-tax yields of 5%. the last three years, bad news was good news in terms of quantitative easing. we sat here together for many, many years always thinking and expecting that bad news was good news for the markets. that's over and that's done. and that's why the most important thing about normal is that portfolio managers, david, you'll appreciate, are now coming to work which you know and i know, which is the risk is being out of the market and trailing the s&p 500 and possibly losing their client and their job which wasn't the case the last five years. >> well, to that point, mr. vice chairman, you were very close to many of the wealth advisers, of course, in your role at morgan stanley. what are they seeing from their clients in terms of a

willingness to take risk and/or move perhaps out of fixed income products out of cash into equities. >> last year was about moving cash into equities and this will not be -- i've said it and i continue to say it. we're not going to see a mass exodus out of mixed income. so, there are a lot of people that own fixed income. they know they're not going to get any capital appreciation out of it. they may actually see month-to-month, mark-to-market losses and they'll hold it to maturity because they want to have an overemphasis in fixed income. we'll continue to see more money move into equities but in a normalized fashion and that's to be expected the rest of this year. >> you say it's normal. we have a few flash points, the debt ceiling debate and the midterm elections and the eventual tapering throughout the year and the exit. do you expect volatility or do you expect it to be smooth sailing. >> i was asked at a meeting yesterday do i expect a major correction this year, that's a

good way to phrase it, and i said no. when i think this year about a major correction, i think we've lived through the washington noise and lived through a lot of these things and people are more conditioned after the last 13 1/2, 14 years to have a longer-term perspective, at least i hope so. the closet indexers is an important component, you guys know i follow this stuff closely. the closet indexers who are underweight the equity markets are now equity. the one thing i'll point out that most people that do closet index and benchmark the u.s. equity markets, last year they finally got to where they need to be. that's not incremental buying but they won't sort of roll over and get out of them. >> you made calls on the ten year last year. >> i did. >> is this year a 3% year, a 4% year? >> if i had to take a guess, and simply a guess here, i think we probably end the year somewhere between 3.5 and 3.6 and that's based on the fact that the economy continues to improve, and as a result of that, higher interest rates is necessarily

good. as you know, mr. faber, because you called me, mr. vice chairman. >> yes, sir. >> 60% of the time the stocks go up. when interest rates are rising for the right reason. >> any particular asset managers you think your clients should be focused on? we always pointed out many times that hedge funds significantly trailing the benchmarks -- >> yes. >> -- that they usually measure themselves against. >> that is true. but most clients who have allocated money to alternative asset managers, ie, hedge funds expected it last year. and if you continue to trail the s&p 500 because you have not closet indexed and you've not paid attention to it and you didn't make a couple of the big bets in the s&p 500s, do the clients say at this point why should i have a long-only manager and pay them a fee when i can go to the sliders. that's the biggest risk, something you and i know a little bit about there. >> a little bit. a little bit. >> good to see you back. >> great to see you guys. >> i should mention one thing --

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on tap. rick, over to you. >> if you look at the charts of the flattening going on in the curve, fives to tens against the performance thus far, and this is over two weeks so the middle of the chart is basically the new year. the dow jones industrial average, maybe there's something here that we're supposed to pay attention to. a flattening yield curve in my opinion is the market pushing the fed along, not only from a taper but potentially when they raise rates. this is something to pay attention to. listen, there's always this ongoing debate forever about main street versus wall street with regard to the economy, how well things are, and there's a big divide there. but it isn't unique to the united states. the ft had a wonderful article about a gallup poll taken about the confidence in the eu leadership and briefly it's good to read. you see it there. but i'm going to give you just an overview. from 2008 spain went from 59% in terms of they think the leadership's doing well to 27%. ireland from 70% to 47% this

these are southern countries. they took a boatload of euros. i'm kind of shocked, maybe more shocking. look at some of the northern prosperous countries. sweden lost 17% in confidence. finland, 14%. austria and the netherland's, 11%. it's a global thing, the common denominator, whether you agree or not, this is what it is. the last point. munis are important and they're a tricky sector in many regards. but what i'm hearing and this is only a superficial overlay of the whispers i'm hearing but governor cuomo took control of the rehab projects for airports, laguardia, kennedy. okay, they have issued general obligation munis to pay for this, so some of my muni sources are telling me, is this in violation of any covenants and even if it isn't, could it impact the pricing of munis, you know, as the executor of the state, he is supposed to abide by certain covenants. the port authority of new york

and new jersey are in charge of the process. is this too much bleed-through? i know it's a big story out on the east coast, but here on the exchange, it more -- it's more of a muni story in the early stages, whether it goes anywhere or not, it will be up to you, the investors. carl, back to you. >> all right, rick, see you soon. rick santelli in chicago. when we come back, the playstation 4 is leading the console wars so far, beating microsoft in units sold by a little more than a million around the world, but microsoft is hoping that fitness can turn the tide in its favor. microsoft's head of xbox fitness will join us here. [ male announcer ] legalzoom has helped start over 1 million businesses.

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coming up in just a few moments new jersey governor chris christie will hold that news briefing on what has been dubbed bridge-gate in which members of his administration allegedly created an artificial traffic jam at the george washington bridge in a dispute with the mayor of the town at the foot of the bridge, that's ft. lee, new jersey. we'll bring you that live when it happens. there's a live pictures of the lectern, so stay with us. in the meantime, "the new york times" is saying the u.s. attorney in new jersey is going to open an inquiry in to the lane closures and there's on her headlines flying around, too, so that will get started in just

about ten minutes. >> the closures happened in september but the e-mails are just coming to light now. for those of you who haven't been followi the story, it escalates the past few hours. >> yes, it has. four hours in traffic sometimes. and the e-mails are fairly incendiary especially when they seem to be making light of kids. it was the first day of school, being stuck on the buses and things of that nature, well, they're probably voters for governor christie's opponent in the election. of course, he won handily. >> right. >> but apparently wanted democratic mayors in a couple of key cities to support him as well, in this case the mayor of ft. lee did not support him, so it does appear he was punished as a result, or his constituents. >> right. even though the irony, of course, is that the governor actually won ft. lee in the election even though he did not get that endorsement. so, we'll watch that very closely. >> in the meantime the dow continues to erode here, down 55. "squawk on the street" is back in a minute. ng your flat rate s. fedex one rate. really makes my life easier. maybe a promotion is in order.

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welcome back to "squawk on the street." u.s. drug wholesaling giant raised offer from german company today persuading a hedge fund that had been blocking that deal to agree to sell its shares. the majority shareholder held back the original deal but hedge

fund elliott management which is now the german company's second biggest shareholder now opposed it. mckesson's higher offer is getting 75% of the shares including those from bonds that convert to shares. overall, it means that mckesson one step closer to taking over celesio and making a drug wholesaling giant on a global basis. back over to you. >> thank you, dom. watching the nasdaq and the mark markets. dow down, off the lows but continuing to go down off the wake of fairly positive data today. facebook at all time high levels. not seen since ipo. macy's trading back to high levels that it hasn't seen since 1992. a lot of market movers, even in the wake of an overall down day. >> i wanted to mention what dom mentioned. i'm going to go back and mention one that he mentioned earlier. it's not often you see numbers like this. intercept pharmaceutical.

look. come on. 197 points up. that's not something i've seen before often. 272% gain. they stopped at a. trial for a drug for a serious chronic liver disease, nash is the name of it. apparently fatty accumulation in the liver for reasons completely understood and due to chronic inflammation from can lead to fibrosis and cirrhosis. not often you see them stop a trial because of effects cassie and saying, hey, it's working so well we've got to get people on it. >> 272%, is that gain. what's the market cap? is it a fairly small company, right? >> it is. but a lot smaller. i have it now at 1.4 billion as overall market cap. certainly got a lot larger today. although i'm not sure my system is updated. i want to make sure that's correct. >> meantime, mentioned the airlines earlier this morning. these are -- you don't see pops

like this on airlines very often, especially the majors. united is up more than 10%. levels we haven't seen since 2007. volume is healthy, too. more than double a 30-day average in terms of volume. delta set a new all-time high. a lot of this traced back toe an update that united gave last night in which they said unite revenue will be up 2.8 -- 3.8 from a year ago. demand is high. pricing is firm. they're going to be adding capacity in 2014. it's a nice confluence of dynamics for an industry that has not seen a lot of that in recent years. >> microsoft is down by half of 1%. of course, some weakness in the holiday sales of the xbox that came out in november. we want to talk more about that as well. the numb rers are in the sony's place station 4 out sold microsoft xbox one by a million units worldwide. can a new online fitness service exclusive to the xbox 1 give it competitive edge to that?

dave, thanks for being with us, especially after a momentous morning ringing the bell at the nasdaq. welcome to "squawk on the street." >> it's my pleasure. thanks for having me. >> tell our viewers what this product is. you have a lot of celebrity trainers but how does it work and how can you getting a cess to it? >> yeah. so xbox fitness is exclusive to the xbox one console. we take these workout videos from the world's best trainers and we make them fully interactive using our new technology. what that means is users are going to get constant feedback on whether they're doing an exercise right, tips to correct if they're not. we measure how hard they're working, what muscles they're engaging. we can even measure their heart rate using the all new knect. it helps them be more motivated. >> holidays are a big season but this looks more like a new year's resolution business to me. of the 3 million xboxes sold during the holidays how many

activated this product and are actively using it? >> we announced today we've had well over a million visitors to our virtual gym in the first month since launch alone which was november 22nd. that's even before, as you mentioned, this huge month of january where the new year's resolutions are kicking in and we're seeing droves of people coming to xbox fitness on a daily basis now. >> i get freaked out when we walk in. we have an xbox one and it knows me and says hello to me. i don't want it to necessarily know my heart rate. i'm curious. in ters of titles available. my kids went to game stop, for example, weren't able to get a lot of what they were hoping for for the xbox one. are you -- when and if are you going to be sort of fully distributing the catalog available on the xbox? >> while we were happy to see over 3 million units sell through in the holiday season and we know that inventory actually sold out in a lot of major retailers and territories we're scrambling to make sure the supplies are in place. we offer everything on our

digital marketplace as well as on xbox live. that's a great alternative for consumers as well with our services. >> what are your benchmarks, dave? when you look at your business and the infrastructure. what are you looking at and how much revenue do you think you can make for the overall product? >> for us, the interesting thing is xbox fitness is part of a larger value proposition around our xbox live service. and xbox fitness is free to all of our xbox gold subscribers through 2014 as an added perk to getting on to our xbox live service. that service is, of course, a huge part of our business overall at xbox. something that's been very profitable for us over the years and we're very thankful for the millions of consumers that make themselves a part of that community. >> all right. dave, for those people who don't want to workout on their xbox, they can also order pizza on the xbox app. seems to be something for everyone. thanks for being with us. we will stay abreast of what's going on with this product.

>> my pleasure. thanks for having me. in the meantime, guys, markets down 59. david, we will see you later on. if you're just joining us this morning, here's what you missed earlier on. >> welcome to "squawk on the street." here's what's happened so far. >> she is committed to the fed to do a mandate of keeping unemployment low and keeping inflation low, but as we all know there's no conflict between those right now because we don't have a recovery that's strong enough to drive inflation up right now. >> the problem with our current safety net programs is that they help alleviate some of the pain of poverty but they do absolutely nothing to help people emerge from that pov ver tip. that's what i think we should be focused on, is helping people get out of it. >> it will be saying when things marketing are going down but i also know this is somewhat typical of a big run and it's been so long. we've had such great januarys. in part because we had washington screw things up. >> the numbers are great.

done this guerrilla war against everybody. david, don't they just want to take this guy out in a back alley and give him a beatdown? >> they may want to do that at at&t. [ bell ringing ] >> a lot of money parked in money funds. and we've yet to see the great rotation. i believe a 4% ten-year is i'm calling for this year will be very positive for stocks. >> what you have to compete with in bricks and mortar then is experience. you've got to get the right assortment. you've got to create an experience that differentiates you from pure on-line retail. good thursday morning. welcome back to "squawk on the street." we are awaiting a press conference from knowledge governor chris christie any moment now. the governor is expected to address the scandal over his staff's alleged role in shutting down access lanes to the george washington bridge over an

apparent retaliation to the mayor of ft. lee, new jersey, for not endorsing him in this prior election. we'll take you there live as soon as the governor begins to speak. although some have called this a largely local story it is becoming a national political story to catch you uppen what has happened in new jersey, eamon is here. >> good morning, carl. no question we are about to see the most important press conference of chris christie's career. if question on the table is can he resurrect his presidential ambitions? a lot of people have seen him as a possible gop candidate in 20106 as a moderate republican who can win in the blue states. that is all on the line here today as he tries to explain just what exactly he knew and what exactly he did about this apparent intentional lane closing, intentional massive multi-day traffic jam in ft. lee, new jersey, today. chris christie has said in a statement last night that, in fact, he didn't know anything about it. it's unacceptable.

he's going to discipline the aides who were involved in this. but the e-mail trail that came out yesterday as a result of the reporting of the bergen record is damning. they've been slow to rally to chris christie's side here. it's going to be a very big test here, carl, on the national stage. >> eamon, thank you for that. >> we're waiting for the governor to take that press conference but let's get insight from former democratic governor of pennsylvania, ed rendell. thanks for being with us. it is an interesting story and one becoming increasingly more national in scope. one of the aims allegedly of this tactic was that christie had been search for bipartisan support that he could potentially tout in the 2016 election. how important is that for a governor and obviously this is not the right tactic to go about it, but what do you think happens from here? >> well, it is an important facet. the american people have made it

clear poll after poll that they want somebody who can work across the aisle. governor christiehas a reputation for doing that. alliance with president obama during the storm was important. he's risking blowing all that. but the most important thing he's got to do, and i think as a former prosecutor, he should know this. he's got to tell the absolute truth today. so if he ordered this, he's got to fess up. because if he doesn't, if he tries to fake it and fire some people and say i'm holding them accountable, i knew nothing about it, the truth is going to come out eventually. if he lies about it today and the truth comes out, that's absolutely disastrous. i think any presidential ambition is over. if he says, look, i was mad, i made a mistake. i told my people to do this. what i did was reprehensible. i apologize for it. it's a chance to limit the damage. but he knows as a prosecutor the truth is going to come out. there's an e-mail out there. there's a text message out there somewhere, or maybe the people

he fires today get angry and say, well, i did it because he told me to do it. so if he did -- if he was involved in this, he better fess up. >> governor, he's already said he didn't know about it and that he was misled by his staff and that they will pay the price. you're referring to some reports now that he, in fact, has fired the aide who apparently ordered these closures. to have him come out today and say he did know about it would be a giant -- enormous reversal. >> but he's already really tripped over the stuff they put out. said there was a traffic study initially. they said it was a traffic study. that came out of the governor's office. in fact, you recall a press conference when he made if joke about putting the cones out there. he said it was a traffic study. it came out there never was any traffic study. it wasn't a traffic study. pure political retall nation. he's already misled the public once. if he does it again, it's real trouble. as a prosecutor, we learn that eventually the truth comes out,

that there's an e-mail you forgot about or a text out there from somebody or you get a person who is fired gets angry and says, hey, this is unfair. i just did what he told me to do. so there's a lot of peril in coming out there if he knew about it. there's a lot of peril in coming out there and saying he didn't. now, on the other hand, if he didn't know about it, it stre h stretches credibility because he's a tough guy and i can't ever imagine a member of my staff doing something like this without my authorization. never would happen in a million years, in a million years. so that's number one. but number two, if that's his approach, and let's say he didn't know about it, then he looks like an administrator who has totally lost krocontrol of office and his staff. >> let's bring in fred fred, a prominent gop donor. >> good man. >> thanks. >> fred, you said that -- a

politician with the savvy of chris christie would have never got along with the plan like this and the risk/reward ratio that it carried. >> absolutely not. i mean, look, i've known this man for five years. sooif supported him for five years. i think he's a man of character. he's a man of decisive leadership. i do not believe he knew about this. i don't think he remotely knew about it. there is no reward for this. there was a huge risk with multiple people evidently involved. he would never ever stoop to this kind of tactic. >> how does he explain not knowing about something from one of his top aides who sits just a few seats away? >> look, he's in the middle of running one of the biggest states in the country. he's in the middle of a re-election campaign. he's also in the midst of helping other people around the country get elected. he's not going to be knowing about what somebody oh several levels below him did or took the conduct they engaged in. he just not going to know that. there's a lot of things you don't know when you run an

organization of that size and complexity. i don't think he should be expected to know about it and i certainly take him at his word. >> the "new york times," governor rendell, is saying that the u.s. attorney in knowledge knowledge may open an inquiry into this. we know about the penalties when you use government resources for political gain. is this a political problem right now or a potential criminal problem? >> in my mind? >> well, let me answer that. you could make a textbook legal exam case for it being a legal problem. i don't think there's a real legal problem but i think it's a huge political problem. let me say to fred, if it's someone in the administration -- >> governor, let me stop you there. here is the governor chris christie coming to the mike. >> i come out here today to apologize to the people of new jersey. i apologize to the people of ft. lee. and i apologize to the members

of the state legislature. i am embarrassed and humiliated by the conduct of some of the people on my team. there's no doubt in my mind that the conduct that they exhibited is completely unacceptable and showed a lack of respect for their appropriate role of government and for the people that were trusted to serve. two pieces to what i want to talk about today. the first is, i believe that all of the people who were effected by this conduct deserve this apology and that's why i'm giving it to them. i also need to apologize to them

for my failure as the governor of this state to understand the true nature of this problem sooner than i did. but i believe i have an understanding now of the true nature of the problem and i've taken the following action as a result. this morning i've terminated the employment of bridget kelly effective immediately. i terminated her employment because she lied to me. i brought my senior staff together, i think about four weeks ago tomorrow, and i put to all of them one simple challenge. if there is any information that you know about the decision to close these lanes in ft. lee, you have one hour to tell either

my chief of staff, kevin o'dowd, or my chief council. i told them that in an hour i was going to go out in a press conference and if no one gave me other information to the contrary, that i was going to say that no one on my staff was involved in this matter. over the course of the next hour, kevin and charlie interviewed each member of my senior staff. came back and reported to me that they all reported that there was no information other than what we already knew that had been testified to by senator baroni regarding this incident. i then questioned kevin o'dowd and charlie mckenna directly since they are the only two who report directly to me. and they assured me that they

had no information that would change my ability to be able to say that no one, in response to angie's question, on my staff was involved in this matter. that was obviously a looi. and the e-mails that i saw for the first time yesterday morning when they were broken -- in i believe the bergen story, proved that that was a lie. there's no justification for that behavior. there is no justification for ever lying to a governor or a person in authority in this government. and as a result, i've terminated bridget's employment immediately this morning. second secondly, i have and will

continue to, started yesterday, to once again now have personal one-on-one discussions myself with the remaining members of my senior staff to determine if there's any other information that i do not know and need to know in order to take appropriate action. i'm not completed with those interviews yet, but when i am, if there is additional information that needs to be disclosed, i will do so. if there's additional actions that need to be taken with my senior staff, i will do so. i will tell you though, it's been written a lot over the last couple of days about what a tight knit staff i have and how closely everyone works together. and that is true. and ever since the time i was u.s. attorney i've engendered the sense and feeling among the people closest to me that we are

family and we work together and we tell each other the truth and we support each other when we need to be supported and we admonish each other when we need to admonish. i am heartbroken that someone who i permitted to be in that circle of trust for the last five years betrayed my trust. i would never have come out here four or five weeks ago and made a joke about these lane closures if i had ever had an inkling that anyone on my staff would have been so stupid but to be involved and then so deceitful as to just to not disclose the information of their involvement to me when directly asked by their superior. and those questions were not asked, by the way, just once. they were asked repeatedly.

so i take this action today because it's my job. i am responsible for what happens. i am sad to report to the people of new jersey that we fell short, we fell short of the expectations that we've created over the last four years for the type of excellence in government that they should expect from this office. but i have repeatedly said to them that while i promise them the best governor's office i can give them i can never promise them a perfect governor's office. when i find those imperfections, those mistakes, those lies, my obligation as the chief executive of this state is to act. and as to bridget kelly, i've acted today. secondly, i was disturbed by the

tone and behavior and attitude, callous indifference, that was displayed in the e-mails by my former campaign manager bill steppy and reading that, it made me lose my confidence in bill's judgment. and you cannot have someone at the top of your political operation who you do not have confidence in. as a result, i've instructed bill to not place his name in nomination for state party chairman and he will not be considered for state party chairman. and i've instructed him to withdraw his consult tansy with the republican governor's association. if i cannot trust someone's judgment, i cannot others to do

so, and i would not place him at the head of my political operation because of the lack of judgment that was shown in the e-mails that were revealed yesterday. that has also been communicated to him last night. there's no doubt that bill has been one of my closest advisers over the last five years. so for that, too, i am sad today to have to take this action but i also know that i have a job to do and it's the job that i've asked the people of new jersey to entrust me with and i can never allow personal feelings or long-standing relationships to get in the way of doing my job the way it's appropriate to do it.

but i don't want any of you to confuse what i'm saying this morning. ultimately i am responsible for what happens under my watch, the good and the bad, and when mistakes are made, then i have to own up to them. i take the action that i believe is necessary in order to remediate them. as i mentioned to you earlier, i spent all day yesterday digging in to talking to folks and getting to the bottom of things. i know there was much discussion yesterday about what was i doing. well, let me tell you, everybody, i was blind sided yesterday morning. i was done with my workout yesterday morning, and got a call from my communications director at about 8:50, 8:55, informing me of this story that

had just broken on the bergen record website. that was the first time i knew about this. it's the first time i had seen any of the documents that were revealed yesterday. and so before i came out and spoke to all of you, i wanted to do the best i could to try to get to the bottom of some of this so that when i came out i could answer questions as best i can and take appropriate action if action was necessary. there was no doubt from reading those e-mails yesterday that in my mind action was necessaried. and then i wanted to make sure that i spoke to those people who advised me to make sure if there was any other information that i was aware of that i had it before i acted. i'm going to continue to this process. i couldn't get it all done yesterday. as i said, if there's more information that i uncover, i'll act accordingly in terms of releasing it to the public and taking whatever action may be necessary, if any is, for any other issues.

and also will react to any information that's incoming from any place else, given that there's noig investigation and legislative investigation. later today i'm going to be going to ft. lee, ask to meet with the mayor to apologize to him personally, face to face, and also to apologize to the people of ft. lee in their town. i think they need to see many do that personally. and i intend to do that later on today. people of those communities for four days were impacted in a completely callous and indifferent way and i'm going to go and apologize for that. let me conclude with this. this is not the tone that i've set over the last four years in this building. it's not the environment i've worked so hard to achieve.

we saw just a few months ago and i've seen over the course of the last four years, republicans and democrats working together, not without argument. governments never without argument. but ultimately coming to resolution on so many different issues in a bipartisan way and running a campaign that was, in fact, a bipartisan campaign. so i am extraordinarily disappointed by this. but this is the exception. it is not the rule of what's happened over the last four years in this administration. i've considered it over the last four years to be my job to be the governor of every new jerseyian, republican, democrat, independent, or unaffiliated. and i have worked with elected officials on both sides of the aisle, ones that i agree with and ones that i disagree with. the political overtones that were exhibited in those documents released yesterday and

the conduct of those people are not acceptable. but people, i think, all across this state understand that human beings are not perfect and mistakes are made. and i believe what they expect of me as the chief executive of this state is when that information comes in to my possession, that i consider it and then about as swiftly as possible to remediate whatever ill occurred. that's what i've done today. actions have consequences. i'm living up to that right now. i'll say one last thing just so we're really clear. i had no knowledge or involvement in this issue, in its planning or execution. and i am stunned by the abject

stupidity that was shown here, regardless of what the facts ultimately uncover. this was handled in a callous and indifferent way and it is not the way this administration has conducted it's over the last four years and not the way it will conduct itself over the next four. i will do everything within my power to assure the people of new jersey that and i thank them for their willingness to consider my apology on behalf of this government. in the end, i have 65,000 people working for me every day. and i cannot know what each one of them is doing at every minute. but that doesn't matter. i'm ultimately responsible for what 245i do and that's why i took this action. david? >> governor, beyond the apology and terminations that you've

announced, what other step, concrete steps, do you plan to take for the people of new jersey and the people of the country that you want to change the perception of what has happened here and will that include working cooperatively with these investigations that are now moving forward? because in the past you've had some rather nasty words for the people who were heading them up. >> yeah, well, and apologize for that this morning, david, because i was being led to believe by the folks around me that there was no basis to this. and so, you know, and let's be fair. there have been times when there have been investigations around here that have led to nothing and have had no basis. but i was wrong. and so now having been proven wrong, of course we'll work cooperative with the investigations and, you know, i'm going through an examination as i mentioned to you right now. that's what i'm doing. i'm going through an exam immigration and talking to the individual people who work for me.

not only to discover if there's any other information that we need to find but also to ask them how did this happen? how did -- you know, how did this occur to us. i think -- listen. as i said before, i've had a tightly knit group of people who i trust i'm pris is it mplicitl. i had no reason to believe they weren't telling me the truth. it was heartbreaking to me that i wasn't told the truth. i'm a very loyal guy and i expect loyalty in return. and lying to me is not an exhibition of loyalty. and so, you know, i'm going to look into this personally. this is my responsibility, david. and so what steps we'll take after that, if there are concrete steps beyond what i've done today, then we'll certainly announce them and talk about them. if, you know, if not, then, you know, i'll just say, listen, i think we've gotten to the bottom of this and we're going to move forward with the new team and i

have a new team coming in as well whom i'm trying to integrate now also in the next two weeks. there will be a lot of action going on around here. >> kelly? >> this revealing that you are a political -- your style is payback. are you and does this compromise your ability to serve? >> no, i'm not. listen, kelly, politics ain't bean bag, okay? everybody in the country who engages in politics knows that. on the other hand, that's very, very different than saying that, you know, someone's a bully. i have very heated discussions and arguments with people in my own party and on the other side of the aisle. i feel passionately about issues. and i don't hide my emotions from people. i am not a focused group tested, blow-dried candidate or governor. now, that has always made some people, as you know, uneasy.

some people like that style. some people don't. and i've always said, i think you asked me after the election, are you willing to change your style in order to appeal to a broader audience? and i think i said no. because i am who i am. but i am not a bully and what i will tell you is, that the folks who have worked with me over a long period of time would, i believe, tell you that i'm tough but i've shown over the last four years in the tone that we've set here that i'm willing to compromise, that i'm willing to work with others. and the campaign showed with all of the folks who came from the other side of the aisle to support us that if we weren't willing to have relationships with those folks, it would have never happened that way. so i don't believe that, kelly. i don't believe the body of work in the last four years desplays that. now, in this instance, the language used and the conduct displayed in those e-mails is

unacceptable to me. and i will not tolerate it. but the best i can do is when i see stuff like that, to end it. and i know that won't satisfy everybody, but i'm not in the business of satisfying everybody. i'm in the business of trying to satisfy the people who elected me governor. michael? michael? michael? >> governor, you say that you're going to individually interview all of the members of the governor's office. >> senior staff. yeah. >> what about the campaign? are you going to personally interview -- >> well -- >> advised a staff meeting in the campaign. >> there was no one above bill ste ste stepien in the campaign. >> others quite close to you. >> michael, their role in the campaign was not the day-to-day operation of the campaign. he was essentially involved with fund-raising. that was bill's main task. mike was the general consultant.

he dealt with tv ads and mail pieces. the day to day operation of the campaign -- >> they didn't know about? >> yes, i've spoken to both of them. they were two of my discussions yesterday. >> governor? >> angie? angie? angie? guys, we don't work that way. >> how confident are you that this tactic, this bullying tactic, was revenge retribution did not go beyond this? >> well, listen, angie, i'm not going to -- i'm smart enough now, after this experience, not to go out there and certify that unequivocally. okay? i don't have any evidence before me as we speak that it went beyond this incident. but i can't tell you that i know that for sure as to every aspect of everything because now i have to be much more circumspect about that. prior to yesterday i believed that if i looked someone in the eye who i worked with and truszed atrusz

trusted and asked them, that i would get an honest answer. maybe that was naive. but that's what i believed. now i'm going and digging in and asking more questions. but i can't make a warranty on that, angie. i don't believe so but i can't make a warranty on that and i won't because when i did that four weeks ago i wound up being wrong. >> you did not authorize the retribution? >> absolutely not, no. and i knew nothing about this. and until it started to be reported in the papers about the closure. but even then i was told this was a traffic study. senator said there was a traffic study. i don't know the answer to that, angie. i think we're going to find out. but i don't know, because the senator presented all types of information that day to the legislature, statistics and maps and otherwise that seemed evidence of a traffic study. why would i believe that anybody would not be telling the truth

about that. i said that, i think, at the time. i'm not finished yet, guys. but the fact is that regardless of all that, you know, it's clear now that in the minds of some people, there were political overtones or political side deals on this. and that's unacceptable. so whether there was a traffic study or not, i don't know. it appeared that there was one based on what i saw in the testimony. but regardless of whether there was or wasn't, there clearly also political overtones that were evidenced in that -- in those e-mails and other messages that were never ever brought to my attention until yesterday. >> yeah. >> you understand why people would have a hard time believing you, that you didn't know about this lane closure considering your management style and the closeness of your staff? if you didn't know about it,

what does that say about your ability to lead? >> listen. i am -- there's this kind of reputation out there of me being a micromanager. i'm not. i think if you talked to my staff, what they would tell you is that i delegate enormous authority to my staff. and enormous authority to my car net. i tell them, come to me with the policy decisions that need to be made with some high level personnel decisions that need to be made but i do not manage in that kind of microway. first. second, there's no way that anybody would think that i know about everything that's going on, not only in every agency of government at all times but also every independent authority that new jersey either has oints own or by state, both with new york and with pennsylvania and with delaware. so what i can tell you is if people find that hard to believe, i don't know what else to say except to tell them that i v. had no knowledge of this, of the planning, the execution, or anything about it. and that i first found out about

it after it was over. and even then, what i was told was that it was a traffic study. and there was no evidence to the contrary until yesterday, that was brought to my attention or anybody else's attention. and so i understand why people would ask that question and i understand your question completely. but what i also want to tell the people is, that even with all of that being said, it's still my responsibility. i didn't know about it, but it's my responsibility because i'm the governor. so i'm take that responsibility and taking actions appropriate with executing the responsibility in accord with what the information is today. marcia? >> a federal law was violated, the u.s. attorney, if you were the u.s. attorney, would you state that there was anything to be investigated? >> as i said many times, when i

was u.s. attorney i hated when politicians stood behind a podium and said this is what the u.s. attorney should or shouldn't do and i'm not going to engage in that kind of conduct at all. >> are there any other cases that you asked your staff, is there any other cases of political retribution throughout your campaign, other than this? >> listen, again, let me say this. clearly that's the tone of those e-mails. but the thing that -- the other part of this that just shocks me is, as i've said to you all many times before, the mayor was never on my radar screen. he was never mentioned to me as somebody whose endorsement we were even pursuing. in fact, i think he said on cnn last night he doesn't recall being asked for his endorsement. so part of this is, i never saw this as political retribution because i didn't think he did anything to us. now, we pursued lots of endorsements during the campaign

from democrats. and we didn't receive most of them. we received about 60 at the end of the day. we pursued hundreds. and so i never -- i don't have any recollection of at any time during the campaign asked me to meet with the mayor or call him, which was the typical course that was used when we were attempting to get an endorsement, that staff would work with the elected official first and then when they thought, using the ven knack clar, the ball was on the tee, they would call me in to make a phone call or have a meeting or a breakfast and then i would then meet with the elected official and see if i can bring it over the line. i don't remember ever meeting the mayor in that certainly never did in that context. i'm sure i met him at some point in an event in bergen county. but until i saw his picture last night on television, i wouldn't have been able to pick him out of a lineup. and so part of this is the

reason that the retribution idea never came into my head is because i never even knew that we were pursuing his endorsement and no one ever came to me to get me to try to pursue the endorsement in any way. i never saw this as any effort. >> now that you know -- of course. of course. john? john? >> you said you're going to continue to ask the staff? what questions are you asking them yourself? these are people as close to you as you can get, people you trust, birthday party, and if they -- what was that last piece? >> went to a birthday party. >> went to a birthday party of mine? yes. a few of them were there. >> so i'm asking, when you ask yourself, as a group they were willing to go rogue and do this and try to cover it up and then lie to you? >> listen, obviously -- i said

earlier, john, i'm heartbroken about it. i'm incredibly disappointed. i don't think i've gotten to the angry stage yet. but i'm sure i'll get there. but i'm just stunned. and what does it make me ask about me? it makes me ask about me, what did i do wrong to have these folks think it was okay to lie to me? and there's a lot of soul search that goes around with this. you know, when you're a leader of an organization, and i've had this happen to me before, where i've had folks not tell me the truth about something. not since i've been governor, but in previous leadership positions. you always wonder about what you could do differently. and believe me, john, i haven't had a lot of sleep the last two nights and i've been doing a lot of soul searching. i'm sick over this. i have worked for the last 12

years in public life developing a reputation for honesty and directness and blunt talk. one that i think is well deserved. but, you know, when something like this happens it's appropriate for you to question yourself. and certainly i am. and i am soul searching on this. but i also want the people of new jersey to know is that this is the exception, not the rule. and they've seen that over the last four years with the way i've worked and what i've done. so i don't want to fall into the trap of saying, well, this one incident happened, therefore, the one incident defines the whole. it does not. just like one employee who has lied doesn't determine the character of all the other employees around you. and so i don't want to over react to that in that way either, john. but if you're asking me over the last 48 hour or last 36 hours i've done some soul searching, you bet i have. brian?

brian? >> the mayor is quoted as saying the day he is behind endorsing you as a democrat, as many as ten appointments between state officials and jersey city officials were canceled, suddenly, all at once. how do you explain that in the context of what you now know about what some of your staff did? >> well, listen, all i know is -- i don't know, brian, is the first answer i'll give you. to the question. but what i will also say is, listen, mayor philips seem to have a lot of disagreements with lots of people, with me, with the senate president, and others. there's going to be back and forth. there's going to be meetings coop se canceled. there's going to be disagreements. but the fact of the matter is we've concerned to work with jersey city over the course of time since he's been mayor. in the last year i think we've approved about $190 million in financing for projects in jersey city. the dep, deputy commissioner,

meeting yesterday with mayor philip and his staff on blue acres issues to try and buyout properties effected by sandy. so we continue to work with them. i don't know act specific meetings or what's going on but certainly, you know, i will look into all of those things. but the fact is that what mayor philip knows is when we agree with him from a policy perspective, we'll work with him. when we disagree with him, we'll express those disagreements. and sometimes that will mean friction. he's suing the port authority at the moment. there's lots of back and forth and to and fro that happens. i look into all of this stuff. but in the end, have i at times been angry with mayor philip and disagreed with him? you bet i have. but i also spoke at his swearing in, at his invocation. political relationships in this state go up and down, as you know, brian. sometimes strange fellows and sometimes expected ones. and they move. i'm sure there's been movement

in those relationships over time but not anything i can explain as to the specific question. bob? >> i have heard that you actually, when your staff learned something new in the situation awareness, the universal apology to the state of new jersey include the press corps? >> sure. i mean, listen, most of you, i hope, are citizens of new jersey. so you would be -- there are a few exceptions. >> i know there are and we don't need to point them out. yes, of course it does. the fact is i came out here and said something that was untrue. i mean, unwittingly, but i said something that was untrue. i think what you all have seen about me over the last four years of my dealings with you is that i deal with you directly. and i say exactly what i think. and i think over time i have developed a reputation for telling you all the truth, as i see it. there can be disagreements but the truth as i see it. as so, yeah, i mean, would i include the press corps, of

course, i would because most, if not, many if not most of you are residents of the state and you rely upon this state government to be honest and trustworthy as well. and in this instance, my government fell short and i take responsibility for that and that's why i'm apologizing. beth? beth? >> i'm wondering what your staff said to you about why they lied to you, why did they do that and their explanation? >> i have not had any conversation with bridget kelly since the e-mail came out. and so she was not given the opportunity to explain to me why she lied because it was so obvious that she had. and i'm, quite frankly, not interested in the explanation at the moment. i'm not done. she had a second part of a question. general sampson put out a statement yesterday that he had no knowledge of this. i interviewed him yesterday. he was one of my interviews. i am con fenced that he had absolutely no knowledge of this. that this was executed at the

operational level and never brought to the attention of the board of commissioners until chairman wrote his -- executive director wrote his e-mail to the board of commissioners. i sat and met for two hours yesterday with mr. sampson, general sampson, and, again, i'm confident that he had no knowledge of this based upon our conversations. and his review of his information. so i think, you know, as he said yesterday, he's angered by this and upset about it. and i know that he's going to lead -- cooperate with the oig investigation that's on going and lead a discussion about the port authority about what can be done at the future to stop such conduct. charlie? charlie. >> you mentioned earlier that the question you were asking in reflection is what did i do wrong to have these folks looi to me. are you also asking the question, what did i say or how did i conduct myself in office

to lead them in a way that would let these folks think it was okay to carry out such a scheme like this? the criticism, suspicions has been that you fostered a culture through your administration or your campaign that allowed people to think it was okay to intimidate or retaliate against people. >> no, charlie, listen, i haven't because i know who i am. i'm not that person. and listen, it's easy for people to be characterized in public life based upon their personality. i have a very direct, blunt personality. i understand why some people would think characterize that, especially people who don't like you as bullying. but it's not that. and i know that about myself and, no, i haven't asked that question, charlie. i'm more focused on why the truth wasn't told to me. melissa? >> you plan to go to ft. lee this afternoon and apologize to the residents there. are you also going to apologize

to the -- >> i just did. i just did. i said i'm sorry for that and i would have never made that joke if i knew the facts that have come forward to me today. >> what problem did you joke about -- >> because i thought it was absurd that we had nothing to do with it. that's why. and obviously -- obviously the e-mails evidence the kind of callous indifference to the result of that ands that what i've apologized for. i do apologize for it, melissa. and i certainly intend to apologize, you know, to the mayor today. i'm going to try to get a meeting with him this afternoon. terry? >> the flip side to the retribution question. the e-mail, the mayor, some sort of war or endorsement. >> who is that? >> the mayor. >> i read that. i didn't -- i didn't read that that way at all.

and that was a reference to a traffic study that candidly i know nothing about. and i recognize that the e-mail said something about the gov supported it or endorsed it. i have to -- because i don't know anything about it, i have to believe that was like the governor's office generically, that reference. as i stand here today, i don't know anything about a traffic study in springfield. >> your campaign, did you ever go into town and say this is what happens if you -- >> oh, god, no, absolutely not. no. no. it's just not -- no, that's not the way it operates. terry, we built relationships over four years with folks trying to be helpful to every town that we could be helpful with appropriately. so no, nothing like that was ever done. >> governor, you said -- i'm wondering if your soul searching about the kind of people you hire or the kind of people who run your campaign or the kind of people you want to run the

republican party here, who are willing to apparently engage in political retribution and also call the mayor of ft. lee racially incensensitive name. >> sure. it was a mistake. i mean, the soul searching is complete on that part of it. it was a mistake. >> did you hire them? >> obviously. it was a mistake. listen, the fact is that mistakes were made and i'm responsible for those mistakes. and i obviously try every chance i can to hire the very best people. and i think the history of this administration shows that we have hired outstanding people with great ethical standards who have done their jobs extraordinarily well and a government of 65,000 people, there are going to be times when mistakes are made, mistakes were made and i remediated those mistakes today by the actions that i've taken. and so, you know, i'm in a

constant state of try to figure out who are the best people for individual jobs who will make me proud to have put them there. that's always been going on. that's nothing new now. there are times when you put people in those positions make mistake, they disappoint you. you lose your confidence in them, or they lie to you. when you find that out, the test of leadership is, what do you do? i found this out at 8:50 yesterday morning. by 9:00 this morning, bridget kelly was fired. by 7:00 yesterday evening, bill stepien was asked to leave my organization. that's pretty swift action for a day's work. that's exactly the way i'll continue to conduct myself if there's any other information surrounding this that comes up or anything different that comes up over the course of the next four years. phil? >> relatively people up in the

hierarchy, how much of a crisis in confidence in the people you surround yourself with and your ability to -- >> i can -- i can differentiate, phil, between people who have served me well and they haven't. and, of course, there's always going to be some after something like this where you've been lied to, there's going to be some crisis in confidence. okay? there always will be. i mean, anybody who tells you differently is not telling you the truth. if they say to you, you know, this happened to you and you're not going to second-guess yourself at all. well, then, then you're just stup stupid. of course, i've second-guessed myself and gone through my head through some of this stuff. and in the future, i'll try to be even more careful. but here's what i know about human beings, phil. i've hired a lot of them in my time as u.s. attorney, as governor, and as a hiring attorney in a private practice

law firm. sometimes despite the best background checks, despite the best interviews, despite your best instincts, sometimes people are a mistake hire. sometimes they start off as a good hire and because of circumstances that happen in their life, they change. you can't prevent everything. but the test of leadership is, when you find it out, what do you do? and i'm saddened to have to do this. it's difficult personally to do. but it's my job. and i've taken an oath and i'm going to dexecute my job. josh? >> you haven't slept the last two nights and you just found out about this. is that just a misstatement? >> yeah, i'm sorry. >> the other thing is, in terms of drilling down getting it to

handle a lit bit more, what happens to this? direct or endorsement, was there then a retribution, and what about this piece that there was some sort of vendetta exercised against the new york side at the port authority after the revelations first began appearing in the press? >> a few things. first off, to my knowledge, and i think the mayor said this last night, i have no knowledge of him being asked for an endorsement. he may have been. but he certainly was never asked by me. but he, i think, said last night on television that he doesn't recall ever being asked for an endorseme endorsement. that's why this never made sense to me, josh, why would you execute a vendetta against somebody who you didn't even give a chance to say no to. put aside the fact that you shouldn't do that at all. but then if you never asked him for an endorsement, why are you mad at him that he didn't give one. none of it made any sense to me. so that's the first point. >> you still don't know what prompted -- >> i don't.

i don't. and again, i don't know whether this was a traffic study that then morphed into a political vendetta or a political vendetta that morphed into a traffic study. i mean, i've seen in front of the legislature statistics and other things about the traffic study so i know there's information there. i don't know what it is. so we'll find out over time, maybe. but that's really in the minds of the people who were doing it and that's what i based my decisions on at the time, was the testimony that people gave. lastly -- >> on the payback. >> no, no, no. listen, i don't know exactly what you're referencing. but i think that you're talking about the voy memo that was leaked? is that what you're talking about? >> it was a little hard to follow, but it seems that according to the e-mails, the traffic history arose, complaints were made, a story

appeared in one of the newspapers, complaints were then logged internally at the port authority and he says, i don't know the exact words, forgive me, but something along the lines of we're taking appropriate action against the new york side and sampson is working with us on it. >> yeah. it's something -- yeah, i asked general sampson about this. i think it said -- yeah, it said something to that effect. i don't remember exactly what it was. i asked general sampson about that yesterday. he said he has no idea what he was referring to and that the only communication that he had is that that's just not appropriate for folks to be leaking internal documents. but he has no recollection from what he told me yesterday of any conversation like that with wildstein or baroni. certainly not that i'm aware of

or not out of the normal. i mean, let's remember something, too. this is a bistate agency with significant tension, all the time. now, dls no tension between governor cuomo and i. we get along quite well. went issues rooiz to our level we've always been able to resolve them. but there is tension and always has been between new york and new jerseyhe allocation of resources at the port authority. so let me be clear. there is some battles over there that go on that have happened in every administration over the course of my memory. but you can't connect that to -- that's kind of the ongoing nature of the tension of that nature. i think of most bistate agencies although i think the port authority of knowlednew york an knowledge knowledge, the demands are greater. nothing that i know specifically about that, josh. but i want to make clear to

people that there is tension that goes on between the employees of these agencies. not every one of those issues have tension, thank goodness, are raised to my level or governor cuomo's level. the good news for the people of new jersey and new york, when they have raised to my level of governor cuomo's level, we have always between the two of us resolved it and been able to move on. sometimes that's the role governors have to play in that agency. >> governor? >> yeah. >> a few questions about your judgment. you said clearly -- the you question your own judgment about whether or not you can discern whether or not putting out a series of cones to change public lanes of traffic was -- traffic study? >> let me answer that and i'll let you follow up. i don't know what makes a legitimate traffic study. it's not my area of expertise.

and so i wouldn't have a nose for that. i just wouldn't. i don't know what makes legitimate traffic study. i've been told that sometimes they're done live, sometimes they're done by computer model. i've heard that from the professionals who have testified for the port authority. you would have to ask them what a legitimate traffic study is. i probably wouldn't know a traffic study if i tripped over it it. >> didn't raise a question? >> no, it didn't. >> governor, you said that sometimes it raises to the level of governors. you called governor cuomo to complain that the new york representative, according to the board, was asking too many questions oh. >> not true. not true. i have denied that story before. that's an old story and governor cuomo has denied it, as well. it's not true. >> do you think pat voy purgered himself when he said it didn't exist? do you think he lied under oath? >> listen, i have no idea.

clearly, you know, there's a difference of opinion between senator baroni and pat voy about the existence of a traffic study and there seem to me to be evidence that senator bernoni showed. they may be arguing about some specific specifics and nuance that i'm not familiar with. i do not accuse pat voy of purgery. i wouldn't accuse him of purging himself in any way. >> do you think everything that he said was genuine and not in any way -- >> guess what, after reading everything yesterday, yon. what i'm telling you is is that that's what i've been told. he seemed to display evidence of that at the time. that's now, because of the tone

and tenor of these e-mails and text messages, that's now, you know, all of this stuff is something that i'm not going to warranty because i don't know given some of this back and forth that went on between all of them. senator baroni is a well respected guy. i've known him for a long time. when he made his testimony i would have no reason to believe that he wasn't telling the truth. from reading these e-mails yesterday there was other stuff going on that i hadn't been informed about. i never called him permly, no. but baroni's position continued to be that there was a traffic study and he had a disagreement with pat voy about that. so, you know, they had a disagreement. that was clear.

matt? >> was he asked yesterday what was going on? >> i had no conversation with bill stepien yesterday. >> listen, i had -- earlier conversations with bill stepien where, as i expressed to you at the time, that bill told me he knew absolutely nothing about this. certainly the e-mails yesterday were well after the fact. so -- but that's not the basis upon which i made my decision on bill. it was made on the tone and tenor and conduct of the evidence of those e-mails. i lost confidence of his judgment and that's why i made the decision i made as to bill. brian? brian? >> it's no secret that many in the republican party are calling

on you -- do you see what has happened here playing into your decision-making process over the next year or two? >> i have no idea what the decision process would even look like at this point. as i said many times before. and i know that everybody in the political media and in the political chattering class wants to start the 2016 race. universities can't help themselves but do polls that are meaningless three years away from an election. you guys can't help but put put them on the air and talk about them. my job is to be governor of new jersey. and i have -- i'll say what i said before. i am enormously flattered that folks would talk about me in my party and someone who they think could be a candidate for president. but i am absolutely nowhere near beginning that consideration process. i haven't even been sworn in for my second term yet. i've got work to do here. that's my focus.

my focus is on the people of new jersey and the job that they gave me. and so all of those considerations are, you know, the kind of hysteria that goes around this because everybody is in that world gets preoccupied with that job. i am not preoccupied with that job. i'll preoccupied with this one. as you can tell, i got plenty to do. so it's not like i got some spare time to spend. yes? because you're rolling your eyes and looking very, you know, d disgruntled that i haven't called on you. i've known brian longer than you. >> you barely talk about a lawsuit. can you elaborate on how you're feel for his role in this and any information that you garnered from him regarding that? you also said that you are one to show emotion. what kinds of emotion? >> i think -- >> in private with -- >> i'm sad. i'm sad. that's the predominant emotion i feel right now, is sas.