switzerland. this is the host city for the world economic far uhm. this is it, guys, we are here. >> funlly a finally all togethe. >> yesterday cleansed all the air, yesterday it was dreary and drizz drizzle. >> not so beautiful back home. >> 10 degrees. >> polar vortex, too. >> i keep reminding them they're inside, we're outside. i'm becky quick along withjoer can kernan and andrew ross sorkin. mark bertolini will be up and ray dalio of bridgewater, william bratter, thomas donohue of the u.s. chamber of commerce and david rubenstein, james gorman and matt damon. that's right. tomorrow an interview with jpmorgan chairman and ceo jamie

dimon. before we get to all of this, why don't we get to some of the headlines. >> let's get to the headlines, ibm reported quarterly revenues below wall street consensus for the fourth straight quarter. steep drop in demand for servers' storage products. earnings topping analyst expectations. also on the list texas instruments, they posted better than expected fourth quarter earnings and revenues, company also announcing that it's cutting about 3% of its global workforce or about 1,100 jobs. the corporate restructuring program aimed to save $130 million by the end of the year. keep an eye on shares of advanced microdevices coming under pressure and extended trading after the chipmaker forecast a steeper than expected drop in current quarter revenue. analysts now saying the news suggesting that sales of gaming consoles were not growing fast enough to offset slowing pc sales. shares have risen 15% in the last month.

>> thanks. something in the water in california. mohammed el erian is stepping down at pimco's ceo and co-cio. >> back and forth last night. >> i got a generic one that said "dear friends, thank you for everything." like it's thanking all of us. i wanted personal. in fact he didn't even clear the whole idea. >> with you first. >> with me first. do we know -- >> i wept back and forth, trying to understand a little bit about, i couldn't tell was this a good thing, bad thing? pushed out? unclear. he didn't fully explain it. i did see a memo that went out internally inside of pimco that was very lauditory bill saying nice things. >> bill saying lauditory things about mohammed. >> and mohammed about bill. it was like a lovefest. >> the more lauditory, the more forced out? >> he's continuing some role with the parent company. i couldn't make sense of what

was happening. >> i haven't gotten a sense either but there are people speculating this would clear him to run for elections in egypt. >> rex ryan resigned, right? mohammed -- >> that role is not available. >> probably not. and then neel kashkari. >> he's not functioning, already gone from pimco. maybe they could run against each other in california. >> mohammed versus neel. neel kashkari plans to run for california governor as republican, he'll challenge governor jerry brown for the state's top job. jerry brown is not going to run for president, we saw that. is he governor moonbeam anymore or has he graduated? >> i think he's grown out of that, i think. i'm not in california. >> the former governor of california is wearing a wig and playing ping-pong stuff on the commercials. have you seen it? you have not seen -- >> no. >> i saw that. i thought you would have seen it. it was on the playoff games for

football. i thought you would have seen it. how did you see it? >> i watch enough tv. >> you saw a series of ads with schwarzenegger with a wig and head band playing ping-pong and warming up. something for the super bowl. >>ing acy maybe coming back? >> markets up or down? >> if you look at the futures they are indicated a little bit lower. the dow futures are down by about 27 points, down by about 42 points below fair value. you look at the s&p this morning they're down by 2.5 points and the nasdaq is off by close to five points below fair value. you look at the energy markets at least right now wti picked up 43 cents, 95.40, stuck in the range tweebetween 90 and 100, t ten-year note the yield at this point is 2.852%, well below 3%. you've been right on that call.

>> i know it gets old. >> let's look at what's happening in the 4x markets the dollar is up against the yen and euro, euro at 1.3543, dollar/yen at 104.32 and gold prices for now are indicated or looking like they're down $2. >> why is this guy doing global markets? >> i was going to say we're here. >> if anybody's global it's us. >> we're across the pond. >> bob westgate is standing by russ westgate is standing by in london. >> you guys look good there. joe, how is it? are you all right? >> i'm fine. i've been avoiding, i haven't talked politics at this point with too many people but we're good. in fact it's so warm here -- >> are you going to take the coat on? >> you know what i have on under

this? i have a sorkin zipper sweater. can you believe that? >> are we getting new animation? >> i joined the sorkin's letter of the month. >> excellent. i'm not withearing my sweater. there it is. "sorkin's sweater of the month." >> we're. more cosmo european than you are today, ross. >> you are, looking good. temperature goes up dramatic when the sun hits the set. 'cooler for european equities. we're weighted to the downside and at the session low at the moment, decliners outpacing advancers 3:2. it was the other way around about an hour into the trade. this is the chart. the ftse 100 was up a mid two points. it was firmer this morning, now down 11 points. come back to the uk in a second. xetra dax off 0.05.

the uk unemployment a sharp fall in the unemployment rate from 7.4% this morning to 7.1%. what's key is that the bank of england a bit like the fed has a threshold for where they said they'd reconsider monetary policy, 7%. originally the bank when they launched their forecast was saying we probably won't hit 7% until the end of 2015 and a couple months ago saying maybe it would have been january 2015. we might hit that rate next month. sterling sharp against the dollar, near the highest levels we hit in august 2011 and a big sell yourself for gilt yields as well, now the yield on that just around 2.89%, ten-year treasury yields 2.85. abb, the swiss engineering firm warning its fourth quarter results will be hit by $260 million charge, missed profit targets, asml, the chip

equipmentmaker up 6.8%, beat profit forecasts and strong demand for tablet and smartphones. becky out to you and i hope the rapidly warming at sphere of the swiss mountains. >> it is so rapidly warming that while you were talking, ross, joe took his coat off. wardrobe change, ripped off his coat. >> she didn't change as quickly. they run back and did you see that, people working on me. >> you have a good staff, got you all set up. pretty good. right there. >> you look very pretty. handsome even. >> all right. in the meantime we've been wondering how obamacare exchange also affect the affordability of health care in the future. we have the go-to guy with us right now on set to answer this question and much more. joining us is mark bertolini, chairman, president and ceo of

insurance jigiant aetna. >> great to be here, becky. >> the obamacare question you recently raised revenue outlook for 2014 by $1 billion. >> right. >> is that because of what's happening with enrollments? >> no, it had to do with medicare. so we had a lot more medicare enrollment than we anticipated and so that revenue number approximately pretty much the medicare growth that we had that we didn't anticipate for 2014. >> what does that mean for earnings? will you raise your earnings? i thought you kept it within guidelines. >> we did. it's too early. we don't have data where they enrolled, how old are they, what kind of comorbidities do they have. until we get data on the individual it's premature. >> medicare revenue is going up. what does it say about the country at large? >> medicare advantage. >> it's medicare advantage right so it's our product within that set. i think there's movement in the industry, i think the overall

industry is up about 1.5% but if you look at cohorts of individuals retiring people are retiring now, more than likely to pick a medicare advantage plan because they're used to working wi ing witing with mana versus people over 70 who old on to the red, white and blue card for dear life. >> democrats tried to crush medicare advantage plans why, and now the rates are going up they're blaming it on the insurance companies. can you tell me exactly what happen happenedyou the sugar coating it? >> medicare advantage is too big. >> what was the point of trying to crush it in the first place, impediment to single payer? >> i'm not sure. there are different points of view about that across the demographic. >> was it too good for people? it allowed the private sector too much weight in deciding health care? >> four years ago medicare was paying 114% of medicare fee-for-service to managed care plans to manage the population.

what we were doing in essence is competing for older individuals because we're getting a risk adjuster and the older individuals were caring for them better so they were jep ragener more march jgin as a result. they were wondering why they were paying so much. >> they tried to killed the goose that laid the golden egg. >> now we're down to 106% and headed toward 100. once we get to that point and the program continues to grow the fodder for killing the program disappears. >> well that's interesting. see the surroundings have not changed my viewpoint on socialism, andrew. >> i see that. >> it's in the air but i think it was a disgrace the way that worked out, no? >> we managed our way through it. >> good. in spite of the government you're doing okay. >> what is your latest read on the website, if if you will that

is obamacare. >> i think too much is being made of the website. we have failures from time to time, it was a particularly big problem but is the problem working behind the website. right now we see only 11% of the population is people formerly uninsured now insured so we didn't really eat into the uninsured population. so is the program working? we saw people that were very adept at shopping and so economics always works and so if i can find a cheaper policy versus the one i already have in the individual market i'll go buy that. we didn't see a whole lot of shift. employers shied away from moving their employees into public exchanges because they didn't like the way it rolled out. and so we saw employers pull back from thinking about the public exchanges for employees. we saw a shift of the individual insured market on to the public exchanges where they could get a better deal on the subsidy. >> that sound like it's not effective though if you're not getting people who weren't insured before insured, do you think that changes with time? >> as our companies made the

shift from b to b, business to business, consumer to consumer, consumers want more choice and flexibility. employers offer health plans. you have your health plans from cnbc and you get how many choices? >> two or three. >> two or three so somebody's either chronically insured, overinsured or underinsured, never "fully insured." if i'm an individual and i know the health care usage i'm going to have the kind of doctors i if to, i want to find the tolecy that,for me. the public exchanges have four options so they don't have the chance to really shop, all they do is have an opportunity to shop for better subsidy. >> fundamentally broken or a way to fix it? >> it's in place now and we have to move forward. we need more flexibility in the program so we should have more options versus the four we have today, we need more rating flexibility in the program than we have today. >> you've seen the problem with you know what is it, 26%, a number that's not sustainable, the subsidies are more than we

thought. an economist that says it is currently in danger of collapsing under its own weight. this is much more expensive? the government will bail out any insurance companies. >> who likes buying health care insurance? do you? >> no. it has to be sold. it's not like i'm waiting on the edge of my chair for the website to go up so i can go shopping. >> it needs to work in the in ex-year. >> we need to make it sempler. we need to make it a lot more simpler for people. there needs to be more choice and when you go i have more choice and make it more of a market you get more people in the program. >> you think they'll be able to do this in. >> whether or not there's the pl political will to make the changes to the program without creating a food fight in washington over what the changes are remains to be seen. >> if it's not fixed will there be a government bailout? >> for us it's 3% of our revenue. whether or not there's a government bailout because we lose money on members is irrelevant to us from the standpont of our earnings.

the real issue is can we make this program grow and will ex-changes in the public sector grow? they're growing in the private sector. >> if you lose money will you stay in the program? >> our big question is may 15th we have to submit rates for 2015. >> right, will the rates go rapidly higher? >> we'll get beat up because of double digit or pull out of the program? those questions can't be answered inle we see the population we have today and we don't have a good finger on that. >> i assume companies like yours will not threaten but suggest to washington you're going to get out of it. how will that change the dynamic? that's how this is going to happen. to move them. >> i think if we come forward with ways to make the program better and can see a line of sight that the practicement will be different in the foo you the i think we invest for the future. if it's just more hammer and tong between the administration and congress and the health plans, then i think it gets difficult. >> so within ten years, how much of the average health dollars is covered by corporations and how

much is around the individual or the government? >> i think the way the world is going to emerge is in 2020, 75 million people will be buying health care insurance as a consumer from exchanges. >> okay. >> some portion will be public exchanges, 20, 25 million, the rest will be private exchanges and i think the real question for us will be we're going to have individuals buying health care with a subsidy from their government or a subsidy frommier employer and it will be a very different marketplace than the one we're in today. >> the idea of double digit increases come may 15th, is that a real possibility, a 50/50 shot? what are the odds we see those increases in. >> i can't tell you. >> how many people are going to be basically paying for incidental health care because they don't get anywhere near their $2,000, $3,000 deductible? people are not going to be covered. most people will be paying out-of-pocket up to $3,000 and when is the last time i had an emergency appendectomy, other

than that -- >> you're paying for everything. >> i've never gotten to $3,000. >> a couple years ago having a baby. >> that was your own fault. >> mark, thank you so much for joining us. really great talking to you. we'll see you again. >> it's a parade. it's a veritable parade in the mountains of davos, just getting started. this vest work? >> it's working for you. >> look at the zippers. i got zippers everywhere. arnie sorenson, got to talk to him. why don't they have a decent, not that my hotel is bad but it would be nice to have, i mean did they think of room service in europe? that is an unbelievable concept, isn't it, to have a kitchen in hotel or bellmen? sorenson how is marriott reshaping the lodging industry. it may be colder back in engelwood cliffs, much colder because we're warm.

>> we're hot. >> it's nice, well you are hot because it's hot on the set. >> it is. lot of light. >> i'm getting hots. the forecast from the weather channel's reynolds wolf who probably doesn't look any better than us. >> it's good times we all look great. davos 15 degrees. you might see some snowfall by friday but here back in the u.s. for the east coast it's the snow today. this system winter storm janus strong air behind it going to set up cold air. much of the snow will be moving out to sea. boston may still see snow showers into the early afternoon hours, some spots like say plymouth, toward say well right near parts of the coast itself could see another three to five inches of snow and then the cold air sets up camp through the weekend. more on that coming up, folks you're watching "squawk box." enjoy. [ male announcer ] this is the story

of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. ...and the little room above the strip mall off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪

marriott is a global brand of hotels all over the world, joining us is arnie sorenson, president and ceo of mare yat international, seems to think i don't get out much. i have stayed at the ven dome renaissance one of your properties in are pais, great boutique hotel, rooms weren't large but maybe 10 or 11 times the size i have here, not that there's anything wrong with that, when i ski you know where i ski. >> i do. >> the greatest, it's a ritz

carlton and there's no ritz carlton here, dude. >> they're fired up because arnie said they let you out. >> that's right. number two this is a scenic, beautiful little town but kind of looks like veil not as new and kept up. >> it's beautiful. >> it is. >> the swiss alps has got so much character, thevillages are all great. >> not enough to bring you to build a facility. >> we'd love to be at davos in some time. i've heard from folks half of the lodging economics every year come this week. >> literal i had in terms of revenue. >> davos week. >> so there's really only two sort of high-end hotels, there's the belvedere and the evercon. >> it's pretty new. i don't think we had a shot at that one but maybe the owners list it and give me a call. >> everything in terms of occupancy is back for most hoe

he tell changes. rev par is below '07. >> you timely made it. >> just about. nominal. >> you're not that back yet. >> we're not back to the same pound for pound profitability. i think that's another couple years away. >> it's not in the u.s., all your international expansion? >> the company as a whole is back to peak profitability now in 2013. >> i think you told me before. >> i never said that before but that's really global growth so that's the new unit since 2007 adding to the same-store sales. we'll see that continue. we see the developing world continuing to provide better growth than the rest of the world and i'm wearing a south african scarf we announced finally selling the definnive agreements on our acquisition of protea, the largest south african company this morning so we're excited about that. in the u.s. we have to see another couple years of gdp growth and with it rev par growth bringing us back to pound

for pound profitability in the u.s. >> one of the big things is global unemployment. it's almost like technology, this is a theme we have a lot, andrew, technology is outpacing the ability to provide good jobs for people unless you're really, really skilled. you continued to build out high end all through the crisis. i think that was a good move but will there come a time where you wonder whether the inequality from this problem becomes a social issue where people cannot go and lavishly spend money on themselves? >> i this i in a small way what's happening with luxury and upper middle class travel around the globe is helpful in terms of employment growth so i was on a panel this morning on wealth and employment and global trends and you see in places like rwanda we'll open a marriott. all the folks who are getting job bees it's like winning the lottery, i got a regular job with predictable income, i can

support my family, i'm so enthusiastic about the opportunity to go to work. in the developed world that's a little less the case but it's still very much the case what we're seeing is increasingly people travel around the globe, as they do, they have more jobs in the places and the jobs are by and large good jobs and helpful. >> are those good jobs, andrew? >> i was going to ask you about the wages for the jobs and the margin for you. i assume in a developing orrwan the margin for you has to be incredible because the wage is so low. is that wrong? >> it varies market to market. you're generally right although the staffing models change a lot with the cost of labor. so if you look in the developing world we'll often have two employees per room. >> wow. stwl a >> and in the you state the average might be 0.6 per game and the average in western europe might be the same. >> you ever take on the wage issue in the u.s.? >> it's an important discussion

to be had. it can be overstated, if it is the single approach to solving income imequality we'll be disappointed. >> why is it important to be discussed? >> a lot of people are working hard and trying to put their lives together and finding it difficult to make ends meet on minimum wage and so you can understand i think why that voice says i need to be paid more. >> is the marketplace seeing for 97.5% of the workplace it generates higher wages people can live on, 2.5%, 1.25% or 1.5% are 16 to 22-year-old, a second or third job. you're down to 1.5% of the too emthat might actually be family providers at that point and that almost seems like just that's what happens. and it's not going to help if you help that 1.5%. you're not going to tackle the big issues. you do it symbolically. >> just the idea that this is becoming an issue that is on the consciousness that is now politicians are using, how do

you solve that problem? >> it obscures the problem of getting more jobs for everyone at the higher paying market price jobs. you know, we're not focusing on that because we're sitting here focusing on listening to the president talk about it. >> there's no doubt that economic growth is a much more powerful driver of jobs creation than minimum wage and clearly we ought to be focused on that. i think it's a good discussion to have. >> some people have to give it lip service to look look they're etch thet empathetic instead of tackling the issues what we need to get to 3.5% to 4% growth. >> we're not running minimum wage programs. >> there are restaurant chains having a hard time dealing with $15 an hour. >> getting it up to $10. >> certain parts of states have gone to $15. in general wage and price controls are not the with a i to run an economy.

>> i have a practical question for you before you go. >> i have one more point if i could. >> go ahead. >> one of the things we're seeing is i think out of 13 states that have moved independently on minimum wages. >> right. >> we've got in seattle, the airport area overnight an increase to $15. >> that was unhelpful there. >> i think there is enough political force around minimum wage that one of the things we have to watch for, are we better off with something which is more graduated, more thoughtful than each individual municipality moving more aggressively and potentially hurting those economies. >> at the end of their rope all right we're doubling it. >> when i say it's an important issue to discuss i'm not advocating a solution. >> you're saying it's better to go slowly and give them a little bit. >> there are things happening here and we ought to be engaged in the shall uinstead of sticking our head in the sand. >> are you supposed to tip the haim cham we aremaid or cleaner

of the room? service is included with room service. we talk about wifi and otherer us. practical question do you leave a tip? >> i do. do you not? >> i do leave mine but i've had a lot of debates about it. what do you think the percentage should be? >> people say a couple bucks. i always do more than that. >> usually ten. >> per day. you leave it per day or at the end? >> at the end. >> sometimes i think it's a different person. >> that's right, hopefully it comes out in a wash at the end of the day. >> is that built into cha the chambermaid i don't know if it's the right phrase. >> unless you're dominique strauss-kahn. >> it's not viewed as a tipped position. >> if it's not free wifi it's how much should i tip. so cheap. >> there are people who want to know this stuff, we have the ceo of the company right here. >> you write jobs and books and movies. is it going to kill you to give a couple dollars to the maid?

>> maria shriver came out with a report on women and economically and one of the points she makes, men tend to dominate the positions in hotels that are tipped. thinking of bellmen and the women tend to dominate the positions like housekeeping which are almost invisible. and these women are absolute heroes. they are often diminutive immigrants who work diligently day of aday and year after year after year and to be able to give them something for to recognize them for their work i think is great. >> i'm sure you figure we got to do that, too? >> we need to do imgraition reform, hopefully done this year. >> thanks. great to see you. >> thanks, arne. >> you can't get one up by the end of the week like a hotel, with room service? the next half hour we'll talk to one of marriott's competitors, frits vap

paasschen, no facility in the hundred-mile radius. . still to come, with he go inside the highest altitude brewer why i in europe and by we i mean joe for a stein or two of the famous beer, a must see tourist spot when visiting davos. come up at the top of the hour, ray dalio will give us his wisdom about the economy in davos. more "squawk" after this. there are trading opportunities1 tdd#: 1-888-648-6021 just waiting to be found. tdd#: 1-888-648-6021 at schwab, we're here to help tdd#: 1-888-648-6021 bring what inspires you tdd#: 1-888-648-6021 out there... in here. tdd#: 1-888-648-6021 out there, tdd#: 1-888-648-6021 there are stocks on the move. tdd#: 1-888-648-6021 in here, streetsmart edge has tdd#: 1-888-648-6021 chart pattern recognition tdd#: 1-888-648-6021 which shows you which ones are bullish or bearish. tdd#: 1-888-648-6021 now, earn 300 commission-free online trades. tdd#: 1-888-648-6021 call 1-888-648-6021 tdd#: 1-888-648-6021 or go to schwab.com/trading to learn how. tdd#: 1-888-648-6021 our trading specialists can

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welcome pack to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and becky quick. coming to you from davos, switzerland. it was cold but we have the hand warmers. lovely. >> mine haven't warmed up yet. >> is that the ohm place you have these andrew, in your pocket? >> are you talking about the other ones in my shoes? >> in your shoes. >> or elsewhere? >> in your shoes. we have so many great guests, ray dalio of bridgewater, tom from the u.s. imchaber of commerce, james gorman and matt damon to name a few. the headlines we're looking at, "squawk" market master, also known as someone from pimco, mohamed el erian is stepping down as the ceo and co-cio. the company is not giving a reason for his farthdeparture. he'll stay on to consult for the parent company. >> people thought he'd run that

someday, thought he was the successor to bill gross. >> he will stay with allianz. egypt has not figured out a leadership structure. i don't know whether this has anything to do with that but. >> it would clear the way for him to run for election in egypt. >> united technologist is among those set to release quarterly earnings today. we should get the numbers at the top of the hour. analysts anticipating utx will report a profit of $1.53 a share, revenue 17.1, $1 billion. only two on that beautiful 757 boeing, but two very good pratt whitney. government officials are said to -- because you're over water. you ever think about that going over, you can't land. >> most of the time you're going up the seaboard and then going up and you can go into greenland, over ireland and then get into europe.

you're not that over the water for too long. >> tough to talk about general safety concerns, we're set to propose tougher regulations for child car seats. the ntsb will announce proposals later today, new testing simulates side crash. officials think the tougher standards would present about five deaths and dozens of injuries per year, prevent. former treasury secretary tim geithner aparentally wants one of the chairman of standard a standard&poor's company they'd be held accountable to strip the u.s. of its coveted aaa rating this comes from terry mcgraw in a statement part of the company's defense though against the government's $5 billion fraud lawsuit over its rating practices prior to the 2008 financial crisis. geithner spokesman said the allegations that geithner threatened or even took any

action to prompt retaliatory government action to s&p is false. it doesn't ring completely true. i think fighter in was furious. they made a $2 trillion mistake in the numbers when they did that and the idea that geithner is somehow in cahoots then to bring a case like this is kind of impossible. maybe i'm wrong but i don't think so. >> why isn't he here? >> once you're a former you have to come? jack liu is here. >> i don't know that he isn't in town. >> just by chance happened to are in davos? >> there are a lot of people in davos, he works for warburg futures. >> yes the dealmaker. >> i did not know. >> are you serious? >> i had no idea. >> what have you been doing? >> she's a reporter, good stuff. >> when you come to davos one tourist destination is the highest altitude brewery in switzerland. used to be in all of europe but

i found out there is one higher in italy. i did trek up the mountain. no one seems to think about driving the vans and look to the right and a rick ety guardrail. i was up a mountain to visit it. garetze, swiss german for hello. we are about ten kilometers south of davos, this little village of monstein, has a microbrewery. i thought i'd check it out. carlo great to see you, thanks to have having us. monstein how many different bores? >> we make five different beers and some seasonal. >> 110-year-old house. why not do a brewery? why? >> for men who live here in

monstein they wanted to do something about the village and bring the people up to see this beautiful village and very soft water here perfect for brewing. >> 10.6 celsius in. >> that's celsius. >> so it's cold. >> it's cold fermentation. stein box, capricorn. >> capricorn, me. >> you are? >> i want to try this, not because it's got 6.5%. >> but because -- >> no, because it's got 6.5%. does the whole area change in the economic forum? >> yes, here in monstein it's easy. here it doesn't change much but down it's completely different. >> president clinton was, you heard was at a place in davos and he enjoyed one of these. >> yes. >> he liked it, right? >> yes, he liked it. he didn't tell me personally but

i heard about it. >> cheers, that nk you. >> thank you. >> there were 15 minutes of timeless tv, i think you see more of it on the web, i talked to the guy, it started 13 years ago, they have 350 -- >> this is for you. >> 350,000 at 6.5%, we never get to drink on "squawk" that you know of. >> what are you talking about? >> this is the first time -- >> i'm still on east coast time feels like 6:30. i'm not drinking peer for breakfast. >> in greek you can't even open, so many regulations, so much entrenched labor issues you cannot open. >> i heard that, too. >> cheers. >> all of these shareholders, guys own one share. >> cheers. >> they get two liters of the beer per year, come they have their own glasses on the wall, 180 people live in the village

of monstein. >> and you found a compatriot with a green hat. >> i did. i have a green hat, his name is flo. >> are you going to debut that hat live on the air? >> no, florian is an old davos name and his generation has been here 700 years. >> you are embracing it. >> let's drempg think this. >> i don't want to drink it. >> it's new. still to come this morning we have more headliners and newsmakers from davos, starwood hotels and resorts president and ceo frits van paasschen gives us ideas of new expansion plans right after this. mine was earned in korea in 1953.

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welcome back to "squawk box." in just a moment we'll head back to davos where it's apparently already happy hour. all morning it's been an implied flat open right now. you can see the s&p 500 would be down about a point, the dow would be down 27 points and the nasdaq which was in the green pre-market now would have an imemployed open of down just about one point. the corporate earnings that have crossed the tape, electronic equipmentmaker t.e. connectivity a former unit of tyco reported a quartert profit of 82 cents a share excluding certain items, five cents above estimates. revenue above wall street consensus and those shares of tel rising slightly.

textron earned 60 cents per share, one cent above estimate. textron did give a cautious outlook for the current year. andrew we send it back to you, you had the ceo of aetna and marriott and a pretty big couple hours coming up. >> thank you, kayla, yes we do. we'll check with the coo of starwood, frits van paasschen, talking about the world of hotels and having drank a little bit of beer we're going to start with some pizza, a little room service before we begin. we're back in just a moment. opportunities aren't always obvious.

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over the pizza place on chestnut street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i-95. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪ hotels and having drank a little

welcome back to "squawk box." starwood hotels and resorts is a global brand with hotels all over the world and still growing with newly opened resorts here in switzerland. joining us is frits van paasschen, president and ceo of starwood resorts. we didn't think you had a hotel here >> there is one. >> you do. marty steward speculated that 50% of revenue for hotels in this state happen this week. >> i don't think so. it's 2% of the year, in order for that to be true the hotels would have to be 25 times as

expensive as they are the rest of the year. rates are up but not that much. >> but you're packed. every room is out. >> arne. >> what did i say? >> marty. >> we have a brand new sheraton in zurich as well i got to visit yesterday. it's a new part of -- it's a new part of town in the sense it's the industrial part that's being turned into an office park and residential. >> you don't see that from the airport, right? i don't remember seeing that. >> you don't, it's about a five minutes' drive. >> you guys have been on a tear, did you open 74 new hotels in 2013? you guys are really knocking them off quite a cliff. >> think what's happening, too, we signed 152 agreements to open hotels this year so the 74 still reflects the fact that three or four years ago when we signed most of the deals that were then opened last year, the world was slower than it is today. we'll continue to see this acceleration because as we've

been talking about it, there is this massive growth in infrastructure and urbanization all across the emerging markets around the world. >> i have a different question, my mike fell off, i don't know what happened. i talked to a research analyst, maybe two or three weeks ago said the hotel business will go the way of the airline business, which is to say over the past two or three years all of the add-on prices, there's the base price for the seat and then you pay for your luggage and all the other things. some hotels are scaling back on things, no more room service for example one of the hiltons announced they were doing that. do you so he that as a real trend? >> no, i think there's a fundamental difference between the airline business and the hotel business, that's this. if there is a route that's profitable for an airline, other airlines will come in and buy that same route. you can't just keep moving hotels around the world wherever there's capacity. fundamentally i think the hotel business remains profitable. the other thing, as you think about cities growing if you build a city in the center of a is it i in a good location that

space is scarce, so there's always the opportunity to earn longer term returns as you go up market, i think we'll be offering more and more services and actually lower costs because of the availability of technology and what it does for people. >> we talked to arne sorenson, i don't think i say marty, did i? grab the tape. poll ji i apologize. >> it's okay with me. >> perhaps we're talking about minimum wage. what is your take on the issue? >> the real issue isn't so much minimum wage. if you're earning minimum wage getting more wage is clearly important. the real issue is the fact there is a supply of unskilled labor around the world that continues to grow, technology is taking away jobs and let's face it, even though we've been in this recovery for four, four and a half years it's not been strong enough to generate job growth so we can talk about minimum wage but the real issue here is how we get jobs created in markets

where there's demand so the wages go up all around. >> i wouldn't say that the administration is trying to oobc aught the shortcomings of job creation and failure. if you add people that aren't working in the participate rate, 7 sounds good but it doesn't feel like 7, that's all i'll say. to come out every two weeks and line up the good looking group of people behind him and talk about the minimum wage and income and and equality it does a disservice to what we're trying to accomplish and it's almost a class warfare again and i don't think it's helpful as you just said we need growth. we don't need excuses for why we're not getting it. >> we want to be a catalyst for growth. the interesting thing about the hotel business in the u.s. right now we're at record occupancies. i don't mean we're at occupancies like they were before the crisis. we're at occupancies in our hotels we've never seen before

largely because hotels have not been built at the same rite for the last decade as they were before. the reason for that largely there hasn't been sufficient construction lending and financing to build hotels. so we could create jobs especially with interest rates as low as they are now, if we could just get financing to build more hotels in the u.s. >> the banks say they want to make loans but they can't find people they can give those loans to. >> the reality is most barngz are still trying to delever and they're generally not looking at trying to increase their exposure to real estate across the board. >> i wonder how it happened there. we've been talking about it but it converged, and in i think it helped the president can set the tone for theer us that are front and center. you've been talking about it. >> right. >> suddenly we're not talking about the 2% growth. we're talking about this instead. >> by the way the issue that people talk about here. >> global unemployment as well. >> frits, thank you for being

here. >> pleasure. >> glad to see you. we still have another two big hours to come with more rock stars of davos including ray dalio of bridgewater, william bradder of hermitage capital and tom donahue of the u.s. chamber of commerce, james gorman and matt damon. "squawk" in davos, we'll be right back. i always say be the man with the plan but with less energy, moodiness, and a low sex drive, i had to do something. i saw my doctor. a blood test showed it was low testosterone, not age.

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welcome back to "squawk box." we are live in the swiss alps. we have a huge lineup of guests joining us this morning from the world economic forum. first, bridgewater associates ray dalio joins us. plus, we talk about the future of small business with

tom donohue. he is the ceo of the u.s. chamber of commerce as the second hour of "squawk box" begins right now. good morning and welcome to "squawk box" on cnbc. reporting from switzerland. the futures have been down for most of the morning, i don't know, off about 42 as far as the dow goes. they've prepared the losses about 24 points. we got the helped earnings from united technology. uqx, revenue was $16.8 million compared to estimates of $17.1. what is that, down 101? >> no, it's up 101. >> it is? >> up. >> good.

assessed revenues were postponed in 2013 due to the helicopter program, however, that delay also resulted in a benefit to earnings since the program is currently operating at a loss, so they put off recognizing some of that, but it's not good anyways. ibm under pressure in premarket trading, reported a profit, however, revenue was shy of expectations for the fourth straight quarter, thanks in part for flagging demand. i think they probably mean china. >> down by 4%, too. >> i think it is china. >> ron burgundy would say chia. >> we have a big guest right now, founder, president, chief investment officer of bridgewater associates.

bridgewater currently has $150 million in assets. good morning. >> good morning. >> you have been on our show several times now, and we have started the dialogue around what you call the economic machine, your theory of how you see the marketplace, the world, the economy. praised by people like volcker, bill gates, people like that. part of my understanding of the theory is there are short-term cycle and long-term cycles. long-term cycle i would argue is bad given the amount of debt we're builds, but when you think about the short-term cycles, u.s., europe, asia, how do you see the economic machine applied to those markets? >> first thing, i'm going to get to answer your question in a minute -- in a second, but i do want to convey, i think we go so quickly to think what's the economy going to do next year without agreeing on how the machine works, and the economy works like a machine, and the only reason i'm doing this

interview and that video, how the economic machine works, is to draw attention to, how does it work? because if we can agree on how it works, so many other things come from that. we'll talk about what i think is happening now, but within the context of that. the economic machine is nothing more than a transaction. a very simple thing. if i buy something from you, i can buy it for money or credit. and when i buy it for credit over a period of time, a credit is a promise to deliver money, so we begin a cycle. in that cycle, there are two cycles around income. at the end of the day, you can only spend what you earn, but that's not true over the short run, because you can borrow money, so around that income growth is our debt cycles, and there's a short-term debt cycle, which we call the business cycle, we're used to, expansions, recessions,

tightening, and recessionss again. i'd like to put where we are in the context of that. sorry for that background, but at least we can then look at the world that way. now where the u.s. is, because it could print money, print money means the purchase of financial assets. financial assets went up a lot and as a result of them going up a lot, future expected returns went down a lot, so the return of equities has gone down to probably about 4%, which is, by the way, in line with cash being about 1%, bonds being about 3%, return of equities about 4%. that liquidity has happened. we are now in the middle of the short-term debt cycle. in other words, you're out of the recession and not into yet the tightening. those middle periods are kind of the boring years. they are the years like 2004 and '06, you forget they even existed. what happened in 2004 and 2006? you don't remember.

2007 and 2008 you remember. we're in that period in the united states. >> the markets went up incredibly in 2003, 2004, right? >> no, 2004, 2005, 2006 were boring years. markets didn't do anything. >> were they flat, joe? >> they were flat. >> they started moving in the financial crisis. >> the returns in each years were single digit returns, boring. >> we had 15 years almost. >> in other words, you take 2000. then pump it with liquidity, then get the bull market in equities, then in that middle period when things are not too tight or too loose, you have that period. that's where the united states is. >> i would suggest we can only go down from here. >> no, no. you're in that middle. that means the central banks got leeway, not too tight. that's where we are and that also means probably pretty

boring for equities. also look at the return. there was a big gap if you look at yields, what would the expected yield be and that normalized. now let's go to europe. by the way, all these countries are in very different parts of their cycle, which is the interesting thing. now europe, southern europe, because it could not print money, could not have that response, and as a result, what happened is they were in a dead bubble, meaning their debts were rising faster than income. if there's one thing to pay attention to is dead debt rising faster than income. is debt rising faster than income. if debt is rising faster than income, it can't do it forever and if it's doing it fast for a long time you're going to have a bubble. the united states' debt is not rising faster than income now, at equilibrium. i'm not talking about government debt. i'm talking about total debt

with all the sectors of the economy. europe, unsustainable, so you couldn't fund it. if you look at who buys the bonds, they wouldn't buy the bonds. they had a funding gap. right now what happens is, in terms of they only have to rollover the debt. they don't have to sell a lot more than they sold, so that's an easier thing to do, but that's a depressed economy, because you can't finance it on debt, so they are in a chronic depression, essentially, depressions, that will remain there and there's a fiscal policy and monetary policy. a very different position in the cycle. now take china. totally different position. so china is in the part of the cycle where they need to tighten. the debt is rising very fast relative to income, particularly certain sectors of that debt, so what you're having is a tightening of monetary policy,

and you need a tightening of monetary policy. now all the economies and markets are connected, so what does that mean? it means that we're, in brief, we have a world in which we have an enormous amount of liquidity. liquidity means that people want to buy financial assets, so we build up the prices of financial assets, and they are not too high, not too low, they seem to be appropriate, but we also have a lot of longer term debt. you were referring to that. that longer term debt means it eats money. in other words, it requires money to pay for it. we have a lot of liabilities, unfunded liabilities beyond the debt. that eats money. we also have a world where there's excess capacity. a lot of the capacity was built in china, around the world. that produces a deflationary pressures, so we're in a world with a lot of liquidity and also deflashary pressures existing at

the same time. >> let me ask this, then. you have historically been a bond investor. >> no. every liquid market in the world equally. >> because you're trying to, i guess, sort of balance the risk in equities versus the risk in debt caused you to overemphasize debt at a time when interest rates were so low. is that strategy still going to work if it was down 3.5% last year? >> i think it's -- let me clarify how that works. >> okay. >> most important thing is to have a balanced portfolio. if i can say one thing to your investors, it's try to achieve balance, because you don't know what's going to happen in the future. particularly your investors on the screen. it's a zero-sum game. and a bond is something that, like a treasury bond, will balance equities and you have to own more of it, because it's got

half the volatility. for example, if you had a lot of treasury bonds at the same time you had equities in the financial crisis, it operates in that way. >> right. >> the basis of that strategy, which is not for your investors, pension funds, endowments, they have to have funds. >> not for all of our investors. we have some. >> for those with assets more than $5 billion, it might apply. anyway, the point i'm trying to convey is not about the all weather. the thing i would like to convey to your investors is at a moment in time where the assets are roughly, particularly balanced, it's very important they don't have exposure to any one particular economic environment, and because a bond has half the volatility of a stock, then you need to have more of that. what you want to do is increase the duration. >> for the past -- >> it's not a strategy in any

way that's related. it worked equally well in the late '70s when bonds went down. >> you have to be total agnostic to the 20-year bull market the bonds were in and ignore from 1% they are probably not going up a lot more. >> no, no, no, no, no. >> in terms of principle. >> no, no, no, no, no. i'm saying if you just ask balance, how will you achieve balance? the number one thing i think you know in investing is asset class in a whole have to have greater returns than cash. because if they are not higher than that, we have depressions. whenever assets are not higher. the system is, the federal reserve puts cash in deposits and people with better ideas come along and use it. then you have to have a balanced portfolio relative to that. the problem is the differences in the volatility of asset classes. so if you hold a 50/50 stock

bond portfolio, you're going to be 90% correlated with equities because of the greater volatility, so the question is how to achieve balance. >> i'm going to ask one last question, which is this. in an environment where everybody is seeking yield, especially pension funds and others, in a year like the one we just had, if you're not living almost all in equities, you looked around and said, i missed the boat. so the question is, what are you supposed to do? >> so, i think that the most important thing is that you look at perspective returns, not what the market did last. the biggest mistake of investing is people think a good investment is that which did well recently, not that it's a more expensive investment, so you have to understand how to look at future returns. the way investments work is there's a present value effect, that what happens is it's a lump sum payment for a cash flow, and what happens is as a present value goes up, the future return

goes down. so for equities, they have to think that way. think about what the yield is. if they pay more attention to equity yield rather than last return and look at the yields of assets, that would be perhaps the best way to look at it, so look at all the yields of assets and when we look at that, cash, 1%, bonds, 3%. you know you're going to get 3% in bonds. that's locked in. equities, about 4%. that's the picture we now have to deal with. now what do you do with that? you have to have balance. that's the perspective i'd rather give. i want everybody, if they can, to watch this half-hour video, how the economic machine works. i'm here at davos with policy makers and we're discussing the central banks and so on, and it's all around that. it's 30 minutes, and if people can understand that, i think it would help them a lot. >> ray dalio, thank you.

that video is on youtube. >> much more ahead from davos. william will be here to give us perspective on russia before the winter games in sochi. plus, a year-long celebration of cnbc's anniversary. we're starting with 200. the 200 most influential names in business. we'll take a peek at 7:30 a.m. eastern time. we'll get it down to 25 at some point. >> you're going to help us, everybody. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

we are just getting started here at davos. a lot to come, including a conversation about russia ahead of sochi. william is ready to sound off on the russian government and its leader, mr. putin. mr. squawk from davos just after this. aflac the answer when cnbc "squawk box" continues. ♪ yeah, he's clean, boss. now listen to me, duck. i have an associate that met with, uh, an unfortunate accident.

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the sochi olympics are just 16 days away. security is a top concern, and with his legacy on the line, flat mir putin is vowing to stop any attacks. joining us is william browder. he is the ceo of hermitage capital. that may seem like an odd intro, but you have been one of the strongest critics. the magnitsky list is something you've been pushing to put into policy in the united states. why don't you tell us about what happened there. >> well, at one point for about ten years i was the largest foreign portfolio investor in russia. we had $4.5 billion in russia in the country. in 2005 i was expelled from the country, declared as a national threat. following that my offices were raided, they seized our documents. i hired a young lawyer to help us with these office raids. his name was sergei ma

it was used for the authorities to steal all the taxes that we had paid in the previous year, $230 million. he testified against the authorities. they arrested him. they put him in jail. they tortured him for 358 days and they killed him. since then i've been trying to get justice for my murdered lawyer. in the process, the russian authorities all the way up to putin have basically covered up what they did to him. that's made me into one of the most outspoken dissidents against putin in russia. >> you know, i was speaking to some people last night and at a dinner they were talking about just all of the things that have happened in russia. our relations with russia have taken a decided turn for the worst and some people point back to the magnitsky list as a reason for that. what happens next? what happens with russia and is there a way that we can work with them or are you convinced that they're so corrupt there's no working with them? >> so it's interesting. why is it that the magnitsky

list caused so much trouble? just for everyone's knowledge, the magnitsky list puts everyone on a list and freezes them and bans them from traveling. >> if it fies back. >> -- it ties back. >> the russian government is up to no good. these guys are doing a lot of stealing. at the olympics it costs 50 billion, 40 billion was kickbacks. all of that money is in the west. why are they so upset about the magnitsky list? they're terrified their money will be frozen in the west. what's this all about? it's all about russian corruption. how are we going to get along with them? how do you get along with people who are criminals who are running a state? i don't know. you can't beg them not to be criminal. >> russia has a list. there are a lot of p lot of guy make money, that are making money off of the blood money that's coming out of russia. >> but politicians in

washington, too? >> politicians in washington on are my side? >> all of them. 89% of the house of representatives voted in favor of the angt. all of the politicians want this. the private bankers don't want it. the sort of lawyers and accountants and various -- >> they want a carrot versus stick or you can get more with honey than can you with a blunt instrument. that's their argument with russia. >> their argument is they want those carrots for themselves in their own pocket. that's what they want. >> mikhackhail kortikofsky is f. will he ever be as outspoken as you will? >> he's got a problem. i guarantee you he said you keep your mouth shut or your guys will be tortured or die. these are mafia people we're dealing with in russia. putin is a mafia guy. >> given that, what do you think will happen at the olympics security wise?

>> it's a corrupt country. they set up this olympics. they set up $50 billion. it's all locked down. it's so corrupt guys are bribing other guys. >> you don't think it leads to putin, he can control it all. >> he can't control anything. he can set the tone for the corruption but he doesn't control anything out there. it's completely -- people are transporting stuff and doing crazy stuff. who knows? i wouldn't go to the olympics even if i was allowed into russia and i wouldn't be arrested if i went there. it's crazy to go to the olympics. god knows what can happen. >> bill, thank you very much for joining us here. thank you. >> appreciate it. >> we have much more from davos right here on "squawk box." back here in a second. [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell.

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welcome back to "squawk box" live from the world economic forum in davos. we have headlines for you. check out shares of coach. quarterly profit of $1.06. shares also fell short with same store sales following 13.6.

dow component united technologies. a stock to watch this morning. that earned $1.58 per share. we should also note that revenue was slightly short. united technologies saw earnings benefitted from a delay in deliveries for a canadian helicopter program although revenue negatively impacted. mortgage applications. mortgage bankers association, that continues at a rebound from a 13-year low from the end of 2013. the average 30-year mortgage rate now stands at 5 -- rather, 4.5%. >> scared me. >> i apologize. it is a special day and a special year here on cnbc as we celebrate 25 years on the air. we began marking this occasion by announcing a new initiative, and we want be your help to help us name the cnbc 25 leaders, icons and rebels. cnbc's tyler mathisen joins us from our global headquarters.

tyler. >> it's a very special year at cnbc, our 25th year of broadcasting. we're going to unveil today right now a list of the 200 most influential business people of the past 25 years. we're coordinating. it's no accident, with the gathering of some of those very influential people and world leaders over where you are, becky, in davos. over the next couple of months as we approach our formal 25th anniversary in april, we're going to narrow down that list of 200 finalists with the help of you, our viewers, and come up with a definitive ranking of the 25, the elite 25. the rebels, the icons, the leaders who mattered most. the people who shaped or disrupted business and commerce, transformed the world of finance or imagined the products, the concepts, the intellectual thought leaders who changed the world. we did our own internal noodling and came up with a list of 200 of our finalists but we also assembled a three person blue

ribbon advisory board to help us narrow and also expand our final contenders and give it the kind of global reach that we sought. for many ibara is a professor. jeff sonnenfeld. and paul steiger is a professional chairman of pro publica. they helped us both pare our list and, as i mentioned, expand it. as you might imagine, folks, the discussions were very spirited. some of the names were obvious, easy to identify. jeff bezos, steve jobs, bill gates, but others were anything but easy to pinpoint. some we know are going to be controversial. we included on our list kenneth lay of enron fame or infamy and michael milkin. i know you were interested in the financial titans who made the final 200 and probably some

who didn't. >> yeah. we've been looking through the list. you are right, tyler, that there will be controversial names. thattest why we need the viewers' help to help us pick these names, to limit it down to those who they see are the most influential. another one is dennis kozlowsky. >> kozlowsky for thinking about the way we think of an american corporation. he was the builder of tyco. he went down in flames over such things as the $18,000 umbrella stand and so on and so forth. so there are some scoundrels on the list and there are some unlikely choices. this list really is like the nfl network's 50 greatest nfl players of all time. some of them are going to be quarterbacks, ceos, but some are not quarterbacks in any way. we have entrepreneurs, we have people from the world of entertainment and sports like quincy jones. even magic johnson is on our list for the ways he has trans

forged minority business in this country. >> this is almost like brackets though. jamie dimon, we have an exclusive interview in davos. if you were to put jamie up against sandy, who would you pick? >> this is one of those things, we're doing it real time. i wish we could wait 100 years. i can tell you edison if you go back to a list like that, ben franklin that stand the test of time. there's an old saying never name a street and city while the guy is still alive. >> i'll give you another one. >> it can be infamous. tyler, you said, steve jobs, put him down. put gates down. but then the rest -- >> bezos. >> john vogel is on the list, vanguard. >> uh-huh. >> you may say not a big trend -- >> boring. >> you may say boring. >> index funds. >> index funds, long-term investing, okay? >> then warren buffet.

where would you put warren buffet? i would argue he's helped spur people to think long term about investing and he's created a con groom mer ra glom mer rate. he piggybacked off of graham and dodd. >> that's why this becomes complicated. >> that's why we need the viewers. i want to pass it off to someone else. >> too hard. you guys figure it out. >> seen you in his clothes, yes. >> drexler. i think mickey is on the list. >> got to be. >> retail. >> you ask a question, andrew, of -- >> how about ralph lauren. >> he's on the list. >> you get into interesting conversations. you are just starting it. is bob eiger more of a change agent than michael eisner. who deserves credit for building the modern disney. what we want to do is get this kind of conversation started with our viewers. who do you think should be on

our top 25. there's iger for you. you can head to cnbc.com, 25 to vote for your picks and leave your comments. you can do write-in campaigns for people we left off. you're certainly in many daze cases going to go, hey, what were these guys thinking? >> ralph roberts, brian roberts. >> not for anything. >> steve parks. >> there are names that need to be thought about. >> you volunteer. >> mark hoffman, cnbc president. >> there's 200. >> i don't know if he makes 25. >> don't sell him short. >> 50. 50. >> all right, guys. >> easy. >> is ted turner on this list? >> ted turner would have to be on this list. >> i think he is. yes. yes. >> that didn't happen in the last 25 years. >> just looking. >> what about roger ales. >> he's on the list. >> ales is on the list. >> tyler, thank you. >> let me say i've covered all of my possible bases as far as career goes. >> i think i've done them all. >> as far as the tv business.

>> go ahead, ty. take it away. >> i think you're supposed to take it away. >> i'm still just in -- anyway, tyler. thank you. up next, policy analysis and the global economy. hedge fund manager, dan arbess will join us after the break. >> announcer: still to come from the world economic forum in davos, chamber of commerce ceo thomas donna hugh, morgan stanley's jim gorm man and actor matt damon. a big morning live from the alps. "squawk box" in davos continues after the break. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses...

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welcome back to "squawk box." our next guest lives at the intersection of hedge funds and deal making. dan arbess is a partner and he's talking about the markets. thank you for being here. >> good morning. >> we just had ray dalia on and he was talking about where he thinks the world is in terms of both the economy and the markets. you think that the stock market right now is fairly priced or a little over priced? >> i heard ray talking about

asset classes and whole which is what he does and he's best at that. i think this is a year for securities selection. if you look at the markets as a whole, last year we had policy supported lift. the markets traded up in anticipation of an improving economy and improving earnings. this year we actually have to see improving earnings and you aren't going to see huge improvement in earnings across the board so this is going to be a security selector or a stock picker's market. the good news is, there's a lot of stuff going on and a lot of industries and businesses. there are a lot of companies going to blow away other companies in terms of earnings and growth potential. that's what's interesting about being here in davos where everybody is talking about everything. >> ray talks about having a balanced portfolio and that means having a lot of bonds in your portfolio. would you do that right now? >> i personally don't worry about having, quote, the balanced portfolio. i think maybe a retail investor

with a long term horizon may want to think that way. >> a lot of money. >> i do like leverage credit, high yield bonds, but those correlate more with equities and are much more idiosyncratic. i would not be long a lot of government bonds as an asset class right now for the obvious reasons that everybody's been talking about for a long time. >> when you say that there are some companies that are really going to outperform, is that because they're in a special sector? is that because they have a great ceo? when you say that, what are you listening for? >> we're about transforming industries and companies. we invest in a lot of balance sheet restructuring for companies facing financial distress. in the equity market, we look for businesses and industries that are going through transformation. take, for example, the whole retail shopping experience. people are staying at home. they're shopping on their mobile devices. the mobile internet is a gigantic secular development that is killing companies like

coach, for example. so if you're long google, the thing is generating huge operating margins and profits. it's growing at 25% a year at least, it's trading at like one times its growth rate. it's still cheap. a company like coach is making kind of old-fashioned belts that you have to go to the store and buy. nobody's buying them anymore, therefore, they got killed on earnings. there's a lot to do. some guys are going to be paying the price and under performing and other companies in the mobile internet space, as an example, there are other industries that are going through complete transformation. the airline industry. >> right. >> a terrible stock investment for all of history. >> until now. >> has just become a great stock investment. why? all of these companies have gone through restructure their balance sheets, taking out excess capacity, charging the customer for everything including an extra inch of space, and so they've got great

pricing power and great margins. they're doing beautifully. >> i have two questions. one on the mobile internet, where do you put amazon there? >> amazon is -- amazon is going to be an absolute winner. >> even though it doesn't make a dollar. >> it doesn't make a dollar. it's still in the business of taking market share and recovering real estate. if you look at a company like price line doing unbelievably because it's consolidated all of the mom and pop hotels in europe that had no other way to market. this whole mobile internet space and all the first movers in it are going to be tomorrow's huge winners in the economy. you have to have a piece of that theme in my view if you're investing in corporate securities. >> how long does this airline game trade work? >> i think the airline trade works, in my view, until the customer kind of starts to push back. right now, great prasm which is

how much you get for every asse the mode. eventually we all know we don't like traveling. i don't like taking flights. it's just not a pleasant experience. eventually the couple will push back and the business will have empty seats. >> for airlines, what's the moral. story? we deregulated and got into trouble. >> we're not in trouble. there's no moral of any story. >> why was it so hard -- what messed it up in the first place? >> you know what messed it up was massive amounts of balance sheet leverage. way too much capacity. a great big jet to fly from one point to the other. >> normally that wouldn't happen. if it was only market forces, that wouldn't have happened. there was some intervention somewhere that happened. >> i don't really think that it was -- that it was -- there are other issues with government intervention. i just think that they structured the airline industry,

it was wrong. the way that managements were thinking about growing and building their businesses was wrong and they've now corrected that problem. energy, another industry which will just blow the doors off. if you look at a company like chenier which jim cramer had suki on a couple of weeks ago, the ceo. they have the first gas export license from the united states. three years ago in 2009 we owned the bank that had 70 cents on the dollar and convertible bonds on 50 cents on the dollar implied that they had zero equity value. the stock has gone from $3 to $46. it will continue to go up. my point is, there's a lot to do. there's a lot of money to be made. it's a great investment environment. we don't have to sit and watch you guys every day and talk about what's going on in the macro environment. the macro environment is pretty stable. not totally without risk. there are plenty of risks including the risk of a more

activist government in russia that bill was talking about a few moments ago. generally, it's a pretty perfect investment. >> we've got to go. >> do you want a beer? >> thank you. >> appreciate it. >> i'd love a beer. >> we have beer, pizza. >> thank you. >> thank you very much. when we come back, u.s. chamber of commerce tom donohue will be joining us. we'll talk immigration reform and small business. we'll be back after this quick break. [ male announcer ] this is the story

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it's called the world economic forum. our issues are all different than the rest of the world. let's talk to tom donohue. he's the leader of the chamber of commerce. >> good to see you. >> it's the life blood of our business in the united states. that's what you tried to ride herd over and make sure that things are -- make it easy for things to hatch. over here each different country the dynamics are different. i went to a micro brewery. it started up well in switzerland. you can't do the same in greece or italy with all of the entrenched labor and

regulations. what do you do when you come over here? you can't tell people how it should be done? what do you do, listen and try to gain some understanding of what? >> well, if you haven't -- if you stopped learning three days ago you're a dropout so you better listen. second, we have all sorts of members that are here or people that could be members. we're a global organization. we have large and small companies from around the world that belong to the chamber because they do business in america. as american companies do a huge amount of their business around the world and that includes small and medium sized companies who because of the internet and quick movement of goods and information more and more of them are trading around the world. this is the place to be to figure out what we're going to do next and to think about what we did before and to be better at it. >> for your guys to flourish, we need policies to be more amenable to the small business. not over here, right?

>> you should keep speaking because that's exactly my message. there are things that -- >> do you want me to keep speaking? you were saying that as an example. i will. you want to speak. you said i should speak. you go ahead. >> i mean for the rest of the week. the bottom line is government can't create jobs for the people in america, the 21 million people that need them. government can be helpful, but they've got to get out of the way. if you have too many regulations, if you have too many restrictions, if you're clamping down on capital formation, if you're not dealing with the realities of the work force it's very, very hard to put people to work. to put people to work we have to be very sure that we get an immigration bill. >> one of the angles i was going to take on this interview is that the chamber, i'm not going to say you move center, but the form j former bedfellows, that's people on the right, you've had to push

back on certain parts of the right even on i guess threatening, look, we're not going to support far right antiimmigration, policies, things that maybe the tea party. have you had a falling out with that party? >> first of all, everybody's on the tea party. the tea party reform by folks like you and me -- >> i know. >> -- that were interested in controlling taxes, fixing cause and fixing entitlements. >> now it's -- >> now people are hooking their wagon to the tea party deal. the people that want to shut down the government, not pay our debts or don't want to deal with reality on education. >> there's some overlap there. >> is ted cruise, somebody like ted cruz? >> people that you know if they get nominated they'll get elected, if they get elected, they'll do no good. don't elect them. >> how about ted cruz? >> we have a great story about ted cruz. he doesn't run for another four years. >> in four years you won't come out --

>> would you support him? >> ask me in four years. >> right now that's exactly the type of thing that was not productive. >> well, i don't think ted cruz is the most productive member of the senate. >> all right. for immigration, what's the problem? i see bipartisan. i see both sides. i see business leaders. i see people that aren't -- >> do you see labor? labor? >> strange bed fellow. >> you see, you need to think all the time that demo graphics are destiny. if you look at japan, if you look at there are more people dying than being born, demographics are destiny, they don't have an immigration policy. the united states, we fundamentally need the really smart people that we're training in our universities, scientists, mathematicians, all of those folks, then we send them home. we need to keep a greater number of those. down at the bottom line, we need more people to come here and work for whom we don't have people to take those jobs. in many ways we're a nation of

people without jobs and jobs without people. we need to bring those folks in. for example, for agriculture, for, you know, people to work in resorts. at various times of the year they need to be able to go back and forth in a legal way. >> is there still mourning in america for the middle class? andrew worries we may be 7:30, 8:00 at night, we're pushing towards midnight, right? it's tough to see the jobs being created with all of this technology. >> you have to believe a lot of good things are going to happen. you have to believe the energy revolution will happen. you have to believe that technology unto itself isn't going to out innovate the jobs on the other side, right? >> look, there are 350 million people in the united states. they are some of the best consumers in the world. the economy is picking up. we're better off than europe. europe is one of our real problems because they're a huge export market for us. you hit energy right on the nose. there are people in american companies going to put factories

here because of our energy prices. the chemical companies are bringing many factories back because natural gas is the seed corn. there will be plenty of jobs in the united states. the problem is that 30% of the kids don't graduate from high school, and in this environment it's hard to find them a job. >> tom, thank you. there's minimum wage to talk about. there's income, a lot of things to talk about. come back to new york. >> that's good, i will. >> thank you. >> thank you. in the meantime, we have a lot more coming up from davos, switzerland this morning. we are just getting things started. make sure you stay up to date with the show and what's happening right here on the ground. the way to do that, follow us on twitter @andrewrsorkin. and becky @beckyquick and @joesorkin. tdd#: 1-800-345-2550 trading inspires your life.

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you're watching a special edition of "squawk box" live in davos. david reuben stein. >> plus, an alpine version of the squawk ceo call. morgan stanley's james gorman will join us on set. >> and matt damon joins us live to tackle the global water crisis. the star studded hour of "squawk box" begins right now. that is live. you saw some of the stuff we did yesterday. it was cloudy, dreary. really beautiful today. welcome back to "squawk box" on cnbc. i'm joe concekearnin along with quick and joe sorkin. we're doing the show from 12:00 to 3:00 which we never thought about. >> pizza. we're eating pizza on the set. >> beer. >> beer. >> we were out last night.

>> slept in the morning. >> did sleep a little bit in the morning. the futures, we'll take a quick look. they've been down. vtx came down and was up a little bit. >> ibm was down. >> ibm, that's one that we need to talk about at some point. >> right. >> down 7 bucks last time i looked. >> six quarters where you're scratching your head. buffet's breaking even, isn't he? keeps buying more. >> see, this is a company where i think you're going to see activists. >> you may. >> i didn't tell you, i went up there a week ago and saw watson. >> did you really? >> i did. i did. >> i need to talk to you. did you talk to him? >> you don't get to talk to him like that. it's pretty amazing stuff though. it would make you -- >> was -- could you tell it was a malevolent -- >> there was nothing malevolent. >> no, no, no, watson is -- >> maybe on "jeopardy." >> i watched what it did to those other players.

headlines, dow component, united technologies a among the stocks to watch. it earned $1.58 per share. revenue was slightly shy of consensus. delays and delivery for a canadian helicopter program hurt revenue but helped earnings because the program is currently operating at a loss. also, coach is now getting slammed in premarket trading. a 14.6% drop resulted in earnings and revenue coming in way below estimates and also ibm as joe and i were discussing and becky beating estimates in its latest quarter. here's the problem, the revenue fell short for the fourth consecutive quarter. that's primarily due to a sales slump in china and emerging markets. a delegation of deal makers hold court here at davos annually. this year is no different. david reuben stein is the co-founder of the carlisle group. he joins us now. david, i know some of the areas you've been focused on have been europe and asia. is davos a time for you to get

to focus a little more on that? what do you do here in davos that helps you with what you do here at home? >> we're not allowed to say what we do here because we want to keep reporters guessing. there's a chance to meet people you can't otherwise readily meemeet them. i'm meeting government regulators, people we deal with, and generally meeting with the media. get a sense of what they think is going on. it's productive. three or four days is quite enough. >> this is early on. most people just arrived yesterday, some even this morning. what's your take away so far about what kind of stands out as some of the important themes? >> well, in the business world, like in life generally, nothing is always perfect. so before it was the business world wasn't doing well, the economy isn't doing well. now they think the economy is doing well and the the united states and some of the developed markets. people are worrying about whether we're too frothy. therefore people are worrying about whether we're in bubble. i think right now people think the economies are generally

pretty good around the world and we should worry about bubbles. people talk about that a bit. people are concerned about income inequality. when they're making a fair amount of money, there's concern about whether people are suffering a bit. that's a concern for people in the business world as well as government officials. >> i wanted to touch on private equity. when we last saw you a week ago, right at the end of our interview we got there on the future of private equity. you've transformed -- carlisle and other firms have transformed into larger asset managers. you were great at private equity. you knew how to do that. now you've taken that name and put it on so many other businesses. does it work long term for everybody? >> well, nbc was a network that did broadcast in the evenings and regular shows and it got into cable. does it do cable as well as it does broadcasting? everybody who's in business does different things. sometimes things work better and sometimes they don't work well. in our case what we've built so far has worked well. we will make some mistakes.

generally what we've done has worked pretty well because we're managing money and we're a fiduciary for people who give us money. it's not all that different from what we've done. >> do you think size is good or bad? >> i think obviously it's harder when you have a lot of money to manage to get the higher return as you may have gotten before. on the other hand, the way we manage each of our funds are separate so no one fund has $190 billion or something. we're not like a gigantic hedge fund. i think size can be a problem. right now the economy is pretty good and we're doing well on our returns. >> you'll be in the retail business. >> well, we are -- like our peers, we are working to get retailers to invest in private equity. why should retail investors not get the benefit when institutional investors can get them. >> are you going to advertise? >> you are allowed more to advertise than before. >> the rules. >> right now we're not focused on advertising, we're focused on doing things through registered representatives and people who work for large firms like merrill lynch, so forth, working through their representatives.

we're not really tieszing but we do let people know what we're doing. >> where are we now? do we like you? private equities. private election, the scum of the earth. guy named bein was in the batman movie as the biggest villain. for a guy to get re-elected, we trash the industry. now you go to parties at the white house. are you good guys or bad guys? >> the president would say he was never against private equity. >> really? >> that's what he would say. >> who put the hit out on romney then? >> well, some things that his -- >> why are you laughing? was it you? >> some things that his opponent in a presidential campaign did were things that they attacked for political or other reasons but that isn't to say that because he attacked some things that mitt romney may have done -- >> job killers, take big dividends. doesn't matter what happens to the company, as long as we get our payout and big dividends. are they a net good for society, net bad? all good questions.

we don't talk about it anymore. >> people have gotten to know private equity, they're seeing we're not as bad as people think. we don't ship jobs off. >> you're a big supporter of private equity. >> i am. i absolutely think it's phenomenal. i can't imagine how many jobs would have been lost. we'd be down to 1% gdp growth. >> if your career is ever over in broadcasting, you have a job. >> hold it. why do you think the industry does such a poor job of articulating that? >> i don't think they do. >> you're a part. you're a democrat. >> andrew, the other side is a media machine and the enablers. >> you talk to them. what do they tell you? >> some people are very good at certain things and may not be good at other things. we're pretty good at making companies better and investing. may not be good at public replaces and advertising our wares. generally we could do a better

job in many other areas and we're working on it. right now the investments we're micking are doing pretty well and the investors are happy. people like you are not getting complaints from people around the country. >> yeah, that could be it. >> you weren't questioning whether i was on your side? >> i was not but i wanted to give you a chance to articulate it. >> i don't want to sound bitter but i am. >> i think if you ever wanted to get out of this business and work for private equity, give me a call. >> give me your card. also, you like coming over here for some of the parties at night, don't you? >> i'm a well-known partier. any party that finishes by 9:00 i'll probably be there. >> he dances. >> it is weird here because everyone's on east coast time so at 12:00 at night, midnight, i'm like, what am i doing here? everyone's saying it's 6:00 p.m. there's a built-in excuse that it's not midnight, it's 6:00. >> how late were you out? >> 3:00.

>> you know what, don't be a pinocchio. >> no, tonight that was true. last night that was true. >> i beat you last night? >> you beat me last night. >> you beat me? >> i did. >> wow. >> david. >> my last dance was my bart mitzvah. i'm not out for dancing. >> that's another subject. you didn't dance this past weekend? >> i watched. >> you and al roker and beyonce. >> i watched a lot of people dance. i watched a lot of people dancing. nobody wants to see me dance, believe me. >> david, thank you so much for joining us. >> thank you. >> my pleasure. media moguls meeting in davos to talk about the future of the industry and reshaping the industry. later we have jamie dimon. and much, much, more. then we should also give you this programming note. we have a biggie, tomorrow, jamie dimon will be speaking on "squawk box" from davos. we will begin airing that interview at 6:00 a.m. eastern time. you do not want to miss it. "squawk box" coming back live in

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exactly. l

>> liberty global has a key presence in europe. here to talk about the global strategy is mike fries. he's liberty's global ceo. thanks for joining us. >> thanks for having me. >> i should have asked it because it's john malone, but when due -- in the past 12 months, past few years it feels like all of a sudden everybody's come back to cable. >> right. >> what is that about? >> well, fundamentally i never left cable neither did john. it's in his dna. it's in my dna. i think a couple of things have happened in the past couple of months. netflix got people scared. one of the main things that netflix did is create great functionality. user interface, recommendation, navigation. with our platform what comcast has done with x 1, my kids don't get off the cable box. the apple remote, netflix is not as present because the x 1 platform gives them great user experience. i think bridging that functionality gap has been a big piece of the video story. then of course broadband has always been our winning formula. >> mike, i want to turn that on

its head. if that's the case, if the cable has come back because they've done such a better job of functionality, is that bad news for the apples and netflixs of the world? is there room for everybody? >> they're pursuing very different strategies. we're about the bundle. we're bringing everything to everybody. 100 megabit broadband speed. all the content you can want with great functionality. netflix is becoming more and more in my mind a channel like hbo. it has original content, great brand. in london, in the u.k., we put netflix on our box. if you're a virgin customer and you want to watch netflix, switch to the netflix app. you don't have to leave the virgin box at all and go back and forth. it's becoming a channel. >> that's smart. >> i've heard some cable operators argue from a margin perspective you would just do better offering straight broadband and let others figure out how to go over the top with the content. >> except that we have 20 million video customers that i would just as soon keep. but, sure, broadband is a great

business. very high margins. something yefr oeveryone wants. it's like water. video. people watch television, 150 hours they watch television. >> not here they don't. >> a little less. >> in fact, get working. you're the international side of this snnchts yes. >> you know what i have over here? four channels, i was watching the simpson's in german. >> i'm embarrassed too say we own that. >> i didn't understand any of the jokes. i was still laughing. >> got to work on your german. >> european video and cable is pretty good. great value. our average is $45. we're giving customers 100 megaby the broadband speeds for 45 bucks, not 150 bucks. >> growth here versus the u.s. >> we have good growth. markets like germany -- >> there are reports out that you want to spin off latin america? >> yeah, we are looking at that. >> because? >> 95% of our business is in europe. that's where we want to stay

focused. we're great at consolidating markets and growing markets. latin america is 25% broadband penetration. there is tremendous opportunity to consolidate that market. it seems better for us to do that off balance sheet and not dilute the story that we built here. >> it's an existential question of the morning. we announced something called cnbc 25. the biggest 25 names in the business over the past 25 years. >> in the world. >> in business? >> in business. >> no, no, not company names. john malone, rupert mourdock. in the world of media over the past 25 years, who would be your number one pick? >> that's an easy one. >> brian webber, ralph roberts. >> that's what we said. that's what we said. >> is this being taped? no. actually, john is incredible. >> he is. >> he has built several empires. today if you add up all the different businesses that liberty media has spawned, it's like 160, 170. >> never paid a dime in taxes. >> but he's a modest -- he's

brilliant. he's modest. >> got to wrap it. >> hold on. if you take john out of the list, who's number two? >> oh, i think rupert probably pretty clever. he's done some great work. >> i was going to talk to you about of all people, michael wolf on net neutrality. how distributors will be back and in the driver's seat. it will be nice if they own some content. they're going to own the content by controlling the distribution. >> there's a lot of misinformation about net neutrality. >> it's already past that. >> nothing to worry about. >> you don't think that the next two kids in a garage who want to create the next netflix could do it if you guys are charging whatever it costs netflix already? >> what netflix will end up doing is subsidizing consumers to get better speeds and better access. today the problem isn't in the last mile, it's in the rest of the network. >> what about harry? will they say no or yes? >> you mean in europe? >> how's it going to come down?

>> doesn't really matter. i think it will dislocate for a little bit. it's clever. very clever. >> kind of underhanded, isn't it? does that crappy little antenna work? >> yeah, it works. >> final self-ish question. i'm a time warner cable customer and sort of locked in. >> he can't give you a discount. >> am i going to be a charter customer soon? >> i can't answer that question. there's a pretty big gap between the bid and the ask, but that's the other side of john's world. how do i know? i think it would be a good thing for the u.s. to continue to consolidate. i would say time warner would take advantage of -- >> good for customers too? >> should be. >> would comcast be allowed to play there? >> my personal view is i think they would. >> you think they would? >> that's just one man's view. >> okay. good. thank you. >> appreciate it. coming up, actor matt damon. we're going to talk about his new film but mostly we're going to talk about his venture into providing water to the world because we just heard that people want broadband like

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♪ welcome back to davos, everybody. this is "squawk box." we're live here.

we've got a lot of things that are coming on. in fact, we're going to be speaking to morgan stanley's james gorman in just a few minutes. in the meantime, let's send it back to cnbc global headquarters. kayla tauschy has a few headlines. >> good morning, becky. futures are looking slightly flat. the first is muhammad el eriam is stepping down. he will stay on to consult for pimlico's parent company. that's german insurer alliance. air watch is being bought. they're paying about $1.5 billion in cash and stock. vmw is down by just about 2% in premarket trading.

government officiwfficials are pay more. the rules will include new testing that simulates a side crash. officials think the tougher standards would prevent about five deaths, dozens of injuries per year. stay tuned for more "squawk box" live from davos. back after the short break. >> announcer: coming up next hour, actor, academy award winner, producer, philanthropist matt damon will be squawking in davos. >> how do you like them apples innocen innocen. >> announcer: he's taking on the global water crisis and he's going to join joe, becky, andrew during the 8:00 a.m. hour. conquer the morning, conquer the day. "squawk box" is coming right back.

opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

welcome back to "squawk box." we're coming to you live from davos, switzerland this morning. we have headlines for you, the big one being amazon is denying reports that it's thinking of starting a paid tv business. they were investigating that possibility. amazon now telling cnbc it has no such plans although it does continue to build selection for

its prime instant video product. also, sears is closing its flagship downtown chicago store. that's the latest move in its effort to trim the number of retail locations it has. this particular store has lost millions since it opened back in 2001. sears does have three other stores in chicago so maybe that mitigates it. the company is headquartered in illinois. >> that's weird. that store has only been open since 2001. usually the old stores -- >> you close the old stores. maybe real estate. also two las vegas casinos will become the first gambling establishments to accept bit co coin. the "d" las vegas casino, bitcoin will be used. patrons will not be able to use the virtual currency, however, for gambling. so i don't know. >> the who and the what? a couple of market leaders. >> those two? >> i have nod state there.

have you? >> they just got free publicity. that might help them. >> does your next guest accept bitcoin? >> let's ask. for some perspective on the global markets, james gorman. he is morgan stanley chairman. and we just asked reuben stein and tom donohue, what do they do over here? what kind of business are they taking care of, if at all. i know you are. what are you doing over here for morgan stanley? how does it make sense for you and what are you accomplishing? >> first off, joe, it's great to be on the set here. >> beautiful. great. nice. warm. weather great. awesome. >> obviously two things are going on. there's the conference itself. important issues of the day being debated bringing the political, the business community, academic community together. that's very convenient. secondly, for institutions like ours, opportunities to see clients who are from everywhere around the world and all gathered within half a mile. ee northern mousily convenient.

opportunities to spend time with people from all over the world. >> you can leverage your time. this isn't going anywhere. there will be a davos. there will always be a time and place for davos. >> it's always been here except the year after september 11th when they took davos to new york which was a wonderful gesture. >> we're all trying to figure out what wall street means now. it certainly doesn't mean buckets in wall street. i'm still trying to figure out where we are in the new wall street. we had earnings recently come out. we had euro earnings, bank of america's earnings. how are you seeing that play out? you've emphasized one thing, goldman has emphasized another? does goldman want retail? do you want more? who's going best? >> first off, wall street is probably in the biggest transition in the last four or five years than we've had in 75, 78 years since the great depression. so enormous amount of strategic change, not just to the u.s.

firms you mentioned but to europe, across asia now. management have to figure out what is the right strategy for them. so when we sit down with our board, we don't say what is the other guy or girls doing, we focus on what is morgan stanley's goal? what is our core dna? what do we want to do? what do we have the capabilities to fulfill. that's how we came up with our strategy. >> how would you grade yourself in what you've decided to focus on in the past couple of years or since your tenure? >> i think the strategy is working. frankly, you know, i don't want to do a self-grade. the stock is up 60 plus% last year. the investor are coming back to the stock. our cds trade is below 100 for the first time since 2007. the credit worthiness is back. the results aren't there to be fair. i think the strategy is in place. the direction is clear. the steps we've laid out are working. the full results aren't there because that's not where we want it to be. >> you don't have to name names.

who missed? big bond trading un be knits? where was the weakness that you saw? >> boy, it's hard to identify who missed. >> you don't have to say anyone in particular. >> i think it was clearly -- >> doing a lot of bond trading. >> listen, the bond business was tough. it was tough for us. it was our worst quarter for the year. commodities were difficult. i think that will rebound now that there's action going on with oil. listen, if you had a strong equities franchise and strong asset wealth management you did better. >> will you get back to where you manage people's money for a living and you don't trade your own? i mean, are you in a good position because you've got, you know, a real solid investor's management company? brokers. you've got -- you're almost a thundering herd, aren't you? >> maybe. what i would point out is we've got 1.9 trillion of folks' money, which is depending how you count, number one or two in the world. that is a phenomenal basis to

put behind the resources, the intellectual capital. match that with one of the top couple of investment banks in the world and you have a really potent business model in a recovering global economy. i feel good about it. >> there is a question, sort of culture question inside of morgan stanley. who's more important now, the investment bankers which typically used to be or the brokers? there's been people who have said, look, now the bankers report to the brokers. it's been a switch. is that true? >> no, that's ridiculous. anybody who says that, listen, we're a big house. they're all important. they all play a role. the asset and wealth management businesses give us balance. the investment banking give us that turbo charge when you're in economic recoveries like we're in now. these questions should have been asked back in 1997 when morgan stanley merged with dean witt ter. we're making it work now. >> do you think it was the right decision then? it failed. i don't know if you think it

failed but -- >> oh, i can't second guess that. i like what it gave us to do what we did recently so, yes, from that perspective, the company is strong because we had that merger originally. >> james, what is it that makes it work now? i mean, what's different? what did you do? >> he works there now. >> if you come through the crisis as we all did, you know, whether on your side of the table or on mine, we're all pretty scarred from it. what people quickly figured out is rolling the dice with somebody else's capital is not a good investment model. investors don't like it. by having a more balanced business model where all you're doing is serving your clients, bringing both the retail clients the product institution can create and bringing them the research that we get off the back of our institutional business is a very potent mix. i think the world's changed. the regulatory world has changed. the political world has changed.

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sachs, i didn't see you unplug. is there anything you should be envious of. >> joe, you know i couldn't answer that. >> you could sort of dance around it. >> listen, everybody's got to do what they think they're best at. we know what we think -- >> goldman is pretty damn good at aye lot of stuff. >> they've done a great job. >> you're not envious of anything they've done. >> i'm going to surprise you maybe because i grew up with so many siblings. live in a world of competition. >> ten of you? >> ten children in my family. >> say that you imagine that he probably wishes he had an arm that could further leverage what they do investment banking wise. do you think he does? >> if i get in the world of trying to imagine what a peer is thinking at some point, this would be -- this would -- >> does anyone else worry? >> go ahead. >> i have a different one for you. we're going to have jamie dimon on the program tomorrow. when you look at what's happened with jamie and the firm and the settlements they've made over the last month or two, what do

you think of that? >> i think firstly the decision to buy into washington mutual, which both helped the american financial system was made with the support of -- the request of the u.s. government. was both a bold decision, generally a positive decision but had consequences. you picked up a lot of stuff along with those acquisitions. i think that's a lot of what j.p.'s living with. listen, jamie's a great guy. we need strong financial institutions in the u.s., no question about it. we should be celebrating when our banks are doing well. >> what about this whole situation in china? i think morgan stanley may be looked at this in hiring princelings in government. >> hiring somebody who's the child of somebody in government is not a bad thing. there are a lot of talented people that come from those families. all you've got to do is have the appropriate conflict controls in

an organization, which all of us face all the time. it could be china, could be the u.s., makes no difference. >> final question. we launched something called the cnbc 25. top 25 business leaders of the past 25 years. >> oh. >> in the world of finance, who would you put at the top of that list? >> i think he'd said lloyd probably. wouldn't you? off of your head. >> you can put paulson, sandy weill on that list. transformative over the past 25 years. >> i think hank paulson made some of the courageous decisions in the shortest period of time that anybody has put under the pressure to do and, you know, i go to work every day thinking if we can hit an 80% right on the decisions we're making we're doing beautifully. i think they did better than that. t.a.r.p. i think was extraordinary. it was innovative. he'd be number one and probably two and three. >> not bernak?

>> obviously great support. he's done great. the troika at the time. bernanke, paulson, this was the yankees. we were lucky to have them at the plate. all three of them hopefully are on the list. >> greg, great having you. thank you. >> thank you. >> we'll be back next year, absolutely. >> thank you. up next, actor matt damon joins us to talk about his new venture to bring clean water to the world. that interview is up after this break. "squawk box" will be right back. by the way, we go from damon to dimon. j.p.'s jamie dimon will be here. we start at 6:00 a.m. eastern time. "squawk box" is back with matt damon right after this break. [ male announcer ] the new new york is open.

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welcome back to "squawk box." 8:45 on the east coast.

on wednesday morning the futures right now still roughly pointing to a mixed open. the dow would be open by just about 18 points to the down side. led down by earnings from united technologies and ibm, two components that both had relatively choppy quarters. more on that in a second. let's check some of the earnings that have come out this morning. we have coach taking a hit. earnings and revenues fell. coach suffering a 13.6% drop in same-store sales for the fourth quarter. losing market share to competitors like michael koors and that stock down 6.5%. mixed quarter for dow component united technologies. it earned $1.58 per share. that's five cents above estimates. revenues were slightly shy. that stock hovering around the flat line. another earnings miss came from mining freeportmcmoran. missed consensus by 12%. revenue also short. that seems to be a recurring problem.

this time it's due to falling metals prices. joe, that's the latest in corporate headlines. send it over to you. hope you're staying warm. >> oh, it's nice, kayla. >> too warm. >> hot. >> much nicer than we have here, i should say. i have my jacket here. i'm wearing it. it's worse here than it looks like there. >> yeah, it's like 10 degrees. polar vortex 2, i think. stay warm. you're sleeveless though. interesting choice. anyway, a planet without access to safe drinking water. this is not funny. our next guest is here in daf vot davos is here to share more with us. academy award winner matt damon co-founder of water.org and gary white. they're working to inform people because, matt, you point out that you have to remind yourself every day that this is for real. and just reading the numbers and some of the facts, i guess i am just clueless.

there are people that are thirsty, and not just a few. >> you. and mo yeah, a child dies every 20 seconds. >> three a minute? >> three a water. >> from not having clean water. >> lack of access to clean water and sanitation. all of these kind of things and diarrheal diseases that wouldn't kill our kids. maybe they miss a day of school or something, but, no, these are claiming millions of children every year. >> there's people that spend most of their day trying to get water, trying to get -- that's what they do. or they can't work a full day because half of the time they're trying just to provide for what we take for granted, food, shelter, water. >> that's exactly right. the -- it's a very big issue for women and girls. it's often left to them to do the scavenging for water. so if you can get clean water into a household, suddenly these kids will go back to school. and, you know, their prospects

for a worthwhile life just -- >> yeah. looking at -- just reading between the lines. philanthropic efforts, while they're noble, you can't leverage them. there's a way to do this where i think everybody in the end knows that as everyone rises up, everybody becomes consumers. there's a way of maybe not making money immediately but there's public/private partnerships that can be done to give people loans, micro loans. explain it. i don't think it's implicit to understand it. >> sure. we look at some of the public/private things we have with the pepsi could kpepsico f >> how does it work? do you lend people money to dig wells? >> yeah. there's people living in slums that have water pipes passing through the slums but they can't get connected because they can't afford to pay the connection fee. that can be over $150. what we help them do is tap into micro finance so they can get a water connection at their home. they're no longer walking to collect water. they can use that time to work

at a paying job and repay the loan. we're really trying to create the market forces. >> you can drive down the per person kofcosts of implementing that even though you have corporate help but you can drive it down. you can cut it in half, can't you, what it costs? >> yeah. even more than that. we're down below, you know, $10 per person? >> where was t 36 at the start. >> it came down from there. the average for digging a well is a standard way of thinking. when i first got involved i started raising money to drill wells and which is something that needs to happen but i realize pretty quickly as i started to look at this issue that that wasn't going to be the answer. >> what got you into this? >> yeah. the very first -- >> well, i was on a trip in 2006

and actually that bono had arranged. and basically it was like a college mini course. it was about studying extreme poverty and every day had a different learning focus and one of the days the learning focus was water. i ended up going on a water collection with a girl and -- a 14-year-old girl and i just really hit it off with her. she had come home from school, grabbed her jerry can. we walked for about a mile. in the course of our conversation i said, you know, what are you going to do when you grow up? are you going to stay in this? a very rural village in zambia? she said, no, no, i'm going to the big city and i'm going to be a nurse. i just remember identifying with her because i remember when ben aflac and i said we're going to the big city of new york and being actors. i remembered that feeling of being a teenager and having that hope of what life might bring. it wasn't until i was driving away that i foresight to sink ae

well a mile from this girl's home, she would have spent her entire day scavenging for water. she would never have become a nurse in lousaka, she would be somebody who was literally trying to eke out an existence from one day to the next. there's the issue of death and needless death and suffering which is -- which is huge, but then there are all these other t t other things. >> i had to ask, what exactly do you do with these companies? >> i think it's a similar situation. we have a lot of the visceral moments. we get to travel to developing countries and to see that hit you right in the face that the people are so held back by lack of water and sanitation from reaching their potential. so, for us what we're trying to do is kind of move beyond that traditional top-down charity model. there is never enough charity in the world to solve this problem. we need $200 billion a year for

5 years invested to get it happen. right now if you add up all the assistance and charity, it's $9 billion a year. we've got to leverage it from the bottom up. we're trying to change the model to help people tap into their intrinsic power as customers and citizens and even the people living in poverty have the ability to do this. right now we meet people all the time in these countries that are paying 125% interest to loan sharks so they can build a toilet. so the demand is there. it's rational to take out a loan to do that but if we can drive down the cost dramatically then we can help so many more people get water. >> it's 98% or something. >> it's better than subprime. >> that's the thing is we've -- is we've completed now 250,000 of these of the loans and they've paid back at 98%. >> yeah. >> and yet when we were in india a few months ago talking to rmfi

partners we asked them what kind of the biggest choke point was for them, which was access to affordable capital. the demand is absolutely there, but the problem is these guys are taking wholesale loans out at 15%, by the time they add on -- they tack on their percentage to keep their lights on, you know, the loans are going out to the poorest of the poor at 22% to 24% which is insane when you think about what you and i can get a loan for, right? >> pepsi i saw a certain amount of money, but this is working so there's a better way to leverage this, isn't there? do a fund or something? you got a fund you're working on? >> right. that's one of the things we wanted to hit on here in davos is the creation of this investment fund that will take social impact investors sometimes called the social capital markets and match it with the demand that we're seeing with the microfinance partners they're paying 15%. we polled them and talked to them and said if we can drive the cost in capital in half from 15% to 7% their demand would

double for capital, they'd be able to reach twice as many people and the costs would come down and reach poorer people further down the pyramid and social impact investors in the united states would be able to get a target rate of return of 2% is what we're hoping for. so they can get their money back. get their capital back as well as some interest as well as do good in the world. we think the market for that is huge. we're going to try to raise $12 million in the first round of this and then we'll continue. >> how are you talking to? did you end up talking to banks about it? jpmorgan did something with the bill gates foundation. >> yeah. >> who -- who are you going to collect the money from? >> matt won't say it but matt and michael and sochi burch who are tech leaders in the silicon valley have committed the first $3 million to launch that. >> we're quarter of the way there. >> i think we're -- is there something we can put up that -- for people that want to get involved? this is new, right? you announcing this now? how do you get to do it, water.org?

>> yeah. you can e-mail him. >> that's okay. >> at water.org. >> this is not beneath what we do here. >> and i'm not joking. >> j.y.? >> yeah, jerry white at water.org. >> hopefully it's starting a new trend of trying to take something as basic as water and sanitation and match it to the capital markets. >> where are the places -- now i'm interested. where the places that you have the lowest percentage of people that can get freshwater and clean water? >> for percentagewise it's countries in sub-saharan africa. in terms of absolute number of people that lack these services, you know, india is huge, you know, indonesia's huge. we're working in both of those countries. but, yeah. the market and the demand for that. >> will this work equally in terms of cooperation with local authorities? >> oh, absolutely. >> everybody wants to do it. you don't have any problem with

any of them? >> no. i mean -- >> it's the water utilities themselves that we're trying to help people tap into, so they actually get more of a customer base. >> do you divide it up evenly? how do you decide where to put your main effort? >> right now we're in india. we've got a lot of programs that are pretty mature there and we've got a grant from the pepsico foundation. so we're -- we're -- this is something we'd like to expand to a number of different countries, i mean, it's -- it works really well. this model works really well in urban and very urban areas where, you know, there are people that are kind of living together and there's infrastructure in place. we're not trying to reinvent the wheel. it's just piggybacking on existing infrastructure. >> is the expectation that individuals can fill the rest fund? >> i think it's a combination. a lot of high net worth individuals are into social impact investing. you look at private foundation that can actually not only make grants, but they can make program-related investments they

are called and they can make loans into this type of work as well. >> before we go, we have one question for matt. you have to ask. >> i was going to ask who is this jeremy renner? i didn't forget who is. >> but jeremy is not playing bourne. >> are you going to be back or not? >> you know, we'd have to have a script. >> are you a bad-ass? >> you are looking at a guy with a broken collarbone right now. >> would that give you a chance? all those moves, do you know how to do those moves? >> if you touched me on the shoulder i would cry like a baby, literally cry. >> i want to ask him a question. we just announced this thing today about the 200 most important business people in the past 25 years. cnbc is 25 years old now. in the media world, in hollywood, is there a person you put on the top of the list? >> the most important -- >> the most important in the past 25 years when it comes to the transformation of your business. >> well, you know, i mean, lucas

and spielberg. yeah, certainly those. >> okay. >> and lucas, i mean, what he did with, you know, sound and, you know, but i'd have to think about it. but -- you do well with spielberg. >> i think liberace is up there, too. >> and liberace. >> clearly. >> matt, thank you very much. we know we're not the center of your life, but we'll do our best to help you connect to what is.

well, a great morning. that was a lot of fun. tomorrow we have an exclusive interview with jamie dimon. make sure you join us. "squawk on the street" starts right now. ♪ good wednesday morning, welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at a snowy new york stock exchange. the snow may have been tough on