doing, but at some point it becomes kind of a macro event. when all these countries very far apart in a globe are very close together in an investor's mind. good morning and welcome back to "squawk box" here on cnbc. we are back in our headquarters. i'm andrew sorkin along with joe kernen and sarah eissen is here this morning. he talked to us about the investor tension level and our global markets story is the top story today. the heavy selling across the merging market currencies that started late last week and continued overnight. take a look at what's going on. the malaysian hit a fresh four-year low against the dollar. the philippines peso hovering close to the four-year low. and the indonesian rupiah hit a two-week low against the

greenback following the sell-off on wall street friday, asian equities also fell sharply starting the week. the nikkei and hang seng closing down more than 2% today. that's putting pressure everywhere else. take a look at what's going on in european trading right now. we have a situation where you have red arrows across the board in europe. the ftse down 1.5%. in italy more than 2%. we'll take a quick look at the u.s. equity futures as well as we take a look now, the good news is we have red arrows with the dow opening five points higher, the s&p 500 up three points higher and the nasdaq up 2.5 points. over to sarah in the meantime. >> among the catalyst most often cited, fears over tightening in u.s. monetary policy and credit conditions in china. let's start in china. eunice is joining us live from beijing with an update.

good morning. good evening. >> good morning. it looks like we have averted a potential crisis here in china, there are rising fears that we could see a default in the shadow banking industry, but this is what happened. basically there was an instrument, an instrument called a wealth management product that was going to be coming due by the end of this week worth about $500 million with a company that had issued it, which is a coal mining company, was having problems and said it wasn't going to be able to pay investors back. so once that happened, for the past week and a half or so, there were quite a few people who were talking about this story, a lot of the players as well as the bank that actually was selling the products. icbc, not really wanting to take on the bulk of the responsibility. and now what we have heard from the shadow lender, china credit trust, is that they were able to work out a deal. not a lot of details, but in a notice they said they would convert loan to equity and that an investor would put money into the coal mining company that borrowed that cash.

so somewhat of a bailout here. what people are talking about now is that there's some relief, there's some expectation that that's what is going to happen because there could be major repercussions across the financial industry, if that particular company and that investment was allowed to default. guys? >> all right. eunice, we need you, so stick around in case anything happens. but 300 points on a friday and then it's up on a monday? we will see -- that's not the big scary thing that happens in a -- a lot of people are saying there's a little trepidation about what's happening in the currency markets, but it's now got to get so bad there that it affects us in terms that we can't export stuff there. it's not -- this is to be expected. we're tapering. hopefully this isn't going -- i'm talking to you, ben bernanke, don't let this -- last time a little flux, a little

vicks goes up 2% and they are going to taper. you are always worried. >> i'm worried. >> don't you worry. >> you are a currency expert, right? >> how do you know what the taper looks like? we have not been here before and don't know what china is doing either. >> i'll give you the other side. >> two scary unknowns. >> the one thing that scares me is that we all assume that they were successful in doing this and that it's a free lunch and there's going to be no repercussions. if that last employment report is actually characteristic of what we do, and if they have not orchestrated a 3% growth rate in this country, they'll have trouble getting out and then we are in the roach hotel we never get out of. >> i want to throw one thing at you. over the weekend i saw a number of major u.s. hedge fund investors who said forget about all the currency stuff and china, that's not what the problem is. the problem is we were all so long we have been so long and after two days, wednesday, thursday, and that people just

decided they had to capitulate on friday, that it wasn't the emerging markets, it wasn't china, it was basically our own little problem. >> that's an excuse, but the question is, is this the beginning of the 10% correction? and if so, do people just say, well, 10 and then buy? or are they unable to pull the trigger and it goes back up before they get in? >> the dow lost 3% last week. last year it was 26.5%. >> that's just the way it goes. >> and the other thing is, everyone says, what, we're going to do 8% or 9%, that's the consensus this year. the market goes up more than that like 20 or down for the year in general. and i'm still sort of thinking it goes up more. we have jeremy siegal on today. >> my american trader friends are watching what happens in japan today. if the japanese market stays

stable and they think the japanese government comes in quietly to try to stabilize things. >> it's all the yen. that's the key to all of this. and it's sort of stabilizing today, but the nikkei japanese stock market plunged overnight. >> either something happened in davos or someone messed with -- everything is very tiny. can you see that? >> where's i.t. when you need that? >> sabotage. >> so it's not me. >> no. >> your eyes didn't get worse over the weekend. >> boy, there are a lot of socialists over there. >> how could you stand it? >> i'm glad that they are going to solve unemployment everywhere. i mean, how can you solve unemployment in the united states and also think of africa and also spain. and they are going to come up with the same remedies for all? >> here's the worst part, they don't realize they are socialist. they just think they are helping people. >> but they are collectivists.

>> this is kind of a big love fest for the rich people. we are supposedly helping poor people, right? that's what they are thinking about, but everyone is going to parties. >> weren't they optimistic about the economy, meanwhile, look what's happening. >> you have a caveat on friday night. >> i did. >> was it a russian party? it sounds like a russian party. >> and she spoke to people about income inequality. do you see the disconnect? >> i see the disconnect. did you see the comment in the wall street journal over the weekend talking about income disparity? >> he got in some trouble, though. >> comparing anyone to nazis -- >> he referred to the attack on -- being compared to modern day germany. >> where you have a percentage of people going after kids

riding buses to work. that was his point, all these kids going to google, et cetera, buses are clogging the streets and people are mad about that. people are going to work and you're trying to bring them down? come on. >> a lot of people came out against him on twitter. >> of course they did. >> and he's -- he likes to stir things up a little, but in general, not a good idea to ever compare anything to either hitler or -- that kind of happened -- that's just left to history. >> and the state of the union tomorrow night. >> it is. >> tom harkin will be sitting in the audience. i saw a piece in the wall street journal. >> the president is using it as a wedge issue, not really trying to solve any of it. in fact, during his presidency, it's gotten a lot worse if you think about it in terms of food stamps and terms of disability and terms of participation in the workforce. it's not like it has been front and center. and even the fed is probably to some extent added to it.

>> i agree with you on that. >> not really bringing it up to address it structurally. long-term, he's bringing it up to excite. but a lot of democrats are starting to worry it implies too much that he's a redistributionist and goes into the thinking, the negative thinking that's all he cares about, is taking from the -- >> living in the de blasio world. >> i'm living in the super bowl host world of new jersey. >> 11% of the population voted de blasio, remember that. when you look at how many people voted, it is hard to -- do you want to talk about this? >> joining us now, who are you? michelle cabrera is our international correspondent, for me going there is different for you. it is different for you to be here. >> i was in puerto rico. >> she's got color in her face. >> i got a tan line from the necklace that i had. it was great, yeah.

>> tan lines are another thing. it's probably a good idea not to -- >> we don't have to talk about it. so i was going to talk about this chinese wealth product expected to go bust on friday. which has got an lot of fears raised about the shadow banking system in china, so we'll give you the details. it matures on friday. they think the original $496 million not necessarily going to get paid back. so far only 96 million has been paid out of 149 million worth of interest. the expected return, look at that, that's what is important. 9.5% to 11%. what do you get when you deposit money in why pennsylvanichina? you get 3%. so people are going into the wealth management product, of which there are a bazillion. now the concern about the wealth management products that have been on the show before is lot of them are backed by junk. ponzi schemes, garbage, et cetera. and many of them we know are going to go bust. the question is, what is china

going to do when they all go bust? there are pros and cons to either side. eunice just reported that there's probably some deal structured on this one. if they don't bail this out, do all these chinese depositors suddenly do what would be the equivalent of a run on wealth management products? in other words, stop investing and you can't roll them over any more. lots of small and medium-sized businesses go bust. if you do bail it out, then you continue what is essentially a very large ponzi scheme and it raises questions on whether or not china is committed to reform. >> two things, this is like the implied guarantee on money market industry here in the united states. my second question is in davos on saturday, i don't know the name of the official, he suggested that the government was not going to be rescuing these things. >> right. there is deep internal division in china about exactly what to do about it. because you bail them out, everything stays calm for a long time, right? and we in the rest of the world economy are happy for them to

keep growing at 7% to 8%, right? if they don't bail it out -- >> does he have to say that a week ahead of time and then you switch at the end? >> possible. there's possible there's a halfway deal. you get your principal back but not interest. somebody sells the asset to a different bank, there's other things that could happen in the next five days. >> could they push the payout a couple weeks? >> they could extend maturities, lots of things. are they going to wake up and say, oh, my god, these are not guaranteed? i know in the paperwork it says they are not guaranteed, so what happens at that point, because they provide a tremendous amount of credit to small and medium-sized businesses in china. >> what's interesting is the regulators have tried to get on top of this issue tackling smad doe banking and so far have made no progress. >> they never do it in a way that would matter, though. which is you have to let interest rates flow. why do you have shadow banking? because 3% in the deposit stinks, right? and you've got up nation running

faster. you're a small business but all the loans go to big businesses that are backed by the chinese government. you need the money. if they let interest rates flow, you have the market setting the lending. >> all right. michelle, thank you. >> great, see you later. >> i want to say, fantastic explanation of what the heck is going on across the pond where we are going in a second. we'll see you again at 7:00 a.m. to talk more about this. in the meantime, we'll talk about the global markets. the global markets report with ross westgate standing by in london. good morning to you, ross. >> hey, andrew, very good morning to you. you can see plenty of red on the dow jones stock 600 board behind me. decliners here by 8 to 1 after the moment. and we are down on the session. the losses aren't huge, only up a percent for stocks 600. the ftse down 2.4%. one of the bigger losers today up 1.5%. and the dax is near a half

percent low. the ftse of italy is lower 1.2% today with banks of italy under pressure with a rights issue in the first half of the year posting a bigger loss of $600 million euros in 2013. large loss provisions, there are concerns about whether the rest of the sector will face similar things. back to the ftse down 1.5%. the reason for that is vodafone currently up 5.8%. the stock has been up 30% since selling off verzizen. plenty of speculation for at&t. there was greater speculation over the weekend that the at&t chief spoke to the commissioner in charge of things like telecom to approve any kind of deal. so there's been speculation. at&t forced to make an announcement to the london stock exchange saying we have no plans to buy vodafone. the stock is down 5%. what it means is it is out of

the picture for six months or so. so that's the individual stock we are looking at. elsewhere, we have seen yields continuing to fall on the european debt as well on this risk aversion move. so red, yes, we are low, i wouldn't call it heavy sell for this stage continued to other parts of the world. back to you. >> all is right with the world, ross. we were down 300. of course you're down. but you watch what we do today so then you'll know what to do tomorrow. but today you need to -- >> that's it. >> it's a tale-all type of thing. i want to say one more thing about davos, while you had caviar on friday night, i was channel surfing out of my four channels or whatever it was in the stupid hotel. >> all in german. >> except al jazeera. so that was in english. they had a special called "meltdown." you were in it. >> i was in it? >> you were in it. and so was charlie gasparino and

a bunch of other people. you don't remember sitting down for an interview in this? >> no. >> just the way -- we had a guest on that sent hank paulson was one, two and three in who saved the planet, did you see this special many can you imagine how al-jazeera portrayed this? they talked about him being a snake and at the top of the crisis he called his wife and said, pray for me. it was the most slanted sickening -- they also spoke to a bunch of euro people about the united states in general. how it was all our fault, what we did to their jobs, what we did to the entire planet, and you were part of it, though. that's what i'm saying. they quoted you and you looked so serious and said, i don't think anyone knew that it would be so infectious abroad. they didn't know we were so interconnected. do you remember saying that line? >> that's good. i like that line. >> do you remember saying that people didn't know we were so -- >> i'm happy i said that. that's good. >> where were you sitting down

to do the interview? charlie gasparino mentioned my name. come on. >> really? >> it was bizarre. i want to talk currencies coming up. there's a bit of a crunch going on. concerns about china in the emerging market creating plenty of unconcernty in the market. but first, we'll get the national forecast now from the weather channel's alex wilson. good morning, alex. good morning, guys. we are talking snow in the southeast down towards the gulf coast as well. winter storm watches posted in the light blue. winter storm warnings out for places like myrtle beach where you notice mobile, alabama, near new orleans, it is included. arctic air diving off to the south. moisture from the gulf of mexico overriding this area of the cold air. and when that combination comes together, we're going to see a wintry mix from new orleans to mobile tomorrow. snow showers off to the north. tomorrow night, a wintry mix for savannah, charleston, up to

atlanta. central and eastern north carolina as well. even wednesday, snow showers inland right along the coast. we're looking at a wintry mix and could be picking up hefty accumulations. around new orleans, especially north, three to five inches. five to eight in the light purple. and the deep purple, up to a foot of snow. we are back after the break.

welcome back to "squawk box." we'll check the futures right

now, which are -- when you see something like that on a friday and then on monday, you never know. sometimes it's better to have a big sell-off on monday and then it comes back from that and makes a decent spot. and sometimes this isn't the way to go, but certainly not a lot of panic at this point in the markets after 300 points isn't what it used to be, but 578 points last week on the dow, that was equivalent to the horrible -- >> how are things not turning over in a good way over here? >> it is still historically very low, but it was not a doomny gloomy research over the weekend. >> 18 has been where it's been. >> we have an expert at the table on currencies. this is perfect. of all days that sarah could be here, this is kind of a good thing. >> thank you. the malaysian ringet is at multi-year lows. the rupiah is getting hammered. i'm sure you haven't checked

ukraine also. >> joe looks at that every morning. >> argentina is down because of argentina. the you capukraine, we see what happening there. and turkey, the election is coming up. he made a good point that once it starts it has nothing to do with the individual circumstance. >> i thought that was spot on compared to credit. if you get in that mentality, it becomes scary. >> that's when we were down 80 points on the future and they closed down 300. so i think -- then again, he also said within a year, it would be long. >> the question is, is it going to turn into the macro event where it starts to really get scary, like the '97 crisis. >> that was so different than in this case it's because -- it is pure and simple that all the qe caused a lot of money to go over there and it may have been invested in places that weren't necessarily economically -- >> you are comparing this to mexico, though. >> '94 mexican peso crisis.

>> is that a better compareson? >> well, you have to see how much that contagent hits the market. joining us, mark chandler, global head of currency strategies. mark, you and i are constantly checking the argentine peso, but explain why u.s. investors need to be looking at these situations very closely. >> well, i think in general what we're having is people are worried like you and joe were talking about, that the emerging market crisis spills over and knocks the fragile recoveries in the industrial countries. i think that we find that people are often give international level of analysis on this with the fed tapering, the wealth management in china, or maybe carney moving away from the

quantitative easing forward guidance replacement he talked about last week. but i think a lot of these problems like joe was saying, primarily are in the country's handsf hands. argentina's problems are in argentina. many countries have a huge level of reserves, system like self-insurance policy, which will protect them from the outflows joe was talking about. >> but here's the problem with that. boris, maybe you can speak to that, you are seeing healthier emerging markets like poland getting beat up as a result of this. the mentality they all get dumped as the same mexican peso put in there as well. >> the problem with all this is it is psychologically driven. it is just argentina and the ukraine actually in trouble, but everyone gets swept into the same basket. that's the problem. once the prices move significantly for psychological reasons, they tend to have serious economic impact going forward. and that is exactly what's happening. i still think the single biggest

risk is the chinese risk. those wealth management products have $1 trillion of savings in them. and i think the reason why the chinese backed off is because they are afraid of the lehman moment. afraid of letting one of these go and everybody else in china starts to run for the exits. and that creates a tremendous security problem for the rest of the world. >> boris, do you buy the argument that a number of u.s. hedge funds that i talked to over the weekend suggested that the sell-off, at least in the stock market, i know your a currency man, but it was unridged to all this. it was really the fact that everyone was so long and for two to three days we had down markets with a bit of capitulation? >> it always starts that way. one market may be unrelated to the other but they start to correlate. once we get into a crisis situation, everything goes to correlation one, right? so every market drives the other market because of the hurt mentality. if the currency is correct, simply because they were complacent and overbought, they could get correct more if the

problem persists going forward. >> i'm sorry, i was just thinking this is not a crisis. we had a soft hit in the mexican peso, but this isn't a crisis level. this is a couple days sell-off. i'm not sure that it's going to be sustained to affect policy or economic outcomes. >> i did not say it's a crisis and totally agree. it is not a crisis yet. my fear here, and this is why i think the chinese story is so important, is it could turn to a crisis if we have a problem with those wealth management products. >> china is one reason, the fed is the other. marc, what's going to happen when the fed meets tuesday and wednesday and makes an announcement. everyone expects another taper argument. what's going to happen to the already fragile financial markets? >> i think ironically the market will take it in stride with the taper. they anticipate $10 billion to be reduced from the federal reserve purchases meaning still $65 billion for the month of february. so the market is taking this on board. and i find surprising the

emerging market pressure is developing just at the time when u.s. treasury yields have fallen over 20 basis points, and that was before the meltdown in the stock market that ended last week. >> all right, marc chandler, boris schlossberg, thank you for talking about my favorite topics. it was another brutal night as the u.s. markets stabilized here. >> doing the math, i didn't have a chance to do it, but 60 divided by 1850 is -- we are on the s&p, we are at 1790 with the high at 1850. it is tough to sell at 1850, buy back at 1790, you are not at a point to play a correction. i don't know if we'll get there. coming up, a fresh week for the market as november or tinve put off friday. but first, heading to break, a look at last week's winners and losers. ♪

♪ welcome back. good morning. "squawk box" on cnbc. becky quick is off tomorrow. i'm leaving next week. >> where are you going? >> we do the show from kabul.

randall is in the news today. >> i saw that. he's not buying vodafone. >> i saw him over there, and he even mentioned vodafone, that's all people want to ask. people like you. >> that's all we want to talk about. and here he is, he's not going to go -- vodafone stock is down today, obviously. >> if he says no, he can't change his mind? >> next change his mind, but the one thing interesting, i went on the rants -- >> up in of the other stuff is interesting that that i brought up? >> i'll help you. remember how we talked about whether the nsa was going to make companies like at&t and google their life partner, my understanding is while it may, at&t's decision to pull back on this now is not related to that. >> i'm glad you cleared the air. you are bringing back snowden as a cop qunquering hero, did thatk

for you? >> i stood outside in the cold in davos taking signatures. >> did people talk about that in davos? >> no. >> the head of the human rights watch stood up at a dipper and said he believed it was a violation of human rights for the nsa to do what they were doing. and that created a stir. >> the market is down 3.2%. >> not worried. the top story is the global market because it has been a global story. heavy selling across emerging market currencies that started late last week and we saw it overnight, currencies like the ma laysian linggit. that's your favorite. it started to sell-off on wall street friday. and then the asian markets fell sharply to start the week. look at early european trading, looks like european markets got hit hard with red arrows down across the screen from london to

parisgermany. dow futures just flipped positive. we are coming off a 3.5 move lower for the week. not too far off. >> the dow did worse than the s&p. 1850 is the high, 1790 is where it is today. 16 divided by 1790 was 3.2%. that's where it is. so we haven't had a 10% correction in years. >> with the european crisis 2011. the fed will be the focus this week. joining us on the set, hans olson, he's in the management division of barclays. and michelle girard from ibs, my question last time when they got cold feet and chickened out, it had more to do with the ten year, i thought.

they don't want any pain because they control our entire economy and our futures, is what they think. i don't know why, but the ten-year is so under control, it's starting to get scary in terms of what it's saying. we're at 2.75. so why would they hold off on tapering because of this? they wouldn't. >> they shouldn't and they won't. but there's a general tightening of financial conditions they watch. so it is not just bonds, it's stocks, it is all of it. but you're exactly right, they won't, but there's nervousness that whatever the market, when it gets jittery like this, the fed is tested to stick with the program. we have seen them pull back. i don't think that will happen because they learned the difficulty is if you take a pass, you only, in a way, almost reinforce the inevitable that at any time you try to do this, the markets are going to have a temper tantrum and you just -- in the way, you just have to stick with the plan. ultimately, it's the best thing for the markets to do because if you don't do it now, it's only going to be twice as difficult

to come back in and do it. and we saw that. >> it is also some kind of drug. >> it's like morphine. >> let me do it a bit more. then you are back to zero days. >> it is almost like having a drug addict and you turn off the morphine. >> they do need to normalize some day. >> this is part of the process of markets setting interest rates and markets discriminating between investments that make sense and those that don't. and under the cover of money printing, money found its way into markets that it probably shouldn't have been there in the first place. you look at the external debt some of these countries have, the current account deficits they are running, they didn't reform their economies, so under -- if they don't have the cover of easy money, right, you start to get money pricing again. and in markets, they

discriminate when working best. >> i like that peter said the warts and blemishes are exposed once the qe comes off. >> and the people that swim naked with the tide. have you ever been to a nude beach? >> no. >> it's better -- the people that go there, actually, i'm going to be like the lulu desklemon guy. i'm not going there. >> i've been to a nude beach. >> what you just said is the currencies weaken, they are already overleveraged, so anything they borrow, they how more and the currency gets weaker and gets into a spiral that becomes, not specific. but it would have to spread to us here by hurting our economy here. and none of them are big enough to affect us. >> i don't think we go back to a contagen like '97 and '98.

when we were together last, i think the differentiation of markets are not monolithic markets. south korea is doing just fine, right in they don't have the debt profile, they don't have the current account issues that some of the other countries have, like brazil. so i think what you'll see is once we get through the initial shock of it, is differentiation amongst these markets. so you can't paint all of it with the same brush. >> so what are they doing, marc, ten? are they doing another ten? >> i would give it ten this week and they will continue doing that at every meeting and the program winds down in the fourth quarter. >> what was that jobs number? >> i think it was to some extent probably a little bit of weather. mostly i suspect it was give-back from the strain from the prior months. if you look at it at phase

value, the 12-month terms, they basically haven't moved. it wasn't that it was so weak -- i think what the december jobs number told us is that things were not getting a lot better. there was a feeling that something was happening and firms were hiring. that setback in the context of the prior three-month strain reaffirms that actually we are still getting kind of those periods of strength and weakness on balance, but we are still trending around the same levels we have for the last couple years. >> i'm back to thinking mortgage rates have gone back down. so when people worry we are setting up 3.5% on the ten-year, they say, i hope that's not enough to cut off the housing recovery. but we are getting both. they are tapering and the mortgage rates have gone back down. that should allow us to keep doing it, shouldn't it? >> it absolutely should. and i think the biggest thing here about the fed is it is not so much about taking away accommodation as i think a shifting of the tools is how bernanke mentioned it. even if things weaken, i think they are going to move away from

qe. if the economy needs more support, it's going to be provided in a different way through stronger forward guidance or other tools if that's where it ultimately has to go. but i think qe is finished. >> what does john allen do if there's inflation? isn't that tricky? >> that's going to allow her to continue to promise that rates will stay low and when they do ultimately rise, that they are not going to rise as fast. there isn't -- because of that low up nation backdrop, that doesn't worry the markets about the consequences of keeping rates so low and policy so accommodating. so i think that buys her more time to provide support in that way. >> two thoughts. i think that employment number, i guess the standard era i'm using on that, you could drive a truck through, so you can see that revised significantly. number two, the big issue the fed has this year is not

tapering but how they talk about it. when you read the notes to their meetings, most of it is spent on these guys figuring out how to talk about what they're doing. and you open up too much and you can see more than you want to, perhaps. >> there's a lot of disturbing metaphors. the tone does not make you feel like we are back in davos? look at it. do you speak german? >> no. >> but as the congress place where they all are, every guy that walked by was like a clone. >> green screen behind him. they were a natural. >> every guy that walked by looked like you in davos and are named han! i feel like, i miss davos, can you stick here -- >> i'll bring artificial snow next time. >> look at him. they just look exactly like you.

thinking big issues, ways to divide things equally. >> i won't quit my day job. >> no. >> i need to wear a bow tie. >> hans did. you know how to tie it, too, right? >> i do. i haven't worn it yet but i will. >> i like the look. good to see you both. coming up, beyond the currency and emerging markets, there is apple. the company is expected to report after the bell. we'll talk about expectations, next. and look at the price of natural gas. this was a huge story while you were gone hitting multi-year highs. this explains the cost of your heating bills. "squawk box" is right back. tomorrow on "squawk box," a cold month for stocks, but leon cooperman still has the hot hand. we'll get some picks from this squawk master tomorrow right here on "squawk box."

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welcome back. watching u.s. equity futures rebounding after that 300-point sell-off for the dow on friday. s&p 500 also looks like it's going to start higher on the week after what was a brutal week. the question is, will the overnight action weakness in emerging market currencies, weakness in emerging stocks be resilient? foxconn may build factories here in the united states. the major supplier of apple's

iphones and ipad have been hit by unrest in china. foxconn's chairman calls the quits a, quote, must go market. >> this is awesome. this is manufacturing back in the u.s. we hear all these stories about how we couldn't do it and you had to go to foxconn because they had the vertically integrated everything. >> you are not getting bullish. >> i am. this could be the turn. >> foxconn is the symbol of why they were so competitive for so long. >> the other stock to think about, corning glass, they are public, right? >> yeah. >> apple is moving away from gorilla glass, which is the glass on top of the iphone, to something called sapphire, which is made by a different company. i don't know what that means for corning glass. >> i don't either. >> anyway. for what it's worth. we have other news this morning. >> i don't know the difference. >> it is much stronger. you have gorilla glass. apple, we should note, set to

post quarterly sales after the bell today. apple could set records of iphones and ipad, but if you are looking for problem spots, here's what you have to do. pay attention to china. it's number two market has been a drag on revenue and margins in recent quarters. apple now sealed the long-awaited deal to sell iphones through china mobile. and that could bear some fruit this year. we had tim cook on just a couple weeks ago on that. and there's carl icahn arguing that at 13 times forward earnings, the stock massively undervalued. he's billing up his stake in demanding that apple share more of its $146 billion cash horde. so far, tim cook has said, talk to the hand on that. >> and icahn has been saying it's not management he's anowed with and wants to change, it's the board. >> financial engineering some

people would say. >> there are a lot of people, joe, that want to know what's going on with the malaysian ringgit. >> you follow 448 people. >> i'm selective. >> i try to keep it under 100. i try to. >> sarah, remember when we don't get cues? now we are getting the cue. . >> we have to go. coming up, a big hit on friday, is the sector ready for the correction or are investors overreacting? and jeremy siegal is going to tell us if he's nervous about january. he will join us in the 8:00 a.m. hour. " squawk box" is back after this short break. ♪ short break. to calculate, to think -- and can respond to what it encounters.

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thank you for joining us. i don't know if it happened on friday or saturday, but there was a piece on the front page of "the new york times" about some of these train companies and the amount of stuff they are transporting and that some of the problems they have had in

terms of accidents and regulation. we'll talk about what's going on in the market, but did you see this piece at all, don? >> i'm sorry, i didn't read that article. >> you didn't. what was amazing in the piece is it suggested to me there's huge regulation coming and that it may slow down some of the stuff that's coming out of the bulk of the area, right? >> it's possible. there's an unfunded mandate of ptc positive train control that they have already had to spend billions of dollars on. >> we had a huge sell-off on friday. what does it mean? >> it's interesting, i remember it wasn't that long ago that the thailand bought couldn't catch a bid in the entire financial market trying to buy a dirt farm as a result. but throughout that entire period back in the '98 asian currency crisis, the transports never really saw a drop off in volume. people kept making things,

people kept shipping things. if you look at the freight flows, they are in a sharp contrast to what we saw in friday's market in a sharp contest. >> ups going to miss expectations. >> overwhelmed with volume. >> css off, as well. >> it was, it was, but in contrast, their main competitor in the east, norfolk southern, beat earnings and raised guidance effectively. >> okay. you're suggesting go long at this point? i don't understand. >> absolutely. if you look at the underlying freight load, that's key. the last 40 years of reliable data has been predicted by truck tonnage. truck tonnage is up 11%, three-month average over 9%. that bodes well at least the short to intermediate term for the u.s. economy. tonnage is up over 3%.

chemical volume is up over 4%, despite the looming threat of some regulation. air freight numbers i get a similar kind of picture. freight flows are telling us the economy is not only strong, but accelerating. >> we're going to leave it there. don, thank you for joining us this morning. >> my pleasure, as always. >> just watching -- >> what are you watching? >> jamie dimon. did you see how they played the story? he should be well paid for what he has to put up with in terms of the media, the way he's treated. >> does anyone realize what the fines came from, does anyone remember it was washington? all right. emerging -- coming up, emerging markets and currencies under fire and a fed meeting under way. these are the big issues facing wall street this morning. and we have a team of guest

hosts. >> look at them hanging out together. >> coffee clutching. >> very friendly here. >> wow, brian bellsky.

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a big chill for the markets. emerging risks from around the world creating investor anxiety. >> the feds roll and the currency punch. we're going to preview ben bernanke's last meeting as chairman. >> all that, plus caterpillar getting ready to roll out quarterly results. the second hour of "squawk box" begins right now.

good morning, welcome back to "squawk box." following friday's selloff, take a look at the futures this morning. the dow looks like it would open up higher. things have been back and forth, back and forth all morning, now looks like the dow will open up 33 points higher, nasdaq up six points and the s&p 500 six points, as well. check out the anxiety over emerging markets, because that has been weighing on wall street on friday over the weekend, as well. japan's nikkei fell 225 -- nikkei fell 2.5% and dipped below 15,000 for the first time since november and hang seng

down, as well. italy hurting the most, off about 1.5%. the yen is among the benefici y beneficiaries of concern. japanese currency hitting a seven-week high against the dollar, and gold also hitting its highest level in more than two months. i also saw bit coin was up about 12% over the weekend. >> you and your bit coin. >> i'm with you. >> it's because you're young. are you a milenial? >> what is the cut off? >> 36. >> i'm 36, so i am. >> now i understand why the euro is doing well. >> why? >> getting the interest of the dollar. >> europe's doing better. >> versus the dollar it shouldn't be where it is, but versus other currencies, it's

almost a safe haven. i brought home franks. >> what about chocolates? >> no, what was in my room melted. >> i put it outside. i couldn't get it out, so i put it outside for awhile. >> then it melted? >> then i had a bit. >> anyway. >> center of the action is in the currency market and in the emerging markets, selloff continuing overnight. currencies getting hammered, turkish lira low, paying for the argentine paeso. remember that started with thailand's currency. cnbc's chief international correspondent joins us now with more. and when you looked at thailand, that was 0. -- something percent. >> so, let's take a trip down

memory lane. here is the dow back from 1997 to the end of 1998, and i want you to see a couple of things there. so, you'll see -- can we bring that up? i see it there in the preview. there it is, beautiful. what do you notice there, joe? >> it was down 318 points. >> that's yesterday's -- i don't know why we do this, the chart is two years from 1997 to the end of 1998. >> it went up. >> the dow finished higher, yes. october 1998, that's that huge dip that you see right there. >> we don't want a dip like that honey. >> one, major horrendous situation with currencies back in 1997, 1998, dow finished higher both years, however, it can feel really, really painful back then. it was october '98, u.s. dollar moved 20 yen in three days.

it was crazy brutal. >> i like looking at that and understand it, but the question for me right now, does this market even go down enough to let anyone on that's not there? a lot of people have never gotten on for two years. >> i agree. >> does this even give you 5% or close to 10%? >> going to give you the present economy? >> plenty of people waiting. >> people missed out. >> what happened back then, india fell 30%, bring up russia, down 90%. so overseas markets if you're invested in overseas markets, they can get a lot, lot worse. now, two full screens. why it could be worse this time and why it could be better this time. why it could be worse this time, we don't know what we don't know. that's always the case. we never know. who the hell knew the thai bot was going to lead, data point,

up from 37%. why? it may not get worse this time around. the first point is super, super important. this time around, currencies float. many, many, many more currencies float, so we see the action happening as it opposed to happening overnight in a brutal trying to predict local politics in some foreign country. those countries now have much, much higher reserves. india was loading gold on a plane and a lot of countries said they'd never be in that position again. the last one is super, super important. repeat after me, china has a closed capital account. at moments like this, we all really like it because they can do whatever they want, whenever they want. >> these mucky mucks, because there's three of them. >> wow. >> but before, before i do, i

want to tell you about one sort of dream i had over the weekend that scared me. >> i wouldn't in it. >> no. >> good. >> people go back and talk about the housing bubble. i don't know if it's been proven, greenspan will say it's never been proven, but there are people that think that, the money went somewhere. compared to what greenspan did with accommodation, remember the size of the housing bubble? it was very painful. wouldn't you say this fed was more accommodated, but we can't point to a single asset class. >> maybe it's emerging markets. >> where is the bubble? >> emerging markets. >> all markets, was it like the late '90s fed on steroids this time around, sort of? >> could be. >> that's what scares me. >> we also don't know how dependent these emerging market economies were on the capital inflight from the quantitative

easing and that's what we're learning right now. >> that's the big difference. >> i'm going to introduce you, sir pinstripe. if i was to go through your accomplishments, i couldn't get through. former vice chairman at goldman sachs international. you were in the state department, you were, like, atmosphere. >> under secretary for economics with hillary. >> other stuff, too, right? >> some other stuff before that. >> what was the first administration you were in? >> nixon. >> nixon administration. >> when they started opening up china. >> early opening of china. went there when we didn't have any trade with china, and now look. >> brian is similar in that he's had so many jobs, for me to go over all the places. >> no time. >> you're at chief investment

strategist at bemo now, you were at merrill. >> yes. >> piper. >> yes. >> pretty much it. >> do you still have your book, how to speak minnesotan? >> you bet i do. >> and michael purvis. weeden and company. >> crow weeden. >> something different. >> weeden is based where? >> greenwich, connecticut. >> back to what you were saying? >> one big difference now is they have a very large backlog of borrowing and they are going to have to roll over, a lot of these countries have big rollover risks and that's going to be a challenge. the other is several have key elections and most elections have a high level of uncertainty attached to them. india's having elections, turkey's having elections, brazil is having elections, just

to name a few. the uncertainty -- >> can i interject what the key impact is, a lot of the central banks aren't doing what they are supposed to do because they don't want to upset the election. >> in turkey, government told them don't raise interest rates now. >> they are also running low on reserves. if you look at argentina's chart -- >> they've been a mess for a long time. anyone that expected argentina would have good economic policy is sorely mistaken. many of them have become nationalistic and nationalistic policies have become very strong and that's going to make it more difficult for them to open up a better investment environment. >> just the beginning of anything, is this the 10% pullback, or not? >> well, it might be. here's the probably not, though. here's why. >> you don't have to answer that way. >> here's why. awesome analysis, michelle,

great data points. here's where we take a little bit of a difference. in the '90s, folks, america was the place to be and everyone was here. the last ten years, everyone has been in emerging markets. that's why people are freaking out. if you think about asset cycles, the last investment cycle was driven by credit. the last one is driven by cash. it's america, so we're in the process of unwinding, if you want to call it a bubble, call it a bubble. >> i don't know if i do. >> we're in the process of unwinding the capacity bubble in emerging markets. we think it's going to take at least three to five more years, and by the way, the answer to your question where people can buy america and stocks, people are not here yet. emerging market clients are not here. europe is a reluctant buyer of america, they are chasing european stocks again, so the biggest surprise could be the u.s. continues to outperform.

i'm not saying we're up double digits. we could be up single digits. >> all the markets fell, the u.s. was up. >> great charlie maxwell was at weeden. >> yes, he was. >> i think you're leaving, right? >> no, i'm on, i think, until 9:00. >> never mind. go ahead, what do you think? >> i think, actually, you know, what's bad for e.m. could be good for u.s. equities. looking at 2014, i think as i've always articulated if you want to buy equities, look to the currencies first. ten years ago you could buy the nifty in india for four times earnings. evaluations can be whatever they need to be when the flows are there. >> emerging markets have done nothing in five years and we're up 50% in the same period. >> there's also more foreign direct investment.

we're going to see a big job increase from chinese investment, investment from other parts of east asia that want to be in this market. >> aren't we more exposed now as american companies try to get in the consumer markets? >> for some of these companies, it's 40%, 50% of their sales. >> coke has more sales abroad than this country. >> many tech companies, too. >> if that's right, how do you make the case u.s. equities are the place to be? >> it's all relative. >> it's all relative. you're right, one of the thing is pointed on friday, watch out for this quarter, caterpillar is one example. many are going to guide lower, slower business. >> then the knock of effect of countries that supply commodities to these large emerging economies because service industries don't use as

many commodities as growth companies to social security going to have a very major effect, but it's going to be differentiated from country to country and company to company, sector to sector. >> they also hate the strong dollar. that's bad for them. >> i'm thinking of the big investment banks, this is not going to be good for them. you used to work there. kind of, vice chairman. >> there's talk volatility because of the volcker rule because inventories are so low in some of the stuff that used to be in house. >> you had a nebulous role. did you work at goldman? >> i did work at goldman. >> what does that mean? i want to see your job description. >> goldman sachs international. >> international. >> i was dealing with these countries. >> '97 crisis, weren't you? >> yes, exactly. >> look how it worked out. >> worked out well. look where they are. they now have a lot of reserves and they are not going to be

defending their currencies the way they were and using up all their -- >> where were you? >> i was here doing my job. >> you know who else wasn't there, bubba. >> some people have to do work at home. >> consumers have to work. >> got his own davos. clinton global initiative. >> we're going to have much more from our guests. also coming up, the blame game. should the federal reserve take the heat for emerging markets threat? plus, caterpillar next in line to check into earnings central. we'll have the numbers as soon as they break and instant reaction on the dow component. and check out u.s. futures pointing to a higher start for wall street. bit of a reversal from what we saw last week. we'll be back with "squawk box." afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection.

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futures are a little better, i've only seen them down just that one time, andrew. about eight points. slowly melting a little bit higher, but it's, you know, market's not even open yet. we'll see where we are at 4:00, but so far, so good after what was a rout, especially on friday. >> you could buy on the dip in 2014 always. i don't know if you can always buy on the dip in 2014 the same way. you know the fed.

not around to help you. let's get you through corporate headlines. erickson and samsung includes an initial payment and royalties from samsung for the term of a multi-year licensing deal. also, google is now buying privately held intelligence company deepmind technology. joe, the singularity is upon us. rico reporting the price will be about $400 million. deepmind uses general purpose learning a lgorithalgorithms. >> we had an eric schmidt interview on friday. hopefully now that he said it, you'll start believing some of the stuff. a.i., people have been hoping for a.i. for 30 years. >> i'm still skeptical on the singulari singularity. i ran into the fellow who does the second machine age, the

author, he thinks the singularity could come, but more like 2060, '70, '80. we'll work on that. coming up, who to blame for the emerging market turmoil. that's the question, china, ecb, fed, take your pick. we have the answer when "squawk box" returns. time now for today's aflac trivia question. what percentage of american adults received a starbuck's gift card over the holiday season? 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. while he's been incapacitated, somebody's been paying him cash. now, is this your doing? aflac? now, if i met with some such accident, would aflac pay me? ♪ nice. this is your stop. [ male announcer ] find out what aflac can do for you and your family... aflac? [ male announcer ] ...at aflac.com.

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now the answer to today's aflac trivia question. what percentage of american adults received a starbuck's gift card over the holiday season? the answer -- 10%. >> aflac! we know emerging market currencies are in turmoil as we speak, but where did it all begin? joining us, joe, chief market strategist for worldwide markets online trading. good to see you, joe. we're watching all these emerging markets going out of control, devaluation like we

haven't seen since the '97 emerging market crisis. is the key to this the japanese yen? futures are higher and things are looking better. >> you know, what you're seeing now is not really a full fledged crisis. if people were really concerned about things deeply, they'd be flooding to the dollar. that's where everyone goes, u.s. assets and the dollar. there are concerns in emerging markets. a lot has to do with the credit over the past four or five years, everyone blames it on the fed. there's a lot there in the amount of fed have pumped out and people have used looking for places to get return. this isn't the major type of crisis where you're getting the shakings underneath the foundation of currencies, not yet. you have to wait a bit. the yen has been stronger, but not tremendously stronger:the dollar, as i said, is sitting still against the euro. the major currency pair traded in the euro is the dollar/euro. that hasn't moved. until that moves, you're not seeing what everyone is afraid

of. >> what would you have to see to be really afraid then? >> china. >> china what? >> well, for china to really be in a problem, if you're looking at argentina, argentina has a history of currency crises and poor management. that's not really the kind of problem to shake everybody. same is true for turkey. turkey doesn't have a history of long problems, but does have a small economy and one that isn't important enough for the world to shake things. however, china is both opaque and large, and that's where i think you'll see if it goes to china. one of the things that triggered this is not only the feds talking about ending qe, but there was a report over china from market economics that perhaps manufacturing is not going somewhere in china. that's the biggest problem and would exacerbate this. >> i have a japanese question for you. my trader trend is e-mailing in. there's a conspiratorial view

that abe and co. have gone into the markets and stabilized things. do you buy that? >> no, i don't. central banks have two tools they can use, generally, immediately up front. one is intervention. japanese certainly haven't done that, the other is interest rates. >> they've done it historically. >> they have done it historically, but it's not terribly effective and certainly not effective when one bank tries to go in and does it on their own. the japanese don't want a stronger yen. >> shadow system in china? >> the chinese have a tremendous amount of money for them to support things z. that mean long term they can continue what they've been doing the last three or four years? i don't think so, but they can prevent any crises right now. >> some calm there. joe, good to see you on this monday morning. we're continuing to watch the currency markets. up next, how the federal reserve plays in.

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welcome back to "squawk box" on cnbc. really nice studio, isn't it? >> not so cold in here. >> i think we were colder in new york. >> hand warmers, feet were cold. >> let's mention caterpillar, hitting right now $1.54 a share. if that's a clean number, it's above where analysts have finally come down to recently. the revenue number was 14.4 billion dollars. company's talking about record operating cash flow, given some guidance for the full year, although why do we need full

year? must be for next year where they are looking for. $5.30 doesn't make any sense. the stock at this point indicated sharply higher. i got a bid of $89 on it, now up $90, up $4, also authorizing a $10 billion stock repurchase. that's a fair amount as far as the stock repurchase goes. let me see if i can get some comments from our buddy. we haven't seen him in awhile. maybe with these results, actually, he comes on either way. he comes on to explain. the big problem last year was what happened in mining. right after they bought harness figure. was it harness figure they bought? no, they bought the other big mining company from wisconsin. what's the name of that one? >> it's been a tough bet. >> long term, still optimistic

about it. it was the one that was in paul ryan's district, i think, in -- >> right. >> put that on the prompter for you and it could come out anything. >> curse word by the time i'm finished with it. we'd be off the air. anyway, steve leesman, am i reading this? >> this is you. >> i'm going to read it really well then. steve leesman joins us now with the preview of the fed's big meeting this week. steve, they'll do ten, right? they are not afraid yet, especially after the positive arrows we have today. >> that's right. i'm interested in the caterpillar earnings, not a bad macro economic indicator. it's bernanke's last batch. if you think about the opposite idea, they didn't do it, it would show they are more concerned than perhaps even the market is. here's a bit of the checklist

for the taper i put together. anything comes along. here's how i think the fed thinks about it. the first thing they ask, does it change the forecast, does it represent systemic risk, i don't think we're there yet when it comes to concern about the currencies and different emerging markets. and the third thing, say we're wrong about both those two, are there underlying macro economic things we should be looking at that are in themselves troubling? i pulled up the debt as a percent of gdp and what you see, they are higher, but not like you woke up out of bed and said, wow, these external debt numbers are troubling. in fact, one of the ones that's the most improved is argentina, which is a country having the most problems. south africa, turkey up a bit, but not really out of line with their ten-year averages, and i think the fed will look at this, you know what, the market can get concerned about this, but the underlying economics are not so troubling. there we go, there's the

relative to the ten-year averages. one other thing i'm hearing, guys, one thing you're seeing is you have this movement away from emerging markets where growth has been slower or disappointing back to developed countries. now, if that theory is right, you could see some pop in stocks in the months ahead as some of this money gets reallocated as they move away from these emerging markets because of concerns about the tapering, but also the growth numbers. back to the developed countries where some of the growth numbers, in fact, have been better, andrew. >> thank you, steve, for that. joe, what do you got? >> it is caterpillar, two big items in here, but after factoring out the $580 million for good will impairment, positively impacted by tax settlement, it added eight cents to the year ago number which was $1.46, so that really is $1.54,

well above expectations of $1.28. $14.4 billion versus $16 billion in the year ago period. i'm proud of the way our employees came together despite a sales and revenue decline of $10 billion, we set a record for operating cash flow, strengthened our balance sheet and improved our overall market position for machines. so, even though they were $10 billion lower on sales, they were able to add eight cents to the bottom line and it's being rewarded. 99 is the high on caterpillar. traded under 80 at one point. >> they are saying they see signs in improvement in the world economy, but also saying expectations that mine production will continually increase -- sorry, mining companies as a result we are expecting sales and resource industries to decline modestly. what is their exposure to

emerging markets? >> they've been big in china. >> all the big emerging markets, particularly the ones benefitting from sales of raw material, which are building capacity. >> this is not -- >> i don't know what the percentage is, but it's an important part. >> there's that of an issue and the mining has been especially hard hit. what's helping is their construction and power business has been doing a little bit better, for instance, the u.s. housing market recovers. >> most countries are investing in infrastructure, unlike the united states, they are. caterpillar is going to be important to that. joining us now this morning, we have kevin hassett, who's in d.c., director of economic policies, and benjin mendell. given the markets, does the fed even blink for half a second? >> right. i think there are two things going on. one is that the long end is going to go up eventually.

it was held down last year and that made people want to take risks in emerging markets. i think as we ease off the pedal, we'll see increased in rates and that will bring money back. remember, i know there's a fed meeting this week, but we have a jobs report next week and we're getting uncomfortably close to the 6.5% the fed has been talking about for awhile. it's a time where people are sending their money into short-term assets in the u.s. so if there's a pop, they can then move, but in the meantime, they are getting out of the riskiest things. >> you agree with that? >> i do. i think an important part of the story is, obviously, the fed's taper that we expect to continue in earnest today with $10 billion going down to 65 per month. >> what can they do with the forward guidance, anything they can say to make people feel better? >> obviously, the unemployment rate falling faster than expected has put pressure on the fed's forward guidance. i think in the back of people's minds is a scenario you get to

the end of 2014 and the unemployment rate is close to 6% and inflation close to 1%. what then for forward guidance and rate hikes? >> andrew? >> yeah? >> there is some skepticism about this fedex pla nation that i think is worth bringing up. the fed tapered on december 18th. what's today? only the end of january, then the fed wakes up, fed is tapering, let's pull our money out of emerging markets. i want to point out, we look around for the nearest cause, but the taper seems to be doubt as to whether or not that's the real cause of what's going on. >> that's probably what the fed would have you believe, or at least some of the fed members, steve, but it still heightens the vulnerability. >> sara, you have to explain that. in other words, why is it that if this is the reason why the market is selling today and if

markets are efficient, as i believe we both believe, then why is it they ignored that fact for, what, three weeks? three and a half weeks? >> dealing with it since the first inkling. they've been dealing with it since then, three steps up, two steps back. they didn't start tapering, that's when they said they are going to start tapering. also every $10 billion is now that it looks like they are going to do another ten and stick to their plan, that's something the market has to digest. what did you say, see if the fed governors are believing that, they are going to tell steve what to believe. that's what usually happens, isn't it, steve? >> andrew had the best question, by the way. he talked about guidance. so the biggest issue going forward is, how is guidance and the language of guidance going to change and how does the fed trip up? where's the surprise coming,

because no one's talking about the surprise. how can the fed trip up on guidance? >> well, a lot of things are changing. forward guidance by its nature is a difference between the path by economic conditions and the fed's reaction function, then the path they project into the future and there are a lot of things buffeting those two things. there's the changing data, incoming composition of the committee, there's the evolving views of the incumbents on the committee. >> where's the trip of those two or three things? >> unemployment rate is falling much sharper. >> data's the easy thing. it's about how they interpret the data and communicate the differences. that's the big change. >> they spend a lot of time describing how they are going to explain this to the market and the really interesting thing is, what happens when they get to the tapering? they've got long dated paper on their books. what do they tell the market they are going to do? this is a very tricky area for

the fed. >> what's happening to the liquidity in the markets, we touched on that earlier, but last year the fed was effectively buying 90% of the 30-year treasuries issued and that's going to go up. those percentages will go up as budget deficits contract, right. >> what do they do with the stuff on their books? >> hold on to it. they hold on to it. >> what are they going to say about it? >> i want to bring kevin in. if you could write it, what would you say on that? >> they thought they were ahead of the curve with their forward guidance, but the big decline in the unemployment rate messed that up. the day it was a positive surprise for markets, but that got unwound by the data. if it's me with the risk of going to 6.5, i point at some of the other things. remember the unemployment rate went down, so if they say something like let's look at the

employment to population ratio, too, then we're really going to have to be worried about inflation. if they do something like that, then i think it would calm markets a lot. >> that's what they are doing, kevin. they got close to their metric and decided to fudge it, is what they are doing. very much the way carney said. we're getting to our unemployment rate, we're going to be obscure here about whether or not we're going to stick to it. >> steve, kevin, ben, longer conversation, i'm sure we'll continue it throughout the week, if not longer. coming up, reaction to earnings from dow component caterpillar. we have an analyst that covers the stock. he's going to tell us what he thinks. then, you can see we have a bigger green arrow, opening up close to 60 points higher. "squawk box" coming back after this short break.

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or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. welcome back to "squawk box." take a look at futures this morning. we have green arrows. it's coming around. dow looks about 55 points higher. nasdaq up 4.5 points and the s&p 500 up almost 5 points. while we watch the markets, take a look at other stories in the news this morning. the faa is calling for more

safety checks for the 787 dreamliner. regulators want inspections of removable tail sections that can jam and cause loss of control. also royal caribbean cutting short a cruise on its explorer of the seas after about 300 passengers got sick. the ship returned two days earlier than planned after an outbreak of -- what do we call that? >> gastrointestinal. >> gastro intestinal virus. >> what do you want for that, by the way, not just the ticket back -- >> another free cruise? >> second prize is two more free crews. >> also liberty global involved in a multibillion dollar deal. it's going to be buying the 71.5% of the dutch cable company

ziggo that it doesn't already own for $13.7 billion in cash and stock. liberty already owns, we should say, a dutch cable company upc and with this deal will own about 90% of the dutch cable market. where are the regulators? >> ziggo is a cartoon character. get rid of that name. put it in with liberty global. how much on the dow now, how many for point in the dow? you get employed to know this stuff. >> listen, joe. >> it doesn't matter, all i wanted to say, caterpillar was up five, that probably accounts for the move from 35 to 55. >> i think the dow futures had already moved slightly more. >> they are moving higher. >> if you add five points to the dow per point in caterpillar, it goes up 25 points.

>> i think they already moved before caterpillar. >> it did take another leg higher. i'll settle it. >> physically adds that. >> i lose, you win, game over. >> i'm learning that here on "squawk box." up next, analysts' reaction to caterpillar earnings. how good they really were. at the top of the hour, emerging markets taking center stage. we'll talk to two market pros about the president moves. jeremy sooeg el and peter boockvar. we'll be right back. tomorrow on "squawk box," a cold month for stocks, but leon cooperman still has the hot hand. we'll get picks from this squawk master. that's tomorrow here on "squawk box."

caterpillar out with earnings, joining us now to break down the numbers, joel tiss. what is this, your guy? >> of course, it's my guy. come on. >> taking over the show. >> joel, i guess expectations were low because of the year that caterpillar's had, and doug's been on a lot, you know, very forthright talking about some of the problems in mining, but what happened that was a surprise? >> well, two little things that i noticed. i mean, the results, whatever, 50-page report, but it's two results, two little things that

i noticed were a currency gain of about ten cents and a lifo benefit of 14 cents. they liquidated about $3 billion worth of inventories in 2013. >> that shouldn't be good. that should be people saying the quality of earnings isn't that great. why is it up $5? what was positive in the results? >> the headline number, people were looking for $1.27, the headline number was clearly a lot better than that, and, you know, i think people were preparing for the worst in terms of guidance, maybe a lot of clients that i talked to last week were looking for kind of $4.50 to $5.50 of guidance, something less than $5 on the bottom end. >> what was it that made that number better? >> well, they cut $1.2 billion out of costs so far in 2014 and are looking at another $500 million in 2014. >> so there's nothing in terms of the mix of what they are selling or where they are selling it where they did better

than people thought, or did they execute better, you're saying it's cost cutting. do people get too negative on the prospects for caterpillar? >> yeah, when things are declining, it's hard to gauge where it's going to go. in the past, the profitability drop on revenue decreases has been more in the 50% range. cat's been really working to keep that in the 30% range, so i think the cost flexibility is probably a little better here than people thought. >> mining has been really hard for this company, and in general for this industry. i think it's about 30% of caterpillar's business. any idea, joel, when that's going to come back? because we have seen a bounce in precious metals prices this year. >> if you think very logically, it takes a long time to build up a mine and it takes a long time to, you know, to slow things down and to start closing some of your higher cost mines. so i don't think we're going to see a trough in mining companies

operating profits until 2015 at the earliest, but the stocks will, obviously, bounce before we hit the bottom. >> so do we care about the housing market here or do we care about china? what's going to dictate whether this company outperforms? >> i think it's going to be a little bit of housing. we definitely need commercial construction to get better, but we need resources and infrastructure. cat's got a lot of oil and gas drilling. they've got a lot of power generation, you know, mining is getting smaller, obviously. so we need global infrastructure would be the one thing that i think we would really drive the stock. >> they have faced some competition, joel, from global and deere. how does caterpillar maintain its dominant position in the industry for when business does start coming back to these guys? >> i mean, there's always been a ton of competition, and that's not going away. it's not getting any easier and cat's really been a master of

changing their stripes and changing their cost structure and really being a global manufacturer, i think, is the one thing they do better than anyone else. >> joel, brian at bimo, i sit a couple doors down from you. say, at these levels, stocks bounced up now, a lot of people nervous about cat, now stock again rallied to the highs. is there enough growth domestically, especially north america, for investors to buy the stock today? >> well, i mean, i would say in general there's not enough growth in north america or in the world to make most industrial stocks that astraktive and that's the reason why all these restructuring stories and share repurchase stories are the ones that are really working, so i think cat doesn't really have the ammunition to make a big acquisition, but they certainly have the ammunition and fire power to buy back shares and to continue to restructure and wait

for the economy to get a little better. >> all right, joel, thanks. is your office about the same size, cubicle? >> no, i have a cubicle. he has, like, a real office. >> do you have glass walls? >> semi. >> little open? >> little open, yeah. >> joel, i don't like it when it's open. >> thank you. see you later. >> thank you, brian. thank you. we also want to thank robert for spending the hour with us, valuable expertise on what's going on internationally. >> nixon to hillary clinton. >> before i leave, i want to make one point, china, let's not get too excited or negative about china. there's still a lot of growth there. >> get on the plane to china tonight? >> i think this china credit trust issue is going to be resolved. the chinese are rebalancing their economy. let's not panicking. >> we'll leave it there on that optimistic note. >> put in a hillary plug,

hillary, if we're talking about the economy, mihillary did moren the state department to help business. >> final words, we got to leave it there. final words on hillary and china, positive ones from robert. coming up, heavy selling across emerging markets is continuing right now overnight, catching investors off guard. more on what market pros will be watching as we get ready for trading here in the u.s. also, another round of bitter cold weather gripping much of the country. take a look at the price of natural gas hitting multiyear highs thanks to that winter chill. futures this morning pointing to a better start than what we saw last week. the dow futures have been moving higher. "squawk box" will be right back. ? there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen.

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for 1.99% financing during our certified pre-owned sales event through february 28th. emerging markets threat. heavy selling friday catching many investors off guard. "squawk box" here to tell you what to expect this week. >> from the fed, to china, earning expectations, we have your assets covered. >> it's going to be a pivotal week on wall street and we'll get you ready for all of it as the final hour of "squawk box" begins right now. ♪

>> i don't know what this song means. >> lucky, you are about to get lucky. >> did you watch the grammy's last night? >> no, i didn't. what network were they on? wasn't nbc, was it? >> cbs. >> i didn't watch. >> i had a colonoscopy. no, anyway, welcome back to "squawk box." >> i thought you were washing your hair. >> i was washing my hair, but this song is in my son's year-end thing. sing it, kids, guys, up all night to get lucky. do you know what they are saying? these are fifth graders. do you understand the song? it's an expression. >> get lucky in the markets today. >> is that what they are talking about, andrew? >> get lucky, get lucky. i don't know if this is right. i'm joe kernan. >> hoping to get lucky. >> no, i'm not.

becky will be back tomorrow. brian belske from bmo capital markets. michael purvis, chief global strategist at weeden and company. >> we could all use a little luck, okay? >> you don't know either, you have no idea. >> anyway. >> you never did get lucky. >> i'm a happily married man. >> i know you are. go ahead. global markets, u.s. equity futures have been rebounding this morning. rebound for the dow, s&p, and the nasdaq after a steep sell off on friday. we're watching currencies, started last week, continued into the overnight session. turkey's lira had a record low for 11 days in a row. argentine peso also baring the brunt. stocks taking a cue from wall street on friday. heavy selling pressure across asia. hang seng and nikkei down. over in europe, mixed back. they were all in the red, now

france turned positive. italy, still down, though, looks like more than 2%. the stock market this morning in the united states, as we said, rebounding. caterpillar came out with earnings beat the street sharply higher this morning. the company authorized a $10 billion stock buyback program. that could be feeding into what we're seeing, as well. >> what they do, 1.7, i think, not like they immediately do the ten, which would be pretty big. joining us now, jeremy siegel, professor of finance at the university of pennsylvania, and peter boockvar is also here, chief market analyst at the lindsey group and cnbc contributor and guest host. brian belske and michael purvis, when i finish introducing all the guests, we're going to have to go to break. thank you all for coming. no. once again, i had to defend you to andrew, because he likes to refer to you as a per ma bowl

and i like to make the case, you know, andrew, since 1982, the dow went from 780 to 16,000. so if you were a permabowl, the perma bears did worse than the perma bowls. >> absolutely. >> have you ever said, you know, step aside, wait for -- >> yeah. >> you have? >> at the top of the technology bubble i wrote a big op ed piece in "the wall street journal." that came out march 14th. i said this is crazy. even me being bullish on the market, you can't stay in the market with those. so, yeah, there have been times i felt we were way overpriced. i don't now. i still think we're slightly under fair market value. i think what happened last week, for those of us with some gray hair, remember the asian crisis of '97, people are beginning to

say, oh, my god, is this the beginning of something that looked like that? that really shocked the market, i don't think so. i don't think argentina and turkey are anything like korea, thailand, indonesia back 15 years ago, but those memories, i think, were one of the things that caused that anxiety in the market. >> you know what, jeremy, it turned out better last year than you could have even imagined. at the beginning of 2013, your target, a lot of people -- >> well, at the beginning of 2012 i said the market was ending, between 16,000 and 17,000. it was 16.5. hey, never get lucky like that again, you know, humility is the order of the day. >> there we go again. >> yeah. boockvar, you are going to be -- it's like yin and yang. friday was your day. you thought, wow, but that might

have been it for you, might have been your 24 hours where you really felt like you've been saying the fed orchestrated this entire thing, up, huge air pocket, friday could have been the start of something. do you think it was? >> i think it was. we've seen this movie many times. i feel i'm seeing sequels of the police academy movies. they are going on and on. we saw it during the summer when the fed hinted about it. that's the problem. the fed creates an artificial edifice and the second they pull away, this is what we get. there's nothing sustainable to what they are doing. >> steve was talking about the fed tapered on december 18th, and into the end of the year we had a lot of momentum. i don't put too much stake into it. last week we had five different fed members that said irrespective of the jobs number, we're going to keep on tapering, and i think people are beginning to realize 2014 is potentially, if they go according to plan,

the end of qe, and again, all you have to do is look at the market responses. >> they said that the whole time. >> yeah, but the market seems to think that we can somehow handle it because the bulls say, well, the economy is fine, therefore, it with overcome the qe. i think what we saw last week, no, the economy is okay, but asset prices are artificially elevated because of qe. >> what is has you optimistic, ginn the fed started to scale back the stimulus and not like earnings have been that positive or that much to cheer investors. >> yeah, actually, i counted the numbers that beat estimates and actually i think it was north of 70% that i did a count on, so that's not horrible. you know, my feeling was in contrast to comments we just heard, the biggest myth on wall street last year is qe is the reason, and the only reason, why the stock market is up. you know, we're selling, what,

17 times past earnings, 15.5 times this year's earnings. that is not overpriced in a low interest rate environment. and even if rates go up a bit this year, we all know we're still way below post-war means and norms for that interest rate. so i don't think the market is overinflated. in fact, when i look at it, i picked 18,000, my calculations is where i think at this structure interest rates, even if the ten-year goes to 4%, 4.5%, that's been the average of the post-war period. so i don't think it's qe artificially propping it up. i think they are not going to do anything this wednesday. they don't want to look at every -- they need two or three, you know, bad labor market reports to really say i'm going to stop the tapering. they are not going to do it on one, but they are going to be responsive to the data.

there's no question about that. if it comes in a week, i think they are going to stop the tapering. >> one thing i'll say, over the last few years, the market, the s&p 500 has been better correlated to the fed balance sheet than corporate earnings. michael, i know you want to jump in. >> i took your course 22 years ago at wharton, it was fantastic. >> thank you. >> when i look at evaluation right now, relative to mid stage bull markets, right, you have a peg ratio for the amount of corporate earnings we're getting almost three times to where you were back in 1995 or, you know, same number back in 2006, 2007, and so i'm actually bullish on equities but maybe for slightly different reasons than you may be. how do you square the -- you know, the evaluation for the amount of growth we've been seeing and while margins are slipping? or trending down and not trending up. >> well, i've been saying over

the last two years, the bull market was going to be driven by multiple expansion, not by earnings growth. my feeling is we all know well undervalued 2009, 2010, 2011, then i looked at the interest rates everywhere and said where are the alternatives to invest in? those other periods of time you could invest in 4%, 5%, 6% in treasuries, 4%, 5% in money markets. right now when it's zero people are saying, hey, i'm going to go for the 2.2%, 2.5% dividend yield with some growth, any growth, even with no growth, it's better than my money fund. that's why i think we're going to be moving to the higher range, not way up by 30, of course, which we were in 2000, the higher range of the historical ranges. 18, 19, and that gives us another 10%, 12% on this market. that's the way i look at it.

>> if the s&p 500 was a company, was a stock, and you saw 5%, 6% earnings growth on historic profit margins and that earnings growth was driven by stock buy backs and lowered interest expense, why would i want to pay 19 times earnings on that company? >> well, because take a look at the cap rates on real estate. because -- the biggest asset class in the world is fixed income, so we have to think about pricing assets relative to that asset class. when the alternatives -- new normal and the alternative interest rates are going to be normal, then as a result you're going to capitalize the other ass assets, including even real estate. you see the cap rates going down, interest rates going down association that is what i'm looking at. we're in a new world, we're not going to get the interest ratings we had in the '80s and '90s. lower capitalization rates lead

to a higher p.e. ratio. whatever the growth is, as long as we don't go into a recession or a slump. that's the way i look at the evaluation. >> peter, what kind of a pullback are you expecting and what would make you more bullish on stocks, especially stocks in america? >> i want the fed to be out of the game of price fixing interest rates association when qe is over and short-term interest rates are normalized and we have a market where i can actually analyze the economy and markets and not worried about the fed, i'll be extraordinarily bullish. >> 2016 is when you're going to get excited? >> every heroin addict has a rough time when they get out of withdrawal, but at the end of the day they are going to be much better off. we're going to have pain in between, but we'll be much better off if the fed gets out of the game. >> how does the fed get out of the game if the inflation is trending lower? >> i don't like at p.c. anymore. rents are rising 3% a year right now on an annualized basis.

p.c. is not capturing that. that's where the inflation is coming from. >> did you see when brody started to get -- don't start reading, that's my tag. see when brody tried to get off, gave him a drug but it was more painful. >> "homeland"? >> brody, yeah. jeremy, are you where rocky was running around on the steps? is your desk out there? >> looks like he's in davos, actually. >> there's that step rocky was going like this. is that where you are? that's not real, is it? >> no, i'm in a studio and put pictures of philly in the background. >> i thought you were, like, sitting on the steps out there. that is where rocky was running around, isn't it? >> he did run up the steps, famous scene from "rocky," yes. >> next time we're going to be in a meat locker giving all your -- anyway, thank you.

jeremy siegel, peter boockvar. >> both hands over the head, come on. >> hang in there, buddy. you feel like rocky. against mr. t. >> last year i got pummelled, this year i'm hoping to stand back up again. coming up, the emerging markets concerns, interest rates, and where he's investing. we're coming right back in just a moment. ok, here's the way the system works. let's say you pay your guy around 2 percent to manage your money. that's not much, you think except it's 2 percent every year. does that make a difference? search "cost of financial advisors" ouch! over time it really adds up. then go to e*trade and find out how much our advice costs. spoiler alert. it's low. really? yes, really. e*trade offers investment advice and guidance from dedicated professional financial consultants.

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it's like credit, if it's name specific and we're at that part of the world, how's this country doing it, that country doing it, but at some point it becomes kind of a macro event, when all these countries that are very, very far apart on the globe, are very close together in investors' minds. >> that was lloyd blankfein in davos talking to the crew here. of the biggest drivers, concerns fellow reserve tapering will reduce global e. wilbur, you are known for going into distressed, suffering industry, countries, does anything entice you now in the

emerging markets world? >> well, i think china is getting very close to the point where one should be making more commitments to it. i think it's true they are slowing down, but by global standards, they are doing very, very well and i think they'll grow something in excess of 6%. i also think that i agree with some of the comments that were made by an earlier guest this morning that the crisis so-called in the banking system, i think, is way overblown. the banking chinese central government controls most of the banks, controls most of the equities, has plenty of resources with which to deal with the thing, and is moving very aggressively to do so, so i think the next big market that turns around could very well be china. >> so where specifically in china are you looking? are you looking at the banking sector? because it's kind of hard for

western american investors to get in. >> well, we're looking at a lot of different sectors, but my own sense is it may be a little bit early to be going in. i just think it's getting very close to that point and i think in general this is going to be a year of individual securities, both in the u.s. and else where, whereas last year was sort of a market of markets. the main thing last year was you had to be long, and if you were, then you probably did pretty well. i think we're getting into a period where selectivity will be the more important criterion than just being long. >> wilbur, would you agree if china does what you think it will do, that that would more than offset the tapering that we're doing to the emerging markets? isn't that a bigger factor for the people these markets were worried about, wouldn't a resurgent china do more for

them? offset $10 million a month of cutting back, wouldn't it? >> yeah, i think there is a psychological problem with the tapering. my own feeling is the most sensible policy would be very soon in here to make an announcement, there will be continued tapering, but on a very, very gradual basis. maybe as little as $5 billion a month for a 15-month period. i think the market could adjust to that kind of very gradual slope and yet it would avoid people worrying, well, is there going to be a sudden drop. some people, as you know, were very surprised when there was the 10 billion taperage just recently and i think predictability is much more important whether or not we taper. everyone knows we have to taper sooner or later, but the fear is when and how abruptly. >> morning, wilbur, quick

question, a year ago the number was 8%. now you're saying 6% is going to be the number. two-part question, what's the number a year from now, and what's it going to take for china to put up consistent gdp growth over a two to three-year time period? >> well, those are all very good questions. i was not a proponent of the 8% theory. i was more around the 7%, and i do think that it will be at least 6%. and perhaps somewhere in the range of 6% to 7%. i think that as the number gets bigger, as that base keeps getting bigger, it's harder and harder to grow at any kind of particular geometric rate, but i do think that by 2015 china will be a lot farther along toward the path of consumer driving the economy rather than just exports and investment, which has been the big driver in the past.

and i don't think it should be too surprising that it's not a seamless movement away from one set of dynamics in your economy to a fairly different one. i think you have to assume there will be some little rough spots in between, but for any big economy, anything two-thirds of 6% would be regarded as a herculean achievement. >> all right. always good to see you and get your perspective, especially with the positive view on china. wilbur ross, thank you for joining us. coming up on "squawk box," stories making headlines, including another retailer warning of another data breach. we'll name names when "squawk box" returns. i had to do something. i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant,

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welcome back to "squawk box." arts and crafts retailer michaels is investigating a possible security breach. it's devising customers to check statements for fraudulent activity. that warning comes in the wake of the massive data breach over the holidays at target. michaels has been preparing to go public. in other news in weekend box office, "ride along" took the top spot for a second week in a row, collecting $22.2 million in ticket sales. >> would you go see that? >> probably not. >> who makes it? >> universal. >> i would see this, looks

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welcome back to "squawk box." futures pointing to a higher start rebound mode this morning after friday's steep selloff. the dow closed down more than 300 points. now it looks higher about 60. those futures moving higher throughout the morning. caterpillar earnings coming in better, buyback, as well, earning $1.54 per share for the third quarter, well above estimates of $1.28. of course, the $10 billion share buyback program. under pressure this morning in response to an inquiry by british regulators. at&t said it had no intention of making a bid for vodafone. downgraded by jpmorgan chase. the firm there citing evaluation, as well as cisco's exposure to emerging markets. that's what it call comes down to these days. >> we got nothing for rick. i'm supposed to get him stirred up, which i can do, because

leesman is here. we're from cincinnati -- >> we're both from cincinnati. that's why we get along so well. >> you're from amberly. >> which is the better side of the tracks? >> let me try to describe it. >> nobody goes to the west side of cincinnati. >> the west side is like duck dynasty. >> reason he has an access is because he's from the west side. >> aren't there days you think we should have a cincinnati weather bug? >> the reason i ask -- you're a reds fan still? >> reds fan, bengals fan. not much of a sports fan, but i do support my teams. >> since we're on this, what did you think of wkrp in cincinnati? >> wasn't in cincinnati. >> was that a big part of your life? >> no. >> do you talk about graders? it's the best thing out of cincinnati, i argue. you can get it in stores here. >> we're more interested in bands, prairie league, isley

brothers. "walk the moon." ♪ >> this is the theme song of wkrp in cincinnati. i love this show. >> more like west side kind of appeal. >> leesman is here. 296,000, joe, population of cincinnati. >> right. >> greater cincinnati. >> they have a million people in cincinnati proper. >> there's a lot of people watching right now who care about this. >> no, no, no. >> good morning, cincinnati. >> skyline, were you a gold star? >> i was a rosa's pizza. >> west side. >> that's not west side. >> from the west side. anyway, rick, think of something to start with. i mean, i know leesman's thinking you're wrong about something today probably, i don't know. earlier he said that the fed can't be blamed for any of this sort of tumult we're seeing in emerging markets and it's not their fault.

>> it would be like parents leaving their kids at home from about age 4 and then not claiming responsibility for how they turn out. draw your own conclusions. >> like a baby with a hammer. >> one thing said on friday i totally agree with, and that is simple, most of the crisis or at least some of the issues over the last 72 trading hours have managed to bring rates down. so why should the federal reserve be less inclined to taper? so, steve, for those words i give you great kudos, because i've said all along, maybe if they would have left the market alone, they would have handled many of these issues by itself, but it isn't just keeping rates down or purchasing treasuries, it's kind of the extra grease that that puts in versus the markets ability to get to the same interest rate level, and i think anybody denies that the last several days aren't at least in part due to the activities of central banks should talk to any central

bankers from mexico to latin america, i think they'd question that reasoning. and one more step, we continue to see some of the southern european economies rates go down, even though spain and portugal maybe popped up a bit, they are now moving countercorrelated to the safe harbor of good sovereigns. the bazooka perceived to be coming out with loans being talked about, this is a bad thing, and we need to pay attention to that new direction. >> rick, just so you know, joe prefaced his remarks by saying his job was to stir it up. >> i didn't catch that part. >> he mischaracterized what i said. >> shaken, not stird. >> i understand that. with a twist or not? >> shaken. shake, rattle, and roll. >> my question was the disconnect in time between when the fed tapered and when, i guess, media financial reporters decided that markets were selling off because of the taper. if we start with a theory of

efficient markets, we come up with the idea market should react, if not instantly, within some approximate period of time. it was a long way, three weeks plus, four weeks plus that emerging markets started to sell off. could well be and it could be a reaction, rick, i think stronger growth expected in developed countries, weaker growth expected in developing countries. so i don't know. it just seemed like a big gap. >> sara's got to learn. >> there's a lot of pieces. there was a lot of things. >> sara's got to learn fast you can be outed. i love steve because he's so easy to argue with, because he always parrots the fed take, basically, and rick will always parrot anti-fed stuff, so we've always got -- but the thing is, rick, when you're talking, steve goes like this. he's not on camera. >> not true, rick. >> i can't see. >> rolls his eyes and does all this. i don't think you do that when he's talking. >> i can't see.

no, the only thing i see is this big silver thing. >> what is that? >> that's a lighting thing, gives him light. >> that's all. >> are you okay that i outed him? >> steve and i had an interesting discussion. >> i think it's water carrying for the fed. >> you can debate this stuff. this is what people say, as well. >> go ahead, we can debate it. >> you can debate it and argue whether the federal reserve is involved or not, but you can't ignore the fact one of the biggest factors on the economy and on the markets over the last few years, whether you're talking about here or indonesia has been the federal reserves injection. you said liquidity is a state of mind, right? >> it is, absolutely. >> when you take it away or at least scale back, there's going to be a big impact. >> right. but why did, by the way, the most unregulated and most efficient market in the world, the currency markets, wait three weeks to price it in? >> it's not that they waited three weeks, it happened last

time we had the taper tantrum or federal reserve scale. maybe china triggered the move, but the fact that's in tapering mode makes things worse, makes the vulnerabilities come through even more. >> weaker than expected china report which most economists think is an unreliable piece of data. >> not always terminal pricing. sometimes you hear it and things -- things start happening with securities in these different countries based on people making moves since the original thing, right? >> but you would offer the possibility -- >> okay, you light the fuse, you hear it going -- but it doesn't necessarily explode while you're hearing this, okay? mission impossible by central banks. the fuses are lit. >> you would acknowledge that what reporters do, and we all do this, if something happens and we look around for a cause. >> sure. >> what an excuse. >> column, time after time. >> so why is a country like

poland and mexico getting sold off? >> stock market goes up every day for 2013, that's when we were on the prowl for excuses and reasons to make it go up. >> got him riled up. >> got to go. >> see? the producer did tell me, okay, we don't have anything planned. and i did. thanks, rick and steve. you guys will be here for a little while longer. >> thank you, czsara. >> i'm not doing that. it's not true. >> some of those motions are not even suitable even for cable. up next, closer look at china. >> you can school me in which are not suitable. >> well, with the new year approaching, what banks may do to stop a crisis. our panel will discuss. and tomorrow on "squawk box," another big lineup with guest host dick parsons. >> got to bring some food from his new restaurant. >> i don't know know he had a new restaurant. plus, leon cooperman of omega advisers will be here and dick

kovacevich will talk financials. "squawk box" is back after a quick break.

welcome back. didn't even check it like that. welcome back to "squawk box." shares of merk getting a boost. upgraded by morgan stanley. two-grade notch up from overweight to underweight. i'd like to look into that and see what was different.

who did we have on, gorman, had a lot of big-name people on. >> yeah, saw him out and about. is more done, do you think, honestly, andrew, isn't it really more about -- does anything ever get done? it's about the parties. >> it's what happens on the air. >> i agree. >> no deal making? >> there's deals. i think there's some deal making. it's usually the seeds are planted as opposed to real things done. a lot of regulatory conversations. >> but mostly parties? >> parties set the seeds for the other stuff. >> i think you might be right. more productive than i thought it was. you're right. >> okay, let's talk about china, is china facing a banking crisis? leader of beige book international and john rutledge. chief investment strategist. good to see you. i want to go to you first. do you understand what exactly this chinese trust firm has said when they come out and said they

reached a deal with investors but not explained how this has happened, do you know what's really going on? >> i didn't hear you, you were asking me that, joe? >> it's andrew, yes, that's the question. >> okay, good. i don't know the details behind that. what i know is that a trust company in trouble with a big lender is a big story in china and that the truth is, if one trust company went down, that actually might be a very good thing for discipline inside china. trust company loans, however, are only 8% of local government debt, which is the thing people worry about, so i think this is a story, but it's not an end of the world story. >> leyland, this story has been made out to be sort of the beginning of the end, if one goes down, the whole thing goes down, do you agree with him? he seems to be not so anxious. >> well, it's not the first domino that's going down, but the problem is china has to

inject risk into the system. how do you do that punishing intermediaries, you're going to have to slowly pull away the lemonade, but this is a very, very difficult thing to do. >> what do you make, and this is something that happened in davos, a big conversation of what's going on between china and japan. do you actually think this sort of war of words is meaningful? >> it is meaningful. you have two countries right now that both have aspirations for larger roles in asia, you know, both have a lot of economic concerns but are building up their militaries. china has been doing this for a long time, prime minister abe is doing this more recently, but you have a clash and a lot of ill will there historically, so things are very sensitive on the ground and there's a potential for overreach any time. >> leyland, i like what you do with the china beige book, you look at what's going on on the ground in industries in china. is there reason to be freaking out about the economic growth and the credit system over there? >> absolutely. i think the problem is people are looking at the gdp number.

if there's a high gdp number, all's well. if it's low, something's wrong. it's actually the opposite. slowing growth, this is what's happening and also a bullish sign, but not just about growth. it's about the credit environment and what people need to be looking at is what's happening, are firms on the ground getting the credit they needed and we have come out decisively and said the credit transmission mechanism is dead. >> that's a very interesting and i think the really big story. china has a structural problem, banks in china exist to loan money to large companies, not small ones. small companies don't have an institutional source of working capital, so they've had to find ways to get it. most of the ways they've gotten it is through trust companies but also black market loans and finding a way to feed those companies working capital in a steady way is what china really needs in order to guarantee long-term stability. >> john, i want to go back to the idea where you said it is important actually one of these

trust companies not be saved. why do you say that? >> you know, as my colleague was saying, there's no risk at the moment in making a trust loan. there hasn't been historically. that's not much different than the situation here where the fed guarantees zero interest rates and bails out all risk that we have here. people make dumb decisions and take risks they shouldn't do. in china, there's about 8% of small government loans, provincial city, town, villages, and so forth that comes from trust companies. most of the rest comes from banks. trust companies are generally subsidiaries of banks, they are regulated, but made in order to find ways of offering higher yields to investors who have generally a low yield environment, so people are shopping for yield there just like they are here. that's the link between fed policy and what's happening in the emerging markets. there's a huge carry trade

that's developed with people borrowing zero interest rate dollars and putting it in all sorts of things all over the world to generate yield. it doesn't make any sense. that's what's unwinding now as people start to think the u.s. rates, long and term, might go up. >> might be good for the u.s. markets or maybe not. john, leyland, thank you very much. up next, jim cramer's reaction to caterpillar earnings. we've been watching futures, they are getting stronger all morning long. we'll talk to jim when "squawk box" returns. tomorrow on "squawk box," a cold month for stocks, but value investor leon cooperman still has the hot hand. we'll get some picks from this squawk master. that's tomorrow right here on "squawk box."

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let's get down to the new york stock exchange. jim cramer joins us now. obviously, you saw caterpillar, jim. but what we saw on friday and i know you saw lloyd and you know, you're an admirer of his trading ability, anyway. but is this thing we saw in emerging markets to specific each emerging market or a bigger

thing that lloyd said it's something you see happen at times? it doesn't mean it leads to a lot but it was all related? >> i think that it's case by case. going over argentina this weekend, they're going with a venezuelan model, 40 million people going venezuelan-like. turkey's going with a secular, and i think that's important. south africa, hard to understand. china, actually, we worried about that trust bank and it's easy to fret over individual banks you didn't know about beforehand, but you're seeing, yes, we're absolutely reaching for yield. countries have changed their political stripes, and i think there's a lot of money. you watch our ads, hear about emerging funds and take money in, and the money that comes out, these are people speculators reaching for yield, and they periodically are punished because their not investors, they're just speculators. >> people waiting to buy, jim, that have been waiting for so long, saw friday, wow, i'm going to wait longer, maybe, and to

this point, for two year, they've never had that opportunity, it always -- the train leaves the station before they're ready. will this be a time somebody can get 10% break or it's on ward, upward again? >> when you get the ep openings, people are surprised. we have apple tonight. there are a lot of people expect a great deal from apple, if it doesn't do well, people come back down. chatter around the fed. the fed is irrelevant now because the economy's coming back. but obviously our network is fed centric. it's difficult to grasp between the rigor of individual stocks in countries versus taking a macro view, that i think is no longer important as it was in the last four years. >> the scone sus iconsensus is,e it goes up 20, 25, or down 15 or something, so i mean, i don't know what it favors are now. >> look, there's real secular

difficults here. it really is hard to figure out what's happening with retail. we take howard schultz's view, this was the shift, when internet took over and bricks and mortar did bad. that group has been a huge, huge black hole since the year began. but when i look at industrial companies i know we want to say that china's bad, but then you're stuck with the work. if you read case by case the industrial companies, almost entirely driven by strength in china, it's counterintuitive to listen to the news about china because it presumes individual banks are controlling. that's not the case. china's doing quite well. again, that's having to do with the facts, and i don't want to make too much of the idea there's a notion of being a close reader of conference calls versus being able to take a more global view. but the global view's going to let you down. it lets you down when things get better in the economy. it's easy to do, it does not require rigorous work. >> that 3.5% ten-year, it took

another wrong turn in albuquerque. >> look, we have -- we had a lot of bond market equivalents do well last week. kimberly did well, some organic growth. the banks do not do this well with the shape of the yield curves. the banks need 3.75. the people investing in banks won't mind. people speculating in banks will get killed. investors are saying i'm getting a chance to come back in. but the speculators dominate the headlines. investors are a quiet investing class. >> jim, we'll see you in over five minutes. >> thank you. >> none of that was scripted. amazing. >> unbelievable. >> yeah. >> i like the calm. have the courage to stay in the market, don't get too freaked out by what's happening with the federal reserve headlines and china. we've heard that message from a lot of guests. ross, this is overblown. >> but dow you you buy the dip?

>> yes. >> hadn't been much of a dip. >> 3% dip. >> dip, 3%. >> historically, if you played 2013 buying dips, you won every single time. what's keeping brian and michael up at night? tell us when we come back. also, make sure you watch "squawk on the street," because the coo of royal caribbean is on to talk about earnings and comment about how one of its ships was hit with the major stomach bug over the weekend. "squawk box" returns after this. . for what reality teaches you firsthand. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this. introducing the 2014 glk. the engineering and the experience of mercedes-benz. see your authorized dealer for exceptional offers through mercedes-benz financial services. through mercedes-benz some brokerage firms are but way too many aren't.

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♪ stock of the day, caterpillar. dow components earnings beat et street by 26 cents. revenue, though down 10% from last year, above consensus. the company also authorizing a new $10 billion stock buyback program, they can do it from time to time. >> what is the music indicating? relaxed, don't do it. got to keep calm. >> keep calm. >> a cramer act. >> michaels, a guy named michael. >> michael. >> founded in 19 -- his name michael dupey, founded in 1976, dallas, texas. >> franky goes to hollywood. you know who frank is. frank sinatra.

>> sold to samuel -- sam wily. >> right. okay. >> 1982. talking about how michaels got its name without the "s" we don't understand why. >> security concerns there. >> one thing belske was right about, he was wrong. >> our guest hosts have been -- brian and michael. give us, real quick, what are you worried about most? make everybody anxious, given the music. >> i don't think it's going to happen but monitor, watch for a move in oil prices, upsetting the japanese apple cart there. >> import. >> yeah. import everything. >> we saw that in the trade numbers this morning, how expensive the imports are. >> look at six-year chart on brent in yen terms it's kind of scary. no one thinks about oil shooting up. >> brian, two seconds. >> too much complacency on the fed. everybody thinks it's great on the way up, everybody thinks it's going to be great going down. come pate yets very bullish. >> you're usually in that.

>> we're 1900 on the s&p and we're comfortable with that target. >> thank you for being here. fun two hours. >> thank you, sarah. >> thanks for having me. >> first-time outing with us. >> comfortable. >> looks like you've done a show before. show on tv before. >> at this hour. >> never heard of it. >> make sure you join us. "squawk on the street" is next. ♪ good monday morning, congratulations to daft punk on their grammy wins. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber. at of the worst week for stocks in a year and a half, we might get a breather from selling. caterpillar beats on earnings. ten-year yields around 2.75. the two-day fed begins tomorrow. bernanke's last day on the job friday. asia continued to get hit overnight.