cnbc. i'm becky quick along with andrew ross sorkin and scott wapner. joe is off today. the nikkei getting slammed overnight as the yen moves higher. stocks in japan following wall street's lead after the major averages dipped more than 2% here. the nikkei dropping to a four-month low, losing 4.2% overnight. the 600-point drop is part of a four-day losing streak. the index slipped into correction territory just a day earlier after yesterday's decline. but keep this sell-off in perspective. the nikkei added 57% in 2013. still, you're talking about a 14 pins drop since the beginning of the year and that is catching some attention. take a quick look at the rest of the asian markets. the hang seng tumbling on its first day of trading after the chinese new year. this is the first chance it was getting to go ahead and react to what's happening around the globe with markets. take a look at what's been happening with the dollar right now. at this point, dollar up against the yen.

with all of this global selling starting after weaker than expected ism numbers. it was a big drop. it dropped from 56 to just over 51. massive unexpected decline and that really started things off. at the end of the day, the dow was down sliding 326 points to close below its 200-day moving average. also, the s&p 500 losing more than 4 had%. and the nasdaq dropped 106 points, to close below the 4,006 level. where does that leave thus morning? at least at this point, the futures have been bouncing back, but just mildly. now you're seeing some of the hesitation. at some point, the dow futures up by only 15 points above fair value. s&p futures up by just over 2.25 points and the s&p up by 3.6. over to scott webb has today's top stories. >> many of those stories this morning involve quarterly

earnings reports. we are watching shares of yum brands, the parent of taco bell, pizza hut and kfc restaurant changes. it reported fourth quarter profits 86% above estimates. sales fell shy, but the company said it's making progress in reversing a sales decline in china. swamping estimates of $1.37. the video gamemaker was helped by the continued popularity of the latest installment of its grand theft auto title. the chairman and ceo will join us to talk more about that. and britain's arm holdings reported profits below the company's forecast. thank you, scott. good to have you aboard this

morning. let's get over to japan because that's where the markets are moving right now. kaori enjoji, good morning. >> good morning. the markets dropped more than 4%, which means the market is down 14%. we seem to be swinging from one extreme to the other. tokyo was the best market globally last year. now tokyo is the worst performing market globally. i really think you need a bit of perspective here. i'm hearing today that it was phrenetic out there. a lot of people are explaining this to me this way. you had $150 million coming into the tokyo capital market in 2013. a lot of rate commerce were able to in december. they are getting spooked and that liquidation is continuing. most people i talk to say that round, we may see more of that.

i also think the linchpin is going to be the yen. when you hear a company like toyota, the biggest latcher here in japan say they're going to post a record profit this year, it's not on him only toyota, it's hitachi as well. toyota is expecting 2.4 trillion yen in profits this year. this is a record. even better than where they were before the lehman crisis. but that bump up that they're giving us, 200 billion yen worth, 100 billion of that is coming from the exchange rate. where we are right now, just around 101, doesn't change that scenario at all. but you have to factor in the part about the u.s. recovery. and the executive at the press conference, i spoke to him. he says for now they're expecting a continued mild recovery in u.s. demand, despite those manufacturing numbers. he sees 16 million cars in the u.s. also for china, which has been very, very critical, sales

figures were just below 1 million last year, but they're expecting this year the number to top up to 1.1. so he is concerned about the declines we're seeing in the emerging markets. but for now, toyota stays their scenario is unchanged. i think over the medium to longer term, we've talked about this a lot, the structural changes that people have been hoping for. that has been starting to wane over the last couple of weeks in the abe-nomics agenda. but that doesn't schan texplain extreme movements we're seeing in the equity markets. right now, some of the institutional investors i speak to, maybe this is a correction the market needed to go through after 2013. >> guys, clearly, some may not be panicking. but the retail audience, when you walk around town, what is the feeling like? >> the feeling is one of maybe we got in too soon because the local story here is that they

want to ship off the shavinavine japanese.homes are famous for out of the banks and into places like equities, for example. part of that push is to pure the reflation that the government and the bank of japan has been trying to institute over the last year, year and a half. part of that process, they have this new tax scheme where you can invest a certain pool of money into the equity market and the tax rate on any kind of capital gains you get from that is limited. so they were just rolling out the scheme so you have a lot of mom and pop investors comes into the market. obviously, this is a new territory for them. compared to the united states, the retail investor is very, very negligible. so we've had similar false starts in the past. i think that's why japanese retailers in general, relatively speaking, are more loath to the investment markets than they are --

>> care horry, just going back to toyota and what happens there, how much were the sales impacted by twaen china and japan, is there a sense that tension will ease this year or is that still a concern? >> i think there's an undercurrent of concern. but when the company said they sold roughly 900,000 cars in the china market last year and they're going to expect that to increase to 1.1 million, this doesn't suggest to me that they're expecting any long-term backlash for the undercurrents of political tensions between the two nations. so this is a factor, of course. but it's a huge market. they have lots of vested interest. they have technological alliances. it's not like toyota goes in there single handedly and sold cars in china. they're required by law to have these alliances with the local automakers. so, you know, it's a bit of a two-way game going on. >> kaori, thank you very much. we appreciate it. right now, it's time for us

to check out the market action in europe this morning. ross westgate is standing by in london. ross, it looked like things looked better about an hour ago. what's happened since? >> yeah. we hit the session high about an hour ago. we've come back since then, falling back down to about the halfway point for the session so far. decliners currently outpacing advancers by a ratio of around about 7/2 at the moment. the ftse yesterday was off around 0.7%. bigger falls for the cac and dax. right now, we're down around 0.3% for the ftse. the xetra dax down about 1%. the cac is down 0.2%. we had some good news for the uk economy. construction pmi is coming in at 64.6, so expect it at 62.1 in december, the strongest since august 2007. a bit of construction in the housing boom still in the uk. just three sectors that are up

this morning, insurance, utilities and banks, autos, chemicals. banks are being driven higher by this stock. ubs today jumping on the open, up 5.6% as you can see after a swiss bank posted a bigger than expected fourth quarter profit of around 917 million swiss francs. most analysts pleased by a better performance at the investment bank, as well. and the ceo speaking, as well, this morning saying they are nulling, also using staff allowances to meet eu rules. remember, eu rules suggest some bankers can only be paid or suggest they say you can only be paid twice your salary in terms of a bonus. a lot of the banks are trying to figure out ways to get around it. bp today down 1.5%. they came out with figures, as well. not great, as expected following the likes of shell and exxon, as well. so a lot of refining pressures for these oil majors. that's where we stand in europe right now. back to you. >> thanks so much, ross westgate. there is always high interest in

what apple is doing. now the company is tackling internet infrastructure. "the wall street journal" says apple is putting together a network capable of putting together large amounts of data to customers. al.'sonline needs have grown with the expansion of its icloud services, but this could lead to broader ambitions for television, either expanding apple tv or building its own tv set. $502 and change for apple. >> do you understand this story? >> i'm a little confused by it, too. >> are they talking about back end infrastructure that they're building out and they're going to use other people's -- >> i was confused by that, too. >> it's a little early, but let me get tim cook on the phone. >> this story is fascinating, but makes no sense at the same time. >> one of the story i heard reporting about it this morning, they were brick bringing it up

saying he was told he cracked the code for television. but i can't put the whole thing in context because i didn't get it, either. >> whatever comes on the tv thing, it's like a little overdue at this point, right? last year, everybody was talking about how the next product was something related to tv, whether it was their own television set or some sort of refurbished apple tv. >> if you can't control the pipes like comcast, time warner cable into the home -- >> and it's nog something you can do overnight. >> unless you think you're building fios into everybody's house or if you crack the wireless code, that would be huge. if you could correct the next at at&t/verizon/sprint in the air, it's not enough. >> let's do more research on it. in washington, the senate judiciary committee is taking on the issue of cyber security and data protection on capitol hill this morning. target's chief financial officer

will be testifying before the panel. but ahead of that, he wrote an opinion piece for the hill where he said the retail giant is spending up a $100 million program to intermountain the use of chip enabled smart cards. the goal is to have it in place by 2016 been six months ahead of schedule. the cyber attack that hit target affected 40 million credit cal card and debit reports and other records with information and these chip cards are long overdue if you talk to security experts. it's what they have in europe. it's what we don't have here. as a result, i think we are paying the price. >> are we paying the price? >> i think so. >> the question is whether there's going to be enough losses that will outstrip whatever it would have cost for them to invest in this technology a decade ago. >> it's not just the losses, what's stolen, it's what you lost in consumer trust. if you are not somebody who is behind this at this point, i think you will get pushed back.

permanently as a consumer, i want them to do it. >> let's say target xwlemts the chip technology and let's say k-mart doesn't. i'm making this up. would you say, oh, i'm not going to k-mart because they have a great sale but -- >> the question will be with the big banks. jamie dimon will push for it. if i'm a consumer and looking around at which bank i want to use. >> are the banks responsible? >> i am going to go -- >> if you said a sale or something you want at xyz store -- >> this really raised my concerns about the level of protections on everything. i spoke about the irs taking their tax returns on all of these things. i think privacy is going to be

one of the huge issues and protecting your privacy. he was saying they'll go ahead and rip off computers from a hospital. even though you may have protected your information, the hospital, if they don't protect their information, it gets stolen from there. this is a huge issue that every business has to think about, making sure they've collected their information on you. >> the banks are going to force the retailer to spend an inordinate amount of money for this technology which they may never get the payback on but the banks will. >> you're going to have to do it and the voices at the national retail federation which meets in january, everyone there who was interviewed said the same thing, yes, they are now on board with this. that's not to say it's going to be an easy transition. there is going to be push back between all these players about who pushes for what. in the end, the consumer will end up paying for it. >> we are. we always do. scott, nice to have you aboard. by the way, i see you're wearing an siaa suit. that happen is that how you

pronounce that? >> i'm not sure. >> i like the pin. >> that's part of the suit. >> can i be honest with you? i think you're supposed to take the pin off. i think the pin just comes with it. >> are you throwing me under the -- >> i don't know. >> i'm not sure. >> you did cut the tags off. >> well, they stick the pin in -- it's a beautiful suit. >> i've seen people wear these before. >> have you? >> yes. i love it. i like the way i look, i guarantee it. >> trust me, that's a nicer suit than the ones they sell over at men's wearhouse. coming up, we'll have more of the in the volatility. we're going to have a squawk disrupter. if you wish you could experience a movie anywhere on the go, we have a device for you. we'll talk to the ceo right after the break. but before we do that, how much more snow and ice could the country be expected to get this

week? tomorrow is going to be bad and then apparently the weekend gets bad again. let's get the national weather forecast from the weather channel's julie martin. >> guys, more snow on the way. this is just the second of three storms expected this week. so for today, we had those winter alerts all over the map, stretching from the midwest all the way into the east. we've got winter storm warnings in places like boston and cleveland and kansas city where we could see upwards of a foot of snow from this system. already starting to see the snow fill in here in the midwest. heading up towards kansas city. oklahoma city kind of a mix for you this morning. all of this quickly filling in across the day and spreading into the big cities like chicago and indianapolis will likely see a wintry mix in between. icy conditions from st. louis down into oklahoma city and then this all heads eastward, as well. so we're looking at heavy snow once again in places like upstate new york. boston, new york, going to be a wintry mix for you. a little bit icy, as well.

should stay rain for you in d.c., nonetheless. travel the next couple of days, going to be very tough here in the northeast. looking at upwards of a foot of snow here in kansas city by tomorrow. also in places like cleveland, we could see 5208 inches coming down. indianapolis, you'll get hit hard. and then in the east, once again, more snow for new york. central park picking up over 8 inches yesterday. another 1 to 3 expected for you. and in boston within we could see anywhere from a to 8 inches of snow from this december. we've got another one behind that one. it's going to be coming across the country. by the weekend, could be sitting offshore creating quite a me mess in the east. we could see a strong nor'easter bringing lots of snow to the big cities. we'll check that for you. more here, but right now, we're going to toss it to break. we miss out on what matters today. ♪ at axa, we offer advice and help you break down your retirement goals into small, manageable steps. because when you plan for tomorrow, it helps you live for today.

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welcome back to "squawk box," everyone. we've been watching the futures very closely because of all the concerns you've had. it looked like we were up above 70 points above fair value. we have come down from those highs after yesterday's loss. right now, futures are up. dow futures up by about 15 points above fair value. s&p futures up by 2.25 points. overnight in japan, the nikkei tumbled. this came the day after japan wound up in correction territory with a decline of more than 10% so far. the nikkei is down by 14%. as for the rest of the asian

markets, they all finished lower. you have to remember this is the first time some of those chinese markets have had the chance to react to what's been going on for the last several days. in europe, you can see that the green arrows there have turned around, too. the dax is down by 1%. a decline of almost 100 points in germany. other incidentsies are under pressure. if you check out the dollar this morning, the dollar at this point is stronger against what the euro and the dollar/yen up, too. 1011.30. euro is trading at 1.3516. and if you take a look at what's been happening with gold this morning, you'll see right now, it is down slightly by just over $5. >> i'm very excited about this next segment because the markets are so lousy this morning, it's a feel good story. if you ever wish that you could have a full movie theater experience in the comfort of your own home, the waiting room, it's gone. in line at the grocery store, it's gone. tech start-up, this is a tech start-up that is changing --

>> avagon is the name of the company. it has a mesmerizing new company called the glitch that you will not be able to look away from. here to show us the next big thing in wearable technology, ed tang. i also want to say this is something you can invest in, effectively, sort of, through kick start. >> absolutely. we're in the middle of our kick starter campaign. things are going wildly successful. >> so let's explain what this is. >> put it on, andrew. >> i will put this on. i will look like an idiot, but i can watch what's on the iphone or an ipad, whatever, in full retina, everything. >> right. what's really neat about our technology is this visual technology we've created. there is no screen involved. the image you see is directly projected on your retina. it's a much more comfortable and

comfortable image that you would see from the screen. you look at these lcd screens and you get tired after a while -- >> that's why you get headaches and things? >> absolutely. so you get this amazing picture quality. >> so this is amazing. i'm looking right now at a game. can you see -- this is what i'm seeing through here. i can play this game. you can see how awful i am at this -- i've got to turn the car again. how do i -- anyway, i'm not doing very well. but -- >> you can back up. >> whatever is on here -- oh, now i'm looking at the iphone. let's back you up here. this is amazing. by the way, the speakers on this thing are out of control. >> yeah. the way we designed this thing is we've taken this amazing display technology and embedded it into premium headphones that we've designed. so you can wear them like headphones when you want headphones. >> so now i tilt them up? >> yes.

it looks like you're wearing beats. >> and how much is this thing going to start? >> on kick starter for $499. >> is this price going to come down eventually? >> we'll see. the more support we get on kick starter, the more successful this will be. we've probably sold about 2,000 units. we're about ten days into our campaign. we've had huge success. >> people who like to watch movies, people who listen to movies and people who like to play games. >> it's the best movie experience i've ever had. >> so the content that comes there is strictly from a mobile device? >> we've optimized it for mobile. it's about 50% smaller, 30% lighter. battery powered, plug into any device you want. >> smaller than what you have in your hand. >> these are early prototypes that we have. >> is this going to be sold in stores? >> eventually, i hope so. >> what stores?

we don't know yet. >> do you expect five years from now, i don't know about your particular -- hopefully you will be the successful one, but that apple is and everybody else is not going to try to ape this idea and we'll be sitting on airplanes and in the back of buses or wherever with these things over our eyes? >> business travelers and people on planes are using this stuff, right? they have their bose headphones and they're watching movies and playing games. we're trying to give people a better experience at a lower price. >> and do you see a time when you wouldn't even need this part of the device? >> i think so. everybody is looking at wearable computing. we'll be watching stuff like this. >> joe gets into the whole singulairty situation. but i was watching a video about this and there's this thing, you know, second life which is one of these sort of simulated alternative virtual worlds. they were talking about the possibility that you would wear one of these things and when you move this way or move this way,

then you would be literally moving into this new world, this virtual world. >> so this device has a head tracker, which means when you turn your head, the device knows where your head is pointing. that allows software developers to turn new types of applications, such as playing a game and turning your head or putting yourself into a virtual world. >> could you see a time when we're all going to sit in our living room and -- >> but everybody can watch their own movie this way. you don't have to watch the same thing. if you're watching something the kids shouldn't be watching, i'm thinking -- >> yeah. can we talk about this? >> yeah, sure. >> usually when these things succeed, like the vcr, it started with porn. that's when it really took off. has anybody approached you about this yet? have you been -- you know, usually ces used to be at the same time in las vegas what the adult -- what do you call it award? i don't know this from personal

experience. i'm not an expert. >> i'm not looking at becky because she knows. have people come to you about this yet? >> no, not really. people are more interested in things like watching movies on a go and playing games on their phone to see a premium visual experience. >> is there a special type of -- you remember when certain types of 3d movies -- can you do 3d on this? >> absolutely. it's one of the best 3d experiences i've ever seen. >> i'm hearing music in here. >> and it's picking up on your mike. >> oh, sorry. anyway, very exciting. appreciate it. >> i want to try them out after the break. >> thank you, ed. >> thank you. okay. coming up, will the upcoming jobs data add even more worry into already already nervous market? and will a correction on wall street put the fed's taper plans on hold?

big question for investors and we're going to kick off that discussion next. and google has its tentacles everywhere in the tech landscape but what's up with that mystery charge? this story is coming up in the next half hour. as we head to break, a look at yesterday's winners, there were a few, and losers. there were many. mine was earned in korea in 1953.

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good morning. welcome back to "squawk box" right here on cnbc. i'm andrew ross sorkin along with becky quick. this morning, scope wapner is here. joe kernen has the day off. in the headlines this morning, let's take a quick check of the futures this morning. following that big sell-off on wall street, you can see what's going on. we have some green arrows for now. >> it's kind of lame, though, after yesterday? wouldn't you expect a little bit of a -- >> 70 points above fair value. so the market is tamped down a little bit since then. that was about an hour and 15 minutes ago. >> that's weak. after a 326 point decline. so for the folks in their car listening to us, the dow looks like it would open up about 20 points high, s&p 500 up about 2.5 points and the nasdaq up 4 points. we will have a lot more on the markets in just a moment. but we also have some other news for you. the news of another credit card data breach, this one affecting

hotel customers, word of that breach coming from white lodging services, which operates hotels under the march yot, ho marriot inn -- >> are you kidding me? >> yes. >> every business has to figure out how to collect the information they collect from consumers. if they can't, they shouldn't be collecting it. >> if you look at what happened with target, that was target's fault for allowing somebody to get into their system. granted, it was somebody who picked up a card and posed their way in. but every company has to be responsible for its own information collecting. that was target's fault. >> if you have a store and you put the lock on the store every night and you -- you know, you close up the shop and then every single night some -- not every single night, but once a robber manages to get in the store, is it the store's fault or is it the fact that the robber robbed you? >> but it's the store and the rest of the businesses that have

to make sure they are doing things to keep up with the critical yams. >> i don't disagree with you. >> and the store may have very good security to make sure nobody walks into the place, but cyber security is more important probably at this point even though it's physical security. while they've kept up in the physical world, they have not kept up in the cyber world. the banks have some of the best security because they're getting hacked by nation states, iran and others. they are spending money to make sure they have other security. every business needs to start thinking like that. i brought up the ideas of hospitals before. suddenly, they have the most personal information you could have about anybody, about thousands of customers. every single business needs to think about this issue. >> okay. well, on that note, we should know it's -- it's true and it's important. i don't know what you do. i mean, i know what you do about it, but i don't know what you do about it because i'm a little anxious. >> the hackers are always going to be a step ahead. always. >> i think that's true. >> but i don't think that's an

excuse for not being vigilant and not trying to keep up with them. is it going to be an escalating arms war? absolutely. is this something the government needs to think about more, too. >> so what happens -- >> if you look at the irs, that is a key example of where the government is not keeping pace with this, either. you have all this personal information on people and you're not protecting it. >> i have no idea what this lodging company, whether they have good security or not. but let's say they have terrific security. >> it seems to me every week there is an issue taking place and that is raising cyber security and realizing this is a national problem we need to figure out. >> fair enough. i agree with that. new numbers due today may show an improving u.s. budget picture, at least that's what we're hoping for. the congressional budget office ask expected to show growth forecasts for the next deck atd lower than its prior readings. small businesseses, they are

borrowing new figures showing that it's small business borrowing index showing that the index is now at its highest level in nearly seven years in december. that index is regarded as a good leading indicator for stronger economic growth. let's check on the markets this morning. take a look at how we're looking in europe. first and foremost, red arrows across the board. asia was getting hit pretty hard after what happened here in the united states. look at the nikkei, down more than 4%. so you're looking at a decline there from the highs of about -- well, more than 14% at this point. firmly in correction territory. korea, the kospi, hang seng getting hit rather hard this morning. let's get a check on the commodity markets. there's energy. crude is up slightly this morning north of 96.60. that's a gain of about 0.5%. brent is down slightly. take a look at the dollar.

actually, the ten-year first. that's where a good portion of this story is at. first, it briefly dipped below that. it was at 2.59%. wow. >> that's now how it was working out. >> and 2014 was supposed to be the year of higher interest rates, too. everybody we were expecting to happen during the first month of the year hasn't gone the way we thought. >> people are wondering whether that is telling the story of something that is worse, that is out there. >> the slowing economy here in the emerging markets, is that here, too? and you're probably looking at a situation where you need to see some stronger economic numbers here before people relax at all. >> friday will be the jobs report. there it is. keep your eye on the ten-year today. 2.60%. take a look at the dollar. the currency has been the focus on the pullback.

euro/dollar, 1.35 and the pound, as well, at 1.63 the. gold, one of the most surprising trades of 2014. gold, at 1254 appear ounce. that's one of the most counter intuitive trades so far this year. gold up. nobody had that. nobody had that. >> it has been a very sprieurprg year. that friday's job number is going to be the biggie. we're joined now by dick mobe. david, let's start with stocks. what the heck happened and what do you think at this point? do i buy? do you think there is more of a correction to come? >> well, i think this is setting us up for a buying opportunity. but when that opportunity is truly available, it remains to be seen. i think we still have to get through some of these data points you mentioned friday's

employment report. if the ism number was still impacted by bad weather, i suspect that the employment number is going to be, as well. so i think it's likely to keep stocks under pressure in the short run. but i still think the most likely outcome here is that the u.s. economy is, in fact, improving. and that this pullback is sets us up for a buying opportunity. it just may not reveal itself in the next few trading days. >> dick, do you think that's the case? how big of a factor did weather play on the ism, on the last jobs report? what's the real situation? >> yeah. i think it's a mixture. i think there was a substantial weather impact, but there's another xa impact which is that we have very, very strong inventory accumulation in the third and fourth quarter. we're going to have slower inventory aaccumulate calculation. >> but the 56 reading that we had before was the thick read. >> no, it's a little bit of both. in other words, yes, it's some of the dynamics in the u.s. economy on a short-term

subsystem basis have decelerated. 3.7% annual rate in the last two quarters of 2014. back last quarter, 2012 first to 2013. we grew at 0.6%. there were these short subcycles where people misread what's going on. so we're in an economy that will grow 3% in 2014, 3% in 2015, 3% in 2016. and that's a poor pull market. >> was the misread, though, at the end of the year where we saw massive gains and the misread now on the under side? >> keep in mind, we had the capitulation of the bears in late 2013. all these guys who were bearish on the s&p at 666 started to come out and raise their targets for where the stock market would be at the end of 2014. all the people who thought the financial system would collapse said, hey, it's a-okay.

what i noticed is there was nobody putting out a skeptical view. i happen to be a fulgdz optimist, as i have been for the last four or five years. but it got to be a very, very crowded perception. >> maybe the misread that you mentioned now is about the valuation on the market. with the fed now tapering and the economy perhaps not as strong as all of us thought, maybe stocks are overvalued. >> no, i don't look at it that way. we had a peculiar market that went a long period of time without a correction. this is a normal market. everybody has said wait until i get a correction. i'll buy. it's a little bit like when they asked mike tyson before a poxing match, they said, mike, what's your plan? he said, well, everybody has a plan until they get hit. so all these people who said that they were going to buy when they got a correction, we've got the correction.

a lot of individual stocks have become very, very cheap. i think it's a market you want an active opportunistic portfolio manager. i think we're past the point of just buying the indices because if you're a portfolio manager with 50 different stocks in your portfolio, you've got to love the prices you've got. >> yeah, but what if they get cheaper? what if, david, they get cheaper? >> that's a possibility. >> usa today front page, investors brace for bigger drop. >> and to me, that's -- that is a positive signal. whereas what was usa today saying december 31st, 2013? all i'm saying is that people wanted a correction in order to buy. they got the correction and now they're saying, oh, ghee, maybe i don't want to do it. we are in a sustainable eight-year economic expansion in the united states and globally we're also in a correction in a bull market, which has happened hundreds of times in history.

this is not something new. >> david, do you agree with that? >> i do. you know, i think coming into this year, you talk about consensus forecast. i think a lot of people looked at this market and said, you know what? stocks are a little bit overvalued. that is okay as long as we're growing. the fed is tapering. that's okay as long as we're growing. and then all of a sudden you get the december employment report, you get the chinese manufacturing data. you get our own ism. all of a sudden it causes you to doubt your views about how fast we're growing. so i think this is simply a temporary moment of doubt in terms of just the pace of global economic activity. specifically also in the u.s. and i think -- >> but the consensus for friday's number is about 174,000 in terms of the jobs number. what do you need to see on friday to make you think this is a temporary thing that passes? >> well, i think if we got a number that was up around 1.70

or better, i think that would go a long way towards settling things back down. it would get us up closer to the run rate that we saw leading up to the december report. it seems unlikely that all of a sudden we hit a wall in the economy, in the fundamental economy in december and january. nothing was suggesting that that was going to be the case. and so i think it's still likely that it was weather related, a lot of this weakness. so if we got a 1.70 or a 1.80 number, something in that range, i think the market would stabilize and give us an opportunity to, you know, maybe assess where we are. >> i think this is too short a time perspective. when markets sell off, everybody worries about the next couple of days. i look and look at the next three years of economic expansion and the profit growth that will come from that, both domestically and internationally. and i think that it's a bit of a land event what one individual

number will be. this is an opportunity in a prolonged economic expansion to buy stocks at a cheaper level. and i think that you have to ask yourself the fundamental question, are we in a sustainable weak economic expansion where growth will average at a faster pace? i think the answer is yes. is the fed going to be hostile to this economic expansion by tightening aggressively? no way. this is an easy fed with low inflation, good economic growth and we've got a correction in a bull market. this has happened so many times before and people are getting too tied up with the very, very authority term view and not the longer term view. >> all right. gentlemen, thanks to you both. coming up, we're going to talk about european banking and european market banking giant ubs rolling out their results and the stock is higher today.

the ubs ceo is going to be here at 7:20 eastern time. and what's up with google's mystery barge? it's in the news again. we've got that story and the answer when we return. check out the price of crude. we're coming right back in a moment.

welcome back to "squawk box," everyone. the u.s. equity futures are indicated higher this morning. up by about 28 points right now

for the dow futures. still off the highest level of the morning when we were up by 70 and this is coming after an incredible down day for the markets where the dow was down more than 325 points. s&p future are up by 4.5 points above fair value right now. if you take a look at what's happening with the nasdaq, they're up about 6 points. >> thank you very much. we still don't know what google is planning to do with a four-story barge in the middle of san francisco bay. what we know is that the company will have to move it, though. san francisco officials now saying that google does not have the proper papers to keep the barge where it is. that type of construction is permitted in the bay. all google now says about anything of this is that they're thinking that it is an interactive space where people can learn about new technologies. some people think it's a big promotional mysterious something. i don't know. >> maybe they've gotter more public publicity out of this barge in the short period than they could have imagined.

>> wi-fi location, people thought it would be a store. google's store on water. >> a marketing thing, right. >> i'm still enjoying my continue negligental breakfast. muffins? you guys really -- >> we live it up. >> cheers. >> next, we'll talk >> next, birthday for facebook. the ceo of sprint, dan hesse will tell us about the president's program that he has his company signed up for. plus, the data launch by at&t. more "squawk" is up next.

wow is that a beautiful morning in d.c. or what? a key day in the history of facebook. of course the company founded by the harvard student mark zuckerberg and his classmates andrew mccollum, chris hughes and dustin muskowicz. facebook shares briefly hit an

all-time high before turning lower in the overall down mar t market. there they go again. up 1% in the premarket. >> impressive. >> it is. when we come back, another nasty day on wall street and we're not talking about the snow. should investors expect the correction to continue? what's triggering all of the selling right now? we'll break it down with our guest host, richard bernstein and rebecca patterson right after this quick break. more "squawk" still to come. stick around. there is only one way to celebrate this unique similarity. witness the cheesesteak shuffle. ♪ cheesesteak, cheesesteak ♪ ♪ it's the cheesesteak shuffle! huh! ♪ ♪ every day, all day, cheesesteak, cheesesteak! ♪ ♪ every night, all night cheesesteak, cheesesteak! ♪ ♪ 9 a.m. cheesesteak! ♪ 2 p.m. cheesesteak! ♪ 4 a.m. cheesesteak! ♪ any time (ruh!) >>geico. fifteen minutes could save you fifteen percent or more on car insurance. and it feels like your lifeate revolves around your symptoms,

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good morning, everybody. welcome to "squawk box" on cnbc.

joe is off today. we've been watch be the futures, so far we have seen green arrows, maybe not the type of snap back you'd expect after deep losses yesterday. this morning, the dow futures are up but only about 22 points above fair value. s&p futures are up by 3 points. nasdaq is up by 4. things have not evened out. there's still a lot of concern on wall street. the ten-year note is an interesting story, the yields standing at 2.6%. it dipped below that in the 2.59 range earlier. this is not the plan we thought this was going to be the year for higher interest rates. that's certainly not been the case so far. overseas market action reflecting the anxiety we saw on wall street yesterday. the nikkei falling more than 4%, to a four-month low. this was the biggest one-day

percentage drop since last june. the nikkei is down 14% for 2014. take a look at the european markets at this hour. you'll see that the dax in germany is off by 1%. we did see green arrows earlier this morning, things reversed course and now red arrows across the board. >> there's always high interest in what apple is doing. now the company is tackling internet infrastructure. "the wall street journal" says apple is putting together a network capable of delivering large amounts of content to customers. this would give apple more control over distribution of its online offerings. apple's online needs have grown with the expansion of its icloud services. this could lead to broaderple e ambitions. in the premarket, apple shares have been higher. that's where they sit, albeit just north of $502. >> this is really just a total back end situation, this is not about technology that brings the

stuff. i was e-mailing with someone close to the company. >> jim? he's up early. >> he does get up early. he's a "squawk" watcher. we don't know if he's watching right now. >> what's the story. >> this is the back end technology that would allow i don't you to pump huge volumes of data through the internet so that a comcast or time warner whoever could eventually deliver it to you. it's not an end-to-end solution. it's the back end stuff that has to get done first. other news for you, the senate judiciary committee is taking on the issue of cybersecurity. this is what we were talking about with becky earlier and data privacy on capitol hill this morning, target's chief financial officer john mulligan will be testifying before this panel. but ahead of that, he wrote an opinion piece for the hill where he said that the retail join is the speeding up a $100 million program to implement the use of chip enabled smart cards. the goal is to have the

technology in place by early 2015, six months ahead of schedule. the cybertheft that hit target exposed 40 million credit card and debit card records and up to 70 million other records with information. we do have two guests with us to help us make sense of today's sell-off. joining us right now, rebecca patterson. richard bernstein, the ceo of richard bernstein advisers. he's also a cnbc contributor. what's happening here? is this something we should feel relaxed about? do you think there's more to come with this? what do you think? >> a couple of things, becky. number one in the short term, everybody who is the least bit short is coming out of the woodwork and telling everybody the end is here. but i think the reality is that one has to figure out, can you really time every market? i don't think anybody can.

i'm always jealous of people who come on your shows and say we can do that. >> i'm dubious of that. >> the question is are fundamentals going to be better or worse one year from today? >> i think in the united states the answer is it's going to be better which would argue that the stock market should be higher one year from today. and i think that's the bottom line. if you look at corporate profits, corporate profits are improving here. they are not getting worse. private sector gdp was over 5% in the fourth quarter. i know people are going to come on. i think we have a guest saying the only reason the market is up because of the fed. private sector gdp is up over 5%. this is not a bad situation. could we have a correction? yes. i honestly don't know. i'm not that smart. but i do think fundamentals continue to improve. >> rebecca, someone just sweeted that said dead cat bounces are painful. he'll buy when there are good reasons. are there good reasons? >> i think when you look at yesterday's pmi, the business sentiment indicator, much weaker than expectations. whether you're looking at the

u.s. or globally, global manufacturing sentiment is still running at around 5%. 5% global industrial production. that's good. so, yes, did expectations maybe get a little ahead of themselves around the end of the year? sentiment was rising, people's economic forecasts were rising. we're having a re-adjustment of that. could last a couple more weeks. i don't know. janet yellen's first speech will be important. friday's payroll will be important. i think this is a correction within a secular bull market. >> how concerning is it to both of you what the ten-year yield is doing. >> i don't know if it's concerning, frankly. i think this is an adjustment of expectations. i mean, not to say it's always going to be self-correcting like this, it could extend further but below 2.6% or ten-year 2.65%, we'll see that feeding through another mortgage market. oil prices, brent below $107 a barrel. now that's good news at the margin for the u.s. consumer. >> right. i think that -- this started in the emerging markets and everybody said the emerging

markets are having trouble, that means the global economy must collapse and everything has to go down. the reality is, emerging market weaken, the developed markets feast on their weakness. we get lower commodity prices, get lower interest rates. we get stronger currencies. that's great for the developed markets. the emerging markets are the ultimate beneficiaries of the global credit bubble. we've been waiting for this for years now, that people believed there was something unique about emerging markets. they were the ultimate plays on credit. people are realizing it was a global credit bubble. the next step will be the developed world feast on their problems. >> did we create that bubble? >> i think we might have started it. but for them, a lot of people are saying that the fed is tapering now and that's what's causing the problems. that's very disingenuous. >> what? >> the problems in the emerging markets started three, four years ago. emerging markets have had the highest rates of inflation for three or four years. >> we allowed those problems.

>> we didn't force china to create credit. we didn't force them to have a banking system they wouldn't control. we didn't force india to do -- brazil, the credit growth in a lot of these companies is not our fault. yes, the fed provided liquidity and maybe that should have gone into the real economy and it didn't. they didn't do anything to stop it, either. right? so they've created some of their own problems. >> they tried. brazil -- >> i disagree with that. i don't think they did at all. >> brazil put in places types of capital controls. >> look at the problems they're having. >> the problems i agree with you and some of the credit problems i agree. china's bank and nonbank credit is 180% of gdp. some of this i agree with you, richard, is self-inflicted. i think it's a balance, to say none of it's the fed is -- >> what if the jobs report on friday is lower than expected? then all bets are off? >> we were willing to say it was

weather at that point. if you see another weak number for the month of january, i don't know if the market will be as forgiving. >> therefore, do you buy? given everyone saying we're down, you might as well buy a little bit. >> we have been. >> we've actually been -- i would call it nibbling. i wouldn't say buying in a wholesale way. >> you think there's room to move? >> i'm not sure this isn't going to be a bigger sustained correction. i can't know that yet. but at this point when we look at the data across the world, japan we've had strong data this week. europe, the data continue improved. the u.s. is messy right now. we're not sure why. so we're taking this as an opportunity. stocks we looked but we thought were overvalued now are more attractive. we're nibbling but keeping a careful eye on this. >> what do you think the bottom could be this year? is 15% too much. >> if you go back to 1980, the s&p had an average entry year decline of 14%. 76% of the time it's ended the year higher despite that entry or decline. most of time it ends higher.

could we see 10%, 15% correction? absolutely. i hope not. i kind of don't think so. i don't think the fundamentals have changed enough to warn the that. but history would suggest that's not an aberration. >> what's going on in japan? why is that market getting -- >> crushed? >> slammed? >> if you are a global portfolio manager and you've gotten losses, big losses on your em holdings, debt, equity, currency over the last month and a half, you need to offset that. you're taking profit on something liquid. >> a winner. >> japan last year was a huge winner. >> is that a buying opportunity if people are taking their winners and cashing them in? >> think about a big economy like japan that starts moving 2%, 3%, 4% in a day up or down. that short-term trading, a major economy like that is watching paint dry. it didn't change that dramatically over such a short period of time. if you need something to short or sell, you're going to sell a market that's extraordinarily liquid. japan fits that bill. >> i wonder, andrew, what dab

lobe thinks about japan? if he's 100% behind it? he was an early call. >> he was an early call. he made his money. i don't think he's gotten out of sony completely. all of these people were betting on this third leg. it becomes so much harder for abe to do anything. >> i don't think that's the story. >> you don't think that's the story. >> there's massive overcapacity around the world. japan has the flexibility to depreciate their currency, right? look how much inflation they've gotten. 40% versus the dollar, 50% -- 1.5% inflation. the emerging markets already have the highest rates of inflation in the world and the economies are destabilizing. look at the riots in the street, the protests and everything else. as the markets now are forcing their currencies down even further, those economies are not going to get more stable. they'll get more unstable. that's huge for japan. in the short term, japan has a problem in that their strategies

deplete the currency. stability in the next 6 to 12 months will show japan has a leg up. >> richard and rebecca are our guest hosts today. more throughout the morning. >> scott? >> the national forecast is coming up, plus a cybersecurity expert will tell us if there's anything that can keep criminals from getting their hands on our personal data. and later, sprint's ceo dan hesse on the president's plan to get the school of america connected. and we'll find out if he's going to enter the data pricing wars as well. "squawk" is coming right back. get a leg up on the trading day with the morning "squawk" newsletter. go to our show page, squawk.cnbc.com and sign up right now. it's a snapshot of day's top stories, guests and some fun water cooler stories that we'll be squawking about all morning long. sign up and get morning squawk delivered in your inbox every

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another big winter mess setting up, this one stretching from the midwest all the way in through the east. you'll notice the winter weather alerts and this encompasses about 118 million people across the u.s. that will likely be impacted by this system. right now it's getting going in

places like kansas city where we could see upwards of a foot of snow. a little bit of ice here in oklahoma city as well this morning. boy, once this system starts pushing east later on today, we're looking at snow through omaha and chicago and cleveland, ice in the middle of that in places like st. louis and then by the time this gets to the east coast tomorrow, we're looking at a major winter storm in boston where we have a winter weather warning out right now. also looking at more snow and a wintry mix for new york city on top of that snow you've gotten. places like philly and pittsburgh also going to be icy and very difficult travel conditions for you over the next couple of days. how much snow are we looking at? again, 5 to 8 in general in places like western kansas but we could see a foot or more in kansas city, which is quite unusual. taking a look at the midwest, we could see 8 inches or more in cleveland, 3 to 5 in chicago and as the system makes its way eastward, looking at, again, significant snow in boston where

we could see a foot of snow with blowing conditions as well. generally 3 to 5 for you in new york city. so another big mess on the way. we've got another winter storm behind that one, guys. so scott, it's going to look like one of those weeks you'll want to hibernate like the groundhog. >> yes, winter will last, i think, a lot longer than most of us hope. thanks so much. let's take a look at how the day is shaping up on wall street. take a look at the futures right now. implied open for the dow of plus 20. we are coming off the worst start to february for the s&p since 1933. the worst start to february for the dow since '82. that's how it's shaping up after a 326-point decline yesterday for the dow. not a big snap back, at least that's the way it's showing off the open this morning. take a look overnight in japan. the situation is worse there. down more than 4%. you're looking at a decline of 14% off the highs there. the nikkei continues to get pounded. it's a four-month low for the

nikkei right there. firmly in correction territory, andrew. >> we have a story, this one is a bizarre one. march madness may wind up in the courtroom before the annual ncaa tournament gets under way. you'll recall we told you a few weeks ago about the billion dollar contest sponsored by quicken loans and backed by berkshire hathaway insurance policy. all you have to do to win is pick all 67 tournament games correctly. if you do that, you get a billion dollars. yahoo! is being sued by sca promotions. parentally yahoo! had plans for a similar contest that sca was going to run for a $4.4 million fee. that's what they were going to pay for the $1 billion payout. that's the way the insurance worked. quicken and berkshire announced their contest first. yahoo! decided to cancel. sca says yahoo! still owes it half the fee. yahoo! disagrees.

>> yahoo! wants the money back. the 1.1 million they've already paid. i'm not sure all those numbers are right in that. i think it was a little more. >> the other piece was there was a suggestion that somehow sca had already been working with yahoo! and they'd gone to berkshire to get this to be reinsured by them. berkshire said no and then they're basically, i think, sort of trying to suggest then berkshire somehow went to quicken to outdo them and berkshire was taking -- what did they say, an eight-figure sum instead of 4.4 million for a ball, somehow berkshire got a much better deal. anyway, weird story. i don't really understand what happened here. >> i don't entirely understand either. i read through the complaint. i'm not sure the numbers were all right. >> i want to talk to warren about this. the suggestion was that somehow the idea came from yahoo! and then somebody went behind everyone's back and was trying to outdo the other one.

by the way, apparently for surns insurance like this it should probably be priced at about 1 cent. >> the odds of it happening. >> because the odds are happening are so small, you shouldn't be charging that much money for it. >> did you see the furniture retailer -- >> yes. >> if you buy $7,000 worth of furniture you get it free if the broncos lose? he's out $7 million. he did not have insurance for it. >> right. >> next. the results from that european banking giant. if warren is watching and wants to call in and tell us what happened, we'd love that. next, the cfo of ubs. what you need to know when they came calling. fight, roll over or work together? we'll check out the playbook at 8:00 a.m. eastern time. time now for today's aflac trivia question.

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now the answer to today's aflac trivia question. which social network celebrates its tenth birthday today? the answer, facebook. >> aflac. welcome back to "squawk box" this morning. our cfo council is in session. tom naratil joins us now from zurich this morning. good morning. these look like pretty good earnings all in all given everything else that's going on in the world. i hope they were forward looking as opposed to backward looking. >> well, andrew, we had a very strong finish to what was a great year for us. we kept up our momentum as the best capitalized large bank in the world and we put ourselves in a position where we were able to increase our dividend to shareholde

shareholders. we'll be recommending that at our agm by 67%. >> tom, help us, you know, the whole morning around the table we've been trying to frs what's going on in the markets, what's going on in japan, what's going on in the emerging market countries. just your quick take and what you're telling clients. >> in terms of what we're telling clients on emerging markets, we're neutral here. we are overweight china. we actually think china will continue to be able to weather the storm here. on japan, we're also a neutral weight. i this i one of the reasons we look at the region -- not from an investing standpoint, our business standpoint, we've been in asia for over five decades. one of things that you see, if you want to participate in the profit pools of the future and the greatest amount of growth in the future, you need to be committed. you need to ride through the volatility in order to enjoy the benefits. >> that may be true from a business operations perspective.

is that true from an investment perspective? >> you know, it's somethiwhat similar because you have to have a longer term view. if you don't have a longer term view, which is certainly the way our cio is setting up our advice to our clients, it would be, don't overreact to some of the short-term movements and be more focused on what the long-term fundamentals are. >> where are you on the u.s. markets? that seem to be reacting, perhaps overreacting, to everything that's gone on globally. >> in terms of the u.s., we continue to see the u.s. economy in good shape. this is, again, overall looking at the investment climate. there are structural issues that we've mentioned in our outlook statement for about nine quarters. you do see that there are structural imbalances. they do concern investors, in particular, ultrahigh net worth investors. our clients are carrying an

extremely high level of cash, about 28% globally. but over time, we believe when some of the structural issues are removed that they'll make the commitment back into equities. >> okay. tom, thanks for joining us from zurich. appreciate it very much. hope to see you on set sooner or later. when we come back, lawmakers want answers about the massive target data breach. the retailer's cfo will be on capitol hill facing a senate panel looking into privacy in a digital age. is there any such thing as privacy anymore? we'll talk to a cybercrime expert, next, that's coming up in the next half hour. lait?

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welcome back to "squawk box." take a look at what's going on. this is muted at best. you called it lame earlier. dow looks like it opened up 23 points higher, the s&p 500 looks like it would open up about 3

points higher as well. keep an eye on shares of michael kors. it beat earnings estimates by a wide margin in its latest quarter with sales well above forecast. same-store sales up 28% during the quarter. who's buying michael kors around this table? medical products maker becton dickinson earned $1.37 per share for the first quarter, 7 cents above estimates. that came despite rising costs. also keep your eye on pfizer this morning. it's been upgraded at jeffries from a buy to a hold based on prospects for a new cancer drug and positive effects of its restructuring. we're watching the asian markets closely this morning. joining us now to weigh in, jeff bahrenburg, head of strategy and research at gardenia global advisers and patrick chovanec,

chief strategist at silvercrest asset management. >> even though the underlying economy is strong, it is vulnerable to a global slowdown. i think it's doubly vulnerable because the end is very much dependent on global growth. it moves with real interest rate differentials and those differential have widened and are narrowing as the global markets discount slowing global growth. so we're in a tough transition. i think it's a buying opportunity. because i agree with the other guests here that i don't see the global economy moving back to a recession. if that were to happen, then we would need much more aggressive bank of japan asset buying and more aggressive fiscal stimulus. but i think that's unlikely. so i would view this as a buying opportunity. >> are you questioning at all,

patrick, the central bank's plan? >> it's not clear whether it's working. we had a 57% runup in the nikkei last year. and that was all in anticipation of this great experiment working out. we see mixed signals. there are work that has to be done. we have the transpacific part r partnership which is critical to a lot of the structural changes that need to take place in japan, it isn't coming together quite as quickly as we would hope. again, there are some people who thought this was all about a cheap yen would be a boost to japanese exports. i don't see that as really the core of abe-onomics. anytime we see this flight to safety, the end goes up that undermines that story. >> what reverses this, jeff?

there has to be a catalyst, whether we talk about our market or what's beginning on in japan, something has to go on to reverse the slide. what is that. >> eventually, the economy proves to be still growing, that the declines in emerging markets is manageable. maybe it's limited to certain countries, not enough to throw the global economy in reverse. >> we have to wait for a japanese gdp report to decide whether the correction in the nikkei is over? >> i think funny enough, the market will ignore the japanese gdp report because the bears think that with the tax hike coming in april, we have a strong gdp in the first quarter and we know that. we'll have a falloff. we know that. >> people think the growth is getting pulled forward ahead of the consumption tax hike. >> the question is what's the underlying trend? i would argue the underlying trend would be sustained growth. i think people are wrong in going back to 1996 the last time they raised the consumption tax.

that was only a footnote in what was happening in '96. we had property income collapsi collapsing, negative wealth effect. we had a very loose labor market. we've had massive excessive investment. all that is the exact opposite now. we have underinvestment, rising labor markets about 2% this year. we have a positive wealth effect, notwithstanding the recent correction. it's a minor adjustment. i think we'll get through it. the markets are setting up. the markets may have a tough time digesting that. we'll have to wait for the economy to prove durable enough to absorb. >> can we turn our attention to china for a moment? what are we to make of what's take is playing there from an economic standpoint, real concerns over where the growth

is going and whether it's decelerating faster than we can handle? >> china is facing a real economic adjustment. it's a shift from one kind of growth model to another kind of growth model. i don't think you'll find anybody more bearish than me probably about the short term implications of this in china. i don't want to understate this. there are signs of real financial stress in china. i think that some sectors that have been traditionally leading growth in china will see real downturns. having said that, i think there are misconceptions about what this means for the rest of the world economy? some people are saying the chinese will have to sell off treasuries to cover losses in china. that's simply not true. that's not how china's fx reserves work. if china does actually start drawing down on reserves, that's going to be because they're maintaining consumption in the face of a downturn.

that's opening up net demand in the global economy. that's going to be a positive thing for the world. so i think there are misconceptions where people say slowing growth in china means slowing growth in the united states. that's not an equation that's that simple. >> historically in china, when you got a 1% slowdown in gdp, it tended to lead to a 10% or so correction in global oil prices which actually helped global growth. there's the short term market impact but then there's the economic feed-through commodity prices which ends up being a plus. i think you're right. you have to look at the balance, not just focus on, oh, my gosh, they're not growing 10% anymore. >> i think we have to talk about a shift in the global growth model. we want to go back to pre-2008 where the u.s. consumer grove global demand and china and other emerging markets drove output. i don't think we'll go back to that world. i think what we'll see going forward is a con summing story out of emerging markets,

particularly china, and a production story out of the united states. that can be a positive story. it's a very disruptive change in the growth model that we're all comfortable with. >> jeff, buying tune in the japan, bottom line? >> yes. i would say so. i think if you go back even -- >> index or individual stocks? >> individual stocks would be preferred. unfortunately the last year has been a wall of liquidity coming in, index buying largely. you haven't gotten paid to be a stock picker. going forward it may be more selective. some of that hot money is being squeezed out right now. it presents a good opportunity. some stocks are getting very cheap. price book on the average share -- the pbr is price book is below 1 now for the whole market. that means about half the market is under book right now. roes have gone up to 8%. we think they're going to 11% in the next 12 months. basically moving closer to global standards. we think there's an underlying trend of improving profitability, if you look

beneath the surface over the last 15 years and that will accelerate as japan exits deflation. >> if we had to make one bet, china or japan, what should we make for the next 12 months? >> i think a lot of exciting things are happening in japan but they haven't reached fruition yesterday. i think this is a market globally that rewards selectivity. the view was hop on any bus because all the buss are going to the same destination. whether it's selecting among emerging markets or selecting companies that will succeed or fail in this very disruptive global environment, i think that this is a market that rewards deep knowledge of markets aand selectivity. >> gentlemen, thank you so much. >> thank you. >> patrick and jeff. when we come back, we'll talk more about privacy in the digital age. target will be center stage on capitol hill this morning as lawmakers dig into cybercrime and security. will your information ever be

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welcome back, everybody. s&p futures up by 2. this of course is coming after the worst day for markets since how long, scott? >> worst start of february since 1933 for the s&p 500. worst start to february for the dow since 1982. >> when you have a stat that includes anything like with 29 or the '30s, most of the '30s in there, you don't want to be associated with that. >> you might have expected a bigger bounce back. you'll be disappointed with the futures. at this point, it looks like up by 15 points. all right.

sunday, the super bowl, even though that game was a bit of a stinker, the super bowl was the most watched game in history. 115 million viewers tuned in for the seattle victory over the broncos. and we have results of how many downloads of u2's sound "invisible". >> bank of america said it would donate a dollar a download. they were giving that money to the red anti-aids campaign. the final tally, $3,138,470. that's the way to go. target's cfo among those testifying this morning. ayman joins us this morning. this is a huge topic. >> yes, that's right. target cfo john mulligan will be up on the hill explaining what

the company knew and what it did about the hack attack that affected target. a couple things to wave, whether the senators focus on what the companies did to protect the data in the first place or whether the questions are focused more on what the companies did to notify the shopping public about what happened here. that's going to be the fascinating issue because it's going to give you a sense of where we might go with legislation on capitol hill later this year. also yesterday, we saw a little bit of a hint here possibly from senator mark warner of virginia that u.s. intelligence knows a little bit more about all of this hacking than they can talk about publicly. take a listen to senator warner testifying yesterday. >> quite honestly, i think we're going to see this is a crime that happens daily to financial institutions, retailers at a level that frankly, if most

americans realize would find rather confounding. >> warner hinting that u.s. intelligence knows a lot more about just how much hacking is going on in the united states and suggesting maybe americans don't know how bad this problem actually is. some folks who do know how bad it is are the financial industry, the american bankers association and others yesterday releasing press releases and testifying on capitol hill. there's a real interesting fight now brewing between the bankers and the retailers where the bankers are saying, hey, wait a second, when these credit cards get hacked, they're the ones that take the losses, we have to eat that cost. yet it's target or other retailers that are responsible for lax security that allowed the hackers to get in in the first place. we want to see more cost sharing here. you can expect the retailers will fight that. they don't want additional cost or liability. an intravoltaing fight brewing between bankers and retailers over who's to blame and who has

to pay the cost when these hacks happen, guys. >> that is incredibly interesting. that's something we were talking about earlier. i didn't realize the banks were pushing back so aggressively. >> they say 60% of the hacks they have to pay for come from the retail industry. that's something they want to see more liability. we're not the ones getting hacked. banks say the hacks are not hitting them, they're hitting the retailers and coming in and getting the credit card numbers and they have to make up the losses. they're upset about it. >> eamon, the other thing you hear all the time the banks and retailers say, it's actually the government, the government's role in this. >> right. >> we have police that police our streets. we should police the internet. we can only put so many locks around the door. the cost should be shared by us, the taxpayers. does that make sense. >> government has a role to play here but then industry doesn't want a whole lot of new regulation, either. they don't want government

coming in and imposing standards that will cost industry a whole lot of money here. there's a real fight over what kind of standards will be set on capitol hill. we're seeing proposals for data breach notification. that is if a company has a data breach it has to tell its customers in a timely fashion everything it knows about what happened and what they should do to fix it. there's a battle between government security here on the one hand and regulation on the other hand. the industry doesn't want to see a whole lot of that here. >> there's a lot of changes that are coming, though. eamon, thank you very much. this is an issue that we'll be watching closely. joining us with his insight into what's happening is david kennedy, he's testify ied. david, thank you for being here today. >> i appreciate you for having me. >> one of the big questions was target unique, target alone? we heard about other retailers that got hack. it seems to me that every day or every week at least you turn

around and there is new business that has gotten hacked and has lost our information. what's going on? >> that's right. target is definitely not alone in what's happening right now. retail industry, especially in the united states is being hammered right now by hackers from overseas. it's predominantly because of emv or the smart card chips which the rest of the world has moved to. unfortunately we don't have that technology. we're still using the magnetic strips from the '70s. the hackers are target retail stores to get these credit ca s cards. >> the chip technology, they're trying to implement it by the beginning of 2015. that gives us all this year that you're going to be open and out there. is it more than just what's happening with the strip technology? what about these retailers, what they do with some of information? >> that's a good point. if you look at the retail industry, i think if you look at history, the largest breach we saw in the retail side was tj

maxx prior to target. the retail industry didn't think they were a big target for the hacking community. they didn't beef up their security controls. you have companies that are years henned in protecting these credit cards, protecting our personal information. it's going to take them a couple of years to even get up there and emv is going to be starting in 2015. we're not going to have a full rollout until 2020 or above. we have a long time to deal with this and the consumer will be hit continuously throughout this year and the next couple of years. >> in this cat and mouse game between the hackers -- or the criminals and the retailers/banks, it seems to me somehow the hackers are always going to get ahead of everybody else. so is there any argument to be made you could spend all this money on these chips in these cards and all the infrastructure acquired and all of a sudden 2016 is going to come up on us and we'll hear about a breach there and say, now we have to come up with a new technology? >> that's a great point. the hacking community continues

to get more and more sophisticated as they get time to research this technology, they find different ways of get around it. there are proven security practices that stop attackers from breaking into infrastructure. even if they do, let's say they phone that one hole in your organization that allows them to get access to the network. we have monitoring capabilities to monitor these attacks from happening and it could be stopped. there are ways of protecting against organizations. there are ways of making solid investments to try and protect an organization. unfortunately the hacking community will continue to get more and more sophisticated. we have to step our game up as well. >> not only are they getting more sophisticated but some of the companies are not doing what they should be doing. >> absolutely right. >> do you think it would require more government regulation to force them to do that? >> that's a tough question. right now, the most of the retail stores that take credit cards have to adhere to the

payment card security industry standard. it's a base level security. they have complied with this standard to a "t." they haven't gone above and beyond. if we have government regulations are they just going to adhere to that standard and that's it. if we continue to go this route, we have to build the security program over years and it's not just a point in time where they assess and that's it. it will be interesting to see if they can come out with something like that. >> coming up, facebook's mark zuckerberg is talking about teen usage on facebook. also, sprint's ceo talks to us about wireless plans and more.

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welcome back to "squawk box." facebook celebrating its tenth anniversary today. mark zuckerberg sat down with the "today" show's savannah guthrie. we have part of that interview. >> i guess the question is, if teens aren't on facebook as much as they used to be, does that matter? do you care if facebook is cool anymore? >> we know that facebook and instagram are both really popular, both with u.s. teens and teens abroad. and we just focus on serving all of these different groups that use facebook. now it's almost a billion and a quarter people are on facebook. overall engagement is growing.

we're helping more people share and connect with the people that they want. that's, i think, what's really important. we pay attention to every demographic in every country. we're going to focus on building things that teens are going to like and focus on building things that other folks are going to like and in different countries around the world. that's what we need to do to serve all the people who rely on us. >> company has come a long way from that harvard dorm room. it's now valued at more than $150. it starts as the facebook, if you remember. now it's facebook and a billion people later. >> the stock has been doing really well. >> it has. a remarkable situation. >> don't you feel as though the entire story has changed or the tide or the tone has changed right from a company standpoint? >> yes. >> even zuckerberg himself feels like he's grown more into that role. >> it's made me second guess that maybe i shouldn't all the things we said at the time of the ipo. it has. >> i think you can make the

argument, though, at that time, some of the things that were said by you, myself and others, were probably correct. i mean, the company had to prove itself more than it had at that point. and zuckerberg himself may have been a little immature as a chief executive. >> right. >> i think he's grown, too. the proof is in the pudding of what the stock has done. >> i don't know. >> coming up, should investors hit the panic button on stocks or use this as a buying opportunity. then, the ceo of sprint, dan hesse. so you can get out of your element. so you can explore a new frontier and a different discipline. get two times the points on travel and dining at restaurants from chase sapphire preferred. so you can be inspired by great food once again.

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before investing. for a current prospectus visit www.etrade.com/mutualfunds. no love so far for the markets in february. emerging markets and this week's big jobs report keeping investors on edge. we'll take a closer look at where you should be putting your money to work enwhat you should expect in today's trading session. >> the fcc announcing a bold initiative to do just that, we'll hear from the sprint ceo plus his thoughts on the data wars, 3wr50denning the spectrum and the future of mobile. plus, the ceo of take two interactive on the company's record-setting year and the future of video games as the final hour of "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, first in business worldwide. i'm andrew ross sorkin, along with becky quick. we have scott in the house. joe kernen has the day off. our guest host, rebecca patterson and richard bernstein is here as well. we have more from both the cnbc contributors in just a minute. first, becky has a look at the markets. it doesn't look like all that strong of a comeback from yesterday's losses. take a look at u.s. equity futures. there are green arrows, dow future up by 26 points. they were up by more than 70. that was two hours. this was the worst start to

february for the dow, since 1982. the worst start for the s&p 500 since 1933. and so you do have concerns, you might have expected a snap back. you saw a big sell-off following our big sell-off. the nikkei was down 1.4%. that brings the nikkei's losses to 14% for 2014 so far. not a very auspicious start to the year. the hang seng was down by close to 2.9. the kospi, duown by 1.7%. in europe, things started out in the green but quickly deteriorated. the dax in germany is off by 1%. scott? target cfo john mulligan is the in the hot seat he'll be testifying before a senate panel on the recent credit card data breach. but new technology to head off future incidents may be on the way sooner than expected.

in an opinion piece published ahead of his appearance, mulligan target is speeding up the production of chip enabled smart cards with the idea of having them in place by early next year. another retailer in the news, michael kors, scoring a huge beat with its latest earnings report with sales above analyst estimates as well as same-store sales jumping more than 27% during the quarter. automaker toyota posted better than expected earnings for its third quarter and is predicting record profit for the fiscal year ending in march. toyota sees annual profits above its prefinancial crisis levels. that music never gets old. >> never. >> you don't get rattled by it. >> you didn't bring the gavel or anything this morning. >> it's on the desk. i forget to bring it over here. >> some judge. anyway, the markets are off to a rough start in february. >> i rule with an iron fist. i don't need the gavel. >> if stocks continue toward a correction territory will the

fed take a time-out on the taper? joining us is peter bookphar. you think everything that's happening is because of the taper. >> i think everything was driven by a qe. we're taking out a lot of that qe fluff, a reversal. >> i will give you i think the taper has a large part of things to do with this but then you'll talk to somebody like rich who will say you're looking at strong gdp, particularly the private sector gdp which was better than 5%. doesn't that justify some of the gains we saw in the market last year? >> if you look at gdp, inventories were a big boost to q3. they rose at the fastest pace in the late '90s. the savings rate was 3.9%. which was the lowest since '08. a lot of retail sales gains were driven by the drop in savings. we saw new income growth. i think the economy is growing but i don't think it's as good

as the second half gdp. >> what about corporate profits getting better. >> we've seen that driven by lowered interest expense and tax rates. >> revenue growth is modest and profit margins are at record highs. i don't think that's necessarily sustainable. >> why aren't rates going up. >> we saw this after qe 1 and qe 2 ended. rates actually fell. that's the irony of this is that the slowdown in the economy is achieving more in what the fed wants. that's lowering interest rates than qe did actually. qe obviously, the fed still saying it helps to lower interest rates but it's proven to not. what percentage of last year's gains would you put squarely on the fed? >> let's define it. the fed printed a trillion dollars. we saw $5 trillion of a market cap increase. that was pretty impressive multiplier. >> you have to admit that there are fundamentals within the

economy that have improved, that have helped the stock market, that have helped companies earn more money to grow their earnings that can't all be related to the fed, peter. >> it's not all. no question the economy is growing and corporate profits have grown. i think that the stock market has outpaced that improvement. >> can we go back to the point about bonds for a second? a lot of people are saying that the reason the emerging markets have sold off is because of the fed taper. people worried about, as you are, the fed taper and stock market falls. as emerging markets go down, everybody is rushing to safe haven assets and interest rates are going down. they're not going up. they're going down more that the fed is tapering with be they're going down more. doesn't the u.s. feast on their problems? >> well, they're customers of ours and they make up, i think, north of 40% of global gdp. we can't ignore what's happening in emerging markets. >> why wouldn't i focus as an investor, why wouldn't i focus on domestic u.s. companies

instead of global multinationals? >> let's take that. i've heard this before, the money comes out of this market and comes into our market. there's a lot of leverage in market players. margin debt as a percent of gdp is at its highest level since 2000. when i sell an asset in mexico or argentina, didn't necessarily go into u.s. stocks. i may be paying off the money i borrowed to buy those assets. i don't necessarily think that it's a one for one type relationship. i think the global economy is integrated in terms of growth and emerging markets have provided that incremental growth. you're certainly not getting it in europe. so i think that you can avoid what's happening over there. last year we had emerging market issues but it was papered over because of qe. qe basically takes the curtain away and reveals a lot of underlying weaknesses. >> we'll go into a recession if the fed continues to taper? >> no, i'm not saying that. i think the stock market has

further downside if the fed continues to taper. >> do new think they'll continue to taper. >> i think they want to get out of qe, i think they'll use every excuse to do that but they will be challenged, or janet yellen will be challenged if the market is down 15% to 20% and the economy is starting to roll over to stop. that proves to the world they're trapped in this policy that they can't get themselves out of. >> peter, thank you very much for coming in today. appreciate talking to you. becky, an update in from jcpenney about the holiday season. the retailer says the same-store sales were up 3.1% for the fourth quarter as a whole. same-store sales were up 2%. it's notable because jcpenney hadn't posted a same-store sales increase since the second quarter of 2011. their shares in the premarket still below 6 bucks but up 2%. >> the present state of the union promised connected.

it's one step closer to being a reality. dan hesse, ceo of sprint, one of the companies that signed the pledge to connect these schools. good morning to you, dan. >> good morning. how is this program going to work and who's going to pay for it? >> this is a public/private partnership called connected. it's the president's program and spren the is happy to participate in it. it's basically the goal of the program is to provide high-speed internet access to 99% of k through 12 students across the united states within the next four years. by basically connecting schools and libraries. the way that sprint's contribution complements that is a lot of students don't have internet access at home. so that's why wireless is so important. we're providing free internet access to 50,000 students per year for the next four years. >> that's going to be on a device basis, meaning people will sign up and get a sprint device? will they pay for that device? will you donate the device.

>> the school will provide the device. the school has different ways. it's possibly part of the program being announced today. the schools may be getting devices from one of the other partners. we're providing free service. >> are you the only telephone cell network that's doing this or are there other cell networks participating with you? >> my understanding is that verizon is participating in some way as well. i don't know the details of the verizon program because that's being -- a lot of those details are coming out today. i believe verizon is participating as well as sprint. >> everyone says 99% of the schools are going to have it. do you know the 1% that don't? do we know where they're located? >> the goal is to have 99% high speed connectivity within the next four years. i think roughly one quarter of the schools have connectivity today. high speed connectivity to the school itself. >> the trick is not simply the broadband at the school level but you think it's once you leave -- once you leave campus,

if you will? >> yes, that's where we come in. there's an e-rate program administered by the fcc that provides low cost internet access to schools and libraries. we're complementing that. so many of the assignments are digital. what if the student can't do their home work at home because they don't have internet access is the home? our contribution is a complement to the program which traditionally has been just to connect the school or library and provide digital education to the teachers. >> i have a couple questions related to the business, if you will. at&t just announced its big price cut. that's going to put pressure on all sorts of companies including your own. what do you make of that? >> well, clearly the family is an attractive segment of the market to go after. you know, sprint announced its family plan about a month ago. i think at&t is just trying to make its family offers more competitive with ours and others in the industry. >> so the only reason i said

that, verizon and t-mobile stock -- i'm sorry, at&t stock went dunn after that report. so i don't know what that's going to do to margins. the other thing i wanted to ask you about, there's a report from reuters that the chairman of the fcc met with someone just said and said the idea of sprint and t-mobile merging was not something he may be in favor of. what do you know about that meeting? >> well, i can't comment on those kind of meetings which are private and confidential. >> i assume you have a view that these two companies should and need to merge? >> well, i've maintained for a long time i believe that cons consolidation in the industry is a good thing, not consolidation with respect to the big two, but at&t and verizon are so much larger than any of the other players in the industry that over the long term consolidation would make for healthier competition. >> mr. hesse, i want to switch

the attention to apple for a moment. i'm just wondering when the last time was that you have had a conversation if at all with tim cook regarding subsidies that the carriers are having to continually pay to apple and if you think that's ever going to break? >> well, we have regular conversations at various levels. it's a great partnership. there is a model if you will today, not only with apple but with all the devicemakers where the carriers in essence pay for the device and for post-paid customers. that's one of the reasons they sign a contract. we do subsidize those devices and the customer basically pays it back for signing up for a two-year contract. there are alternatives like prepaid in what we call in the industry that's becoming increasingly called install bill where the customer pays the full price of the device but over time but separately from their service contract. there's a lot of different models. apple is really not different than the other manufacturers in

that regard. >> do you think the model itself needs to change? will you aggressively push for that? >> no. we obviously will work with samsung, apple, htc to get the best price we can for the device. we have a lot of pricing options with respect to how we bring those out into the market. >> two very quick questions. one on google selling its motorola business to lenovo. does that mean anything to you? what the your take on what just happened? >> from my vantage point it looks like a win/win for lenovo and google and motorola. google acquired motorola partly for intellectual property and they got a good trove of patents, if you will, to protect its android business. also given the importance of android to google and the fact that so many other manufacturers use android operating systems like samsung and hdc and lg and others, it makes android look

more independent if they got rid of, if you will, google sold off its motorola unit so it didn't look like -- i don't think they were but it didn't look like they were preferencing their internal motorola. i think it's good for google and lenovo. >> i could talk to you for two, three, four hours. thank you for doing what you're doing on this connected program. it's an important one. thank you. >> thank you. when we come back, some of the stories making headlines this morning. and stock picking with an international flair. "squawk box" will be right back. . around here you don't make excuses. . you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where it's needed most.

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welcome back to "squawk box" this morning. take a look at the futures after a tough day yesterday, things looked up, getting better, not great. dow looks like it would open 46 points higher, s&p 500 up about 6 points, the nasdaq up about 13 points. coming up next, do you fight, fold or work together? we have the activist playbook when we return. later, the ceo of take two

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welcome back to "squawk box" this morning. in an age of high powered activist investing, corporate battles seem to brew up almost on a daily basis to top the chaos. several firms have teamed up to create an activism playbook.

jim woolery is the deputy chairman at cabwalader, wickersham and taft deputy. >> you've team up with block rock which starts with 4 trillion. >> state street, vanguard, ontario teachers. this is a wide and diverse group. some of the most respected institutions in the business. and they've come forward and decided that, you know, it's time to start a new conversation. we have some of the most important directors in the land. and they've joined together to basically for the proposition that we need to have some more symmetry in the conversation. you've got $100 billion worth of assets under management in activism. yet that's all we hear about all day long. it's reality tv.

this is an effort to bring forward some balance and a little bit of symmetry into the conversation. >> here's the question i have about the symmetry issue, though. how can this $10 trillion of war chest ever feel bullied for even half a second by carl icahn calling up scott or nelson peltz come on tv? i would think they would say, that's pocket lint, why are we listening to these people. >> not all activism is bad. nobody is pointing to any particular activist. but the fact is, this side of the conversation hasn't -- how often is it covered? how often do you talk about it? how often are we talking -- >> traditionally, the blackhawks of the world do not come forward publicly and speak. will we see those folks coming on tv, going on halftime, coming on "squawk"? getting involved in the quote, unquote, conversation every single time, you know, someone

on the other side comes out? >> i think the first thing to recognize is that it's significant they're doing this in the first place. the reality is, this is the first time this has happened, where these groups have come together. this isn't intended to be an enabler to have a conversation. today is the conversation of that. the reaction we've had has been amazing. all of the shareholders are thinking there's a way to begin this discussion. that does not preclude you from coming on television and talking about it or you doing your job. >> what does this entail? i got an e-mail yesterday after that story ran on deal book from a big name activist investor who said, this group should be called the shareholder collusion organization. >> you're making the point exactly that we're making. we're into sound bite, into 50-second discussions on

something that involves trillions of dollars. a statement like that is not helpful or productive but it is reflective of what's going on in business in america today. you have $100 billion talking to 100 trillion. i think the people who are represented and involved in this organization, i think their organization speaks for themselves. i think over time, if this initiative is successful, i think it can be impactful in making a difference in a conversation. >> is this a way of lessening the potential blow of an activist himself or the power they wield or making their hammer not as effective? >> think about it. if you have your long-term shareholders with you if you're a company and your long-term shareholders agree with where you're going, the ability for a short-term minded investor to drive you into a particular decision is pretty limited. >> some of these guys are not short term. i don't know the term means. >> we're not suggesting that every kind of activism is bad. by the way, this is a much more mature phenomenon than just

calling it one thing. these are different funds, they're different people, have different approaches. some of them have brought companies to their knees. okay? and others have been very constructive. i would point to peltz and heinz as a great example. i witnessed with it my own eyes. very constructive engagement. you can't paint this with one brush. it's more complicated. >> do you get the sense that the companies and ceos you talk to feel like they're under siege? >> if they feel the conversation has become a little bit ridiculous. this is a relatively recent phenomenon. we're not saying it's a bad phenomenon. we're not saying that activists don't have a place in business in owe site in america. what we are saying that is you can't have a 140 character tweet be sent out about apple. probably to you guys and then all of a sudden the company goes into turmoil, hundreds of millions of dollars or billions of dollars are lost and nobody's

had a conversation. that's not healthy for the financial system. if that's where we are, we have a real problem. this is not just about activism. this is about governance. directors and shareholders opting at the behest of management. they're the ones responsible for i have an obligation. >> how does this actually work? are people going to have meetings and talk on a per deal basis or is this just a big conversation about the future of all this? >> first of all, where it starts is, it basically lays out a path for independent director to engage directly with share holders. >> got it. >> something that's not happening systemically. it will drive a dialogue and what comes out of that will yield -- here are the views of $10 trillion of folks under management. they agree with this. this is the way we're heading and that sort of insulates you from a short-term swing. >> right. >> guys, thank you.

it's called the shareholder director exchange. coming up when we come back, sales nearly doubled on grand theft auto, the nba and wrestling series. the company's ceo will be with us in a moment.

welcome back to "squawk box" this morning. take a look at futures after yesterday's broad-based sell-off on wall street. you're seeing green arrows this time. not enough to make up for yesterday. dow looks like it would open up 50 points, the nasdaq up 16 points and the s&p up 8 points. michael kors on the move in this morning's trading. a big beef for that retailer on the top and bottom lines. same-store sales jumped by more than 20% and also raised its yearly forecast. jcpenney also higher. the retailer posted a 2% gain in same-store sales for the fourth quarter. that's the first time it's seen a year-over-year increase since the second quarter of 2011. shares of britain's arm holdings, that chipmaker's processors are pretty much in all the top celling smartphones but it did not meet analysts forecasts because apparently

slowing smartphone sales growth has come down a little bit. right now it's time for a broader look at currencies. our next guest says that the green back will remain the world's go-to currency for the foreseeable future. joining us now is the author of "the dollar trap," how the u.s. dollar tightened its grip on global finance. we have a fellow from the brookings institution and senior professor of trade policy at cornell. steve liesman joins us as well. welcome to both of you. >> good morning. >> ishwar, your book looks at the dollar maintaining its currency status as the go-to currency. when people get afraid, things get ugly, is that in spite of what we've done? >> it's in spite of what we've done. everything is relative. what's happened since the financial crisis, the demand for financial safe assets has increased enormously and the

supply has shrunk. europe doesn't look that good. really the u.s. is the only place to go. >> especially right now when the central bank looks like it is starting to tighten things, going against what you're seeing in all the other places. do you think that will help lift the boat for the next decade? >> i think for the foreseeable future it's hard to see a significant rival to the dollar. there will be other currencies that become more important in financial transactions but if you think of currency as a safe haven, there really is no alternative to the dollar, because there are no other markets that are big enough, liquid enough to be able to accommodate international investors' need for safety. >> one of the things the book points out is what it takes to have an international reserve currency. you don't go and set up a shack on the side of the road and put a reserve currency sign on it. it takes decades. >> bitcoin is trying to do just that. >> bitcoin is trying to do that but it takes decades.

you have to have the market and the place to put the dollars into, you have to have the assets. it's not often that a book comes along that says the opposite of what almost ever other book says, the collapse of the dollar, the doom of the u.s. financial system. that's what's interesting about this book, among other things. the reasons are not stellar. talk about what the fed is doing right now and what it means to emerging markets and should the fed have concern when it does its policy for what's happening in emerging markets and foreign markets? >> the fed like every other central bank is like its mandate. the fed is arguing that doing the right thing for the u.s. will be good for the rest of the world. the fed's argument is for a long time been if we take care of our economy as best as we can and you do the right thing, having flexible currencies, better financial markets you'll be okay. here's the real paradox.

no what t no matter what the u.s. does, the rest of the world comes to the u.s.-for-safety. i it was the quantitative easing policies that led them go into emerging markets, creating problems for them. they knew this day would come and they needed to find protection. where did they go for protection? the u.s. >> does the theme change within the fed if people get into the fed and have international backgrounds, think about emerging markets differently than current fed members, do we get a different dialogue? >> i think there will be more empathy for the fed. will it change the way the fed runs its policies? no probably not. >> wait a second. more empathy for emerging markets, would that translate into things anyway? look, the mandate hasn't changed yet the fed has changed drastically over the last eight years. >> the emerging markets are becoming more important in the world economy. the u.s. cannot carry on pulling

along world growth by itself. the emerging markets are becoming more important. the u.s. recognizes this. the u.s. needs the emerging markets to grow faster, have more stability because they're going to help the u.s. ultimately. ultimately it's on the u.s. interest to help the emerging markets and not have too much volatility. >> keep with that theme. what does it mean for an average u.s. citizen to live in the country that has the world's reserve currency? do we want to be the world's reserve currency? is that good for us or bad for us. >> it's a great thing. it means no matter how much trouble there is in the world u.s., they will finance it at ridiculously low interest rates. >> it's a zero interest loan when somebody buys my dollar. >> if it's cheap money it's not too bad. the down side is it keeps the dollar stronger than it ought to be. it has an effect on export

growth and job growth. >> our export in south carolina and north carolina pay a price for that? >> at a time like this when the economy has weakened, every little bit helps. it's certainly not helping. >> let's say you're bearish on emerging markets like i am. i think they have sec lar problems within the future is bleaker than people think. in that case, the dollar gets much stronger than people think which actually may benefit our economy more and as foreign flows come to the united states, that may push the dollar up even more. it seems to me like, to some extent -- >> depend on the form of those foreign flows -- >> let's say ten years, flows come back to the united states, isn't some of this kind of a process, it's not necessarily that we're doomed forever and, you know, if the emerging markets get worse, we look relatively better. doesn't that benefit the u.s.

economy, strengthen the u.s. economy and alleviate or correct some of the problems we've had in the last 10 or 20 years. >> they have structural problems, that i agree. the question is whether it this is good for the nus terms of allowing us to have undisciplined policies. the problem is if you're getting cheap financing it allows us not to do the right thing. any other country going through these sorts of problems would have to self-correct. we don't have to self-correct because the rest of the world is willing to live with our problems and if we create problems, the world comes to our house. the problem is this may not be good for u.s. long-term growth and productivity. that's what you need to focus on. >> thank you very much. >> interesting read. >> thanks for bringing it. >> thank you very much. record earnings for take two interactive. gamers can't get enough of grand theft auto, wwe and other titles.

cast your vote today for the most influential business leaders of the last quarter century. go to cnbc.com/25. make your picks from our list and submit your vote. you can even write in your own. who will be the cnbc first 25? vote today. hi, are we still on for tomorrow? tomorrow. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow.

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dow futures up 44 points. the highest we saw them was up 70 points earlier this morning, about three hours ago. up 44 points. let's keep this in context. the dow was down by more than 325 points yesterday. that volatility, nervousness still exists. the maker of grand theft auto posted third quarter profit that beat analysts estimates. we have the ceo, strauss zellenck. >> we had a record, we sold a billion dollars of product in three days. it was extraordinary. i think we set six "guinness book of world records" with the title, we have nba 2k14 and of course our catalog which continues to sell very well.

>> the forecast for the current quarter is below estimates. what would you attribute to that? >> it's one of these situations actually i'm having trouble understanding. we beat the quarter. we guided up for the year. meaningfully up from 350 to 375 to 415 to 425. we have a billion dollars in cash and gave initial guidance for the fourth quarter which happened to be a couple cents below estimates based on the year. it was our initial guidance. we only take responsibility for the guidance we give. we beat our guidance six quarters in a row. >> has your own success raised the bar to unattainable levels or just beyond the finger tips. >> we're always raising the bar on ourselves. the truth is we love what we do, we've proud of what we do and we have more to do tomorrow. we don't mind the bar being high. >> how many titles do you have that work with the xbox 1?

and a have a follow-up. >> the first title was the nba title this year. we said we have more than ten unique titles in development for next gen, sony and microsoft platforms. we've announced evolve, our new basketball and wrestling title. beyond that we haven't given specific title announcements. >> i can't speak from experience on the play station but i can on the xbox 1. >> you have one at home? >> i do. >> i was not happy with the fact that you could not use games from the xbox on the xbox 1? do you think that was a mistake for microsoft. >> i don't actually. you have to make choices when you're creating hardware so it doesn't become so expensive. >> that's a huge decision with wide-reaching ramifications. >> most gamers will hang on to the old machine as they buy a new one. when the new machines are launched there's not a huge amount of entertainment product pore them. we were selling ps 2 products

until recently. clearly people were still playing ps 2 games. with digital distribution it is quite possible to play older games on the digital networks that both platforms offer. i don't actually think it will matter to consumers. it apparently did the maer to you. >> it matters to a lot of people i've heard from who had similar things. you can't get that many games. >> these aren't choices we make. we take the platforms as we find them and support them to the best of our ability. >> when do you think it goes fully digital? meaning you're not going to buy physical disk from you? >> retail physical retail is still the lion's share of our business. retail is an important partner to us. digital is growing rapidly. our digitally distributed revenue was up 42% year-over-year. the significant portion of that was recurrent consumer spending. in-game spending on virtual currency and online gaming which is extraordinarily good news for us. it's not related just to the initial release of a product. that said, we're the consumer.

if the consumer wants to buy physical goods, suits us just fine. my view is that over time, digital distribution continues to grow as it has for the book business, as it will and has for the movie business. >> one other quick question. we just had a conversation about activism. we've dealt many moons with carl icahn. is there any lessons from that experience? >> numerous lessons. i think the biggest lesson, listen to your shareholders and cooperate with them. and i never had a quarrel with carl or others that came through the icahn holdings. >> should others have an influence? >> i think it's management's job to run the business. equally, i think management must be communicative and responsive to all share holers. look, some activist are

operators themselves. i am a big believer that all opinions are welcome. >> okay. all right. good to see you. congratulations. >> thanks for having me. coming up, an erlgly read on what to expect at the opening bell this morning. we'll head down to the new york stock exchange, check in with jim cramer. "squawk's" coming back right after this. and guaranteed one-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and e-trade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. call or click to open your fidelity account today.

let's get down to the new york stock exchange. jim cramer joins us right now. what can you tell people after what we watched with japan? is this more of the same? >> i think we need a -- we're pausing, we need more data. i don't think you can keep going down this same negative data and the data has been negative. >> yes. >> we have to take a breath, figure out whether there's reason to hang our hat. the nikkei, we used to trade off the nikkei in '88 and '89. we're not going to start trading off of that. whoever is the weakest we trade off of. that's what's happening here. when we had good eurozone numbers, it doesn't matter, we're trading off the weakest. when that happens, there's data we trust here. our data is corrupted by the weather. our data is corrupted by retail streams. listen to strauss, they have a billion dollars in cash. people say they have very little

cash. the cross-currents of people who think companies are doing well and badly, very hard right here. in particular, we need more data from the united states that we can trust. i think we'll not get that till friday. >> jim, i agree with you. the numbers we've seen to this point, the ism number yesterday, a lot of that did have weather in it. if the january jobs number on friday is a weak number, though, will the markets be willing to give it a pass for weather or are all bets off at this point? >> i don't think so. if you have two bad numbers, the history of the employment number in the last seven years and two bad numbers are a definitive slowdown. that would be another leg down if we did have a bad number. >> the question becomes beyond that friday jobs number what are the other important data points we should be watching and waiting for? >> look it. we'll have a big storm tonight and this weekend. the february data's going to be skewed, too. >> a mess, too. >> if you listen to mike jackson and you see the inventories go up and you want to asterisk for weather?

they keep pumping out cars, you got to cut the price of cars. it doesn't matter. there's too many on the lot. just because it's weather doesn't mean we should say wait a second, we've got to discount it. then you have numbers with clorox not what you want and the currency you are talking about the dollar. as someone that looks at earnings every single quarter that we see of companies that are overseas the numbers are horrendous because of the dollar. >> right. >> you can asterisk those, too, i'm tired of asterisking everything. >> i think that's the market's general sense right now, jim. >> too many asterisks. thank you. >> jim, thank you. we'll see you in a few minutes. >> yeah. coming up, markets have been volatile in the u.s. and abroad, where should you put your money? next we'll talk to a global stock picker with names that could make you some money. 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.

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welcome back. stocks coming off their biggest selloff in months but there's still opportunity to make a little bit of money in this volatile market. joining us now with some of his ideas where you can make some of that money is the cio of iva funds and the portfolio manager of the four-star $9.6 billion iv worldwide fund. good morning, charles. >> good morning. >> richard bernstein is here

with us and i asked if he would like to lead coming out of the break. he said, of course, i would like to, he's my competitor. where would you put your money now? and i'll let you and richard go at it. >> it's a stock pick of markets and it's a cliche but more true than ever. if you look at the liquidity our stocks were up 35.5% and the msi was up only 23.5. instead of picking regions or sectors one has to look at individual stocks. the only maybe exception to that would be japan. japan despite the rally over the past, you know, 12 months or 13 months is still very cheap. >> help us. give us some names? >> pharma is a very well managed pharmaceutical company, great capital allocateallocators. they pay nice dividends and they trade below ten times. now, you may worry about the yen so you may want to hedge some of the currency exposure if you are

a u.s.-dollar based exposure, investor, but, again, japan still has -- offers great bargains. >> okay. what else do you love? >> random names. it can be a hotel company headquartered in the uk called millennium. that company owns, they own the hotels around the world it's not a uk play. it's a play on hotels around the world that are owned by them. another company that's misunderstood in hong kong is hong kong and shanghai hotels. in fact, they own the pendant hotel chain, i'm sure everybody knows about that chain. yet the bulk of the value lies with real estate both deluxe residential properties in hong kong as well as commercial real estate in hong kong. the company's misunderstood and is very cheap. >> charles, i see you like berkshire hathaway. >> still, we have trimmed last year the stock has had a great run last year. it still trades at a discount to

what we think the entrance value is but the discount has narrowed so we've trimmed it but we're happy to keep some exposure there, yes. >> you like oracle as well? has it run its course yet? no. the perception is that the cloud will hurt the company a lot we think the cloud will hurt but maybe not as much as expected. the ceo has been a great capital allocator and we trust they are doing the right things. >> those are softballs and richard is here and the gloves are coming off. >> i'm sorry i have to ask you this question. you mentioned before that a stock picker's market is a cliche and i kind of agree with you with that. but even if you look at asset allocation which your fund is very important to your fund as well, yes, your stock picking was good, but the asset allocation hurt. when is macro not important? because asset allocation's always a macro decision. >> i mean, both matter. in fact, we own no bank stocks

from '04 to '08, i guess, you know, we sense the credit bubble was reaching obscene proportions and would not end well. and today, you're right, we are mindful that the macro matters. we're very worried about china, the big credit bubble that has taken place, but also apropos imaging markets i think people simplistically assume imaging markets are going down because of china or the tapering. it's more than that. there have been credit bubbles in brazil, in india, in indonesia, in turkey. and south africa. and it's -- the credit bubble in those countries were instances of households overborrowing in overconsuming so the bad kind of credit bubble and now we starting to -- these countries will start to pay the price. >> charles, thank you for joining us this morning. >> you're welcome. >> sorry to sic richard on you like that. but you guys did well together,

so we can't complain. >> andrew, you wanted to talk about your new -- >> if i could. i have a little initiative that i want the viewers to pay attention today. >> and i started it for you. i apologized. >> you did. something we are calling on twitter #apologywatch and every ceo and politician and leader is apologizing and we call it apology theater and the question is whether the apologies are sincere and on twitter we used the #apologywatch if you see somebody say i'm sorry let us know and we'll track it over several months and we'll see whether or not anybody did it about. >> i was not sincere. >> i could tell that. >> i think it's real interesting because i think apologies stink if they're not sincere but i don't want to discourage people from apologizing when you make a mistake. >> we think you should apologize, and it cat the be apology washing and you are saying i'm sorry and walk away. or if you don't think you're sorry, by the way, don't say you're sorry. a lot of executives feel they

have to say they're sorry because there's a pr thing to it. >> when you don't mean it and people can tell you are doing yourself damage. >> how did the shares perform relative in the market the six months after, do they act and does it get reflected in earnings expectations? >> we'll do on a segment on that for you, how about that. >> thank you. "squawk on the street" starts right now. ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber on the phone at the new york stock exchange. looking for a little stability this morning in futures suggest we are going to get it after the worst day for stocks in more than half a year michael kors beats and we might get a new microsoft chief. the yen is below 101 and europe is mixed despite good