i have to do everything? >> everything. always. >> becky has to keep it going. >> you have broad shoulders. >> getting broader. my trainer eddie. have a great monday. thank you for joining us today. make sure you join us tomorrow as well. right now, it's time for "squawk on the street." >> good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. final week of february kicks off today. nasdaq 5,000, just 45 points away. goldman cutting boeing to a sell. that's looming a little bit here. oil back below $50. we'll talk about that and the ten-years still in a range just below 210. the markets dancing around record levels a day ahead of the fed chair's two-day testimony on capitol hill. after that deal is struck to

extend the greek bailout process. it's now official. we're going to have a lot more additional details on this big deal. >> and as we said shares of boeing slipping in the premarket. worries about demand risk. we will bring you up to speed on that call. first up dow and the s&p closed out last week at record highs. the nasdaq finished within 2% of its all-time closing high. this after that deal to extend the greek bailout by four months. the greeks must present their reform plans to creditors today. but this week's big event is the fed chair's two-day capitol hill testimony on the economy. janet yellen begins by going before the senate banking committee tomorrow. we'll bring you live coverage right here on "squawk on the street." jim, is that going to set the tone for the week? >> there's some retail that i think can matter. libya came back online. there is a sense that perhaps we

have a number of buyers for oil companies that do go under. i think that's worth watching. a lot of money has been raised. the large numbers, the retail sales numbers that she has to work with. a nice combination. >> wow, almost sounds like goldilocks kind of stuff. >> the three bears are hungry. all they ever had was porridge anyway. >> it is the best month for the nasdaq in three years. >> a lot of it's etf.

big semiconductor etfs. we have had a number of stocks within the nasdaq that are what i would call outlier restaurants that are now so big that they're terrific. i call your attention once again, it's this biomarin regeneron. little biotechs that are getting bids or drug approvals. it's this great mosaic. >> we have this conversation virtually every day, but we should. it is the most important metric. >> they always say that. >> apple is so much involved. >> only three quarters of a trillion dollars. >> we're beginning to see two stocks of leaders. you mentioned boeing. the stuff that's really been moving up is cyber, cyber

security, cyber arc being the fastest grower. the companies that i follow that do cyber are all on fire. they're nasdaq. we've also had this amazing internet cisco. by the way, you know what else has been great. the cloud stocks that peaked this time last year, they're all coming back. we can say that's the overvaluation. they're as expensive as they were last year. >> i love the stat in "usa today." nasdaq is up 15% in 12 months. in the 12 months prior to the dotcom bubble bust it was up 110%. in 12 months. >> i think when you add up all the most overvalued companies in the nasdaq you get anywhere near the market cap of cisco this week in 1999. >> yeah. having lived through it as we did, of course. it's the only good thing about getting old, i like to say, is at least we have some experience. there is very little that you could compare to that period of time. very little. >> why do these people that were on tv last night not get older?

why do they get younger? is that not an interesting thing? maybe it's some of those valiant drugs. maybe that's why we end up buying activist because those people -- i mean julianne moore. people are like she lost about 15 years. they don't talk about weight. >> congratulations to her, by the way. >> she's ten years younger. i bumped into her ten years. it is amazing how much younger she got. and i love that. i like that. i take vitamins. i'm not younger than i was. she's actually physically younger. it's a remarkable thing. >> you're slowing the aging process, you're reversing it. >> bradley cooper, by the way, is going to be this age for 30 years. that's obviously valiant. >> that's what we're going to talk about right now. mike pearson joining us later. he's going to tell us all about those great skin concoctions because i'm sure that's all it is. >> as for the deal on friday we told you they were very near a deal in which valiant would buy

salix pharmaceuticals. all cash. and that seems to be something that valiant is being rewarded for in the market. the stock was up on friday on a report this the deal was near but it's up another $18. $17. this morning, because they're talking about $500 million in synergies from the call, we can tell you of that 500 million in synergies, they say they did it bottoms up. it's the cost that we need to run salix and where we'll get the synergies. i.t., finance, purchasing savings across the two companies and they plan to keep their commercial activities in place. that synergy estimate is helping fuel valeant's stock price. as for salix, you can see it's not doing much of anything. it did move up sharply on friday when we reported that the deal

was near. and there may have been other bidders there that may have been in a position to offer stock and perhaps their stocks would have gone up equaling if not exceeding valeant's. but cash deal you're going to be able to close it very quickly, before they get the review from the fda on their latest. which may be something they'd get out of the way. the whole allergen thing was falling apart and they just didn't look good at all. here it is $190. >> i look at the big pharma stocks, which by the way this is now big pharma. i don't know how else to put it. i do not see the level of growth in these drugs that say that valeant has -- thehow did that

accelerate like that? >> very good price. >> sold it during the allergen fight. he's got a skin cancer drug that accelerated. the numbers that he puts up in terms of what he calls same store numbers, this reads like chipotle. i don't mean to be facetious at all. he uses same store sales numbers for drugs. and they're double-digit and i don't know how he does it. that's why i cannot wait to hear your interview. i don't know how he does it. i've never seen pfizer do it. >> we know the company benefits of course from having an extremely low tax rate. mr. pearson will be joining us later on. we know they benefit from the lower tax rate. we know of course that they eliminate what he claims to be a lot of unnecessary r and d. but that would come in on the margin, jim. what you're talking about is

simply top line growth of drugs that had been around before valeant took them. >> the best of both possible worlds. higher sales. you have bigger gross margins. now, obviously when david was fighting them he had the highest r and d and felt that this was a mickey mouse company. >> raised a lot of questions about what they really are. whether they simply are a roll-up around a great tax rate that eviscerates r and d and will keep benefiting. some will say valeant told us not that long ago you're about organic growth. but here you are yet again doing a deal. >> but organic is good. the organic was good. >> they reported numbers this morning that were quite good. >> blowout. >> health care in this country, $40 billion year to date. this is the number two deal. no other segment has been able to keep up with what's going on in health care. >> a lot of these companies did a big buy in health care.

i mean these deals with all additive. as soon as the deal closes, they raise numbers. the stocks go higher and they reload. and they ready for another deal. the medtronic deal was remarkable. remarkable, instant home run. >> this guy is really aggressive. and they'll lever up to 5.7 times. which is a lot. they're going to have $30 billion-plus in debt. he did seem to rule out selling stock. activist doing that $4 billion raise through equity. that doesn't appear to be in the cards here at valeant even though it's all debt financing. >> he makes activist look like the pfizer of old. it's like oh, you know it's a turtle. it's good. this guy is the hare and the turtle. he's a curious hybrid.

he's he's a rabble. >> the jet-maker is the most exposed in the industry to aircraft demand risk. they do see orders slowing, jim. they say aircraft supply is up two times from the trough. they still like the aftermarket. but they're taking the price target. >> every one of these objections could have been made at 120, at 130, at 150. jim mcinerney has said over and over again exactly the issue they're talking about. going to lead to a problem. demand has not come true one bit. he's surprised at the sheer number of orders. he's got a ten, 20-year plan. i get that. >> what about their addition? the fuel equation is one piece of the call. the other is that emerging markets, huge source of demand for the past 15, 20 years are going to go through a more

volatile economic environment. >> i wish that -- look. i understand the bear case. it hasn't been produced in any way. by the way, one of the reasons why we didn't like boeing was the defense business was bad. the defense business has been cleared up. the dream liner is really kicking in. making more and more money. my problem with boeing is it went from the mid 150s off of one quarter. when everybody so-called reraided the stock. but if you want to sell jim mcinerney if you want to do that then you want to sell bill belichick. i'm not kidding. you want to sell -- i was going to say girardi because i like him, but obviously he's not good. >> why do you say he's not good? >> i happen to like him. but he hasn't won lately. i think he's a tough guy. >> hasn't won lately? i'm not even a yankee fan. >> you're selling the golden state warriors. you're selling mark cuban.

this guy's a competitive guy. when i made a little joke about how he went to yale. and harvard is air bus and he's boeing and it's all collegial. he looked at me and he said, no! no. i didn't know where to go. i mean it's so not collegial. you bet against mcnerney like goldman says to do you will look back and say, what was i thinking? that's how good mcnerney is. >> you don't like the call clearly. >> how are you going to get back in? going to sneak in a buy there? a little thread the needle? no. >> with the stock already up 40% since the beginning of january, things looking even better for netflix. we're going to fill you in on that. also ahead, david's exclusive with michael pearson on the company's deal to buy salix. take another look at the premarket on this monday. the dow 25 points away from a

thousand-point month, something it's only done two times in history. we're back in just a minute.

that is netflix's trailer for "house of cards." shares off to a flying start this year of 40%. best performer on the nasdaq. people loved the sub-ads last quarter. the stock never really looked back. i just find the discussion of "house of cards" is kind of the discussion about what people used to talk about movie. are you ready? people been saying to me. you know what saturday is house of cards day. i don't know but it is the discussion. it's the watercooler discussion. and it's important discussion. because that's why that stock has moved. >> right. it's keeping people subscribing.

that is what it's doing. >> the question will be how far i can talk to you about it depending upon how far you've gotten in the season. >> we all have to worry -- just like "orange is the new black." i was, like three episodes ahead of other people who were close to me and i had to pretend that i hadn't seen it because that's the other game you have to play with netflix. you have to pretend because the stuff is so powerful you can't stop. >> meantime expansion in europe. going to japan. marco polo actually got past some initial weak reviews. >> do you believe that marco polo did well? i mean other than my daughter i don't know a single person who watched. i think she watched it for a class. >> a lot of money on it that's for sure. >> people loved it. game of thrones coming on that other network called hbo. they don't release that all at the same time. >> yeah we block that in our house. >> really? >> triple x. i don't like that. >> really? >> it's not triple x. >> that's pornography. i'm shocked at you that you

watch that. >> you're shocked at me. >> i know it when i see it. >> did you see "fifty shades of grey"? >> i know it when i see it. did you know bradley cooper won a feragamo tux? >> what's the problem with bradley cooper? >> redmayne in a beautiful blue thing going. >> "the new york times" did have a fabulous red carpet. >> the show was a bore man. >> it was a total bore. >> it's what they wear, david. >> the whole thing. >> by 10:00, it's like please. let's go to bed. i went to sleep. >> went to sleep? >> it's very helpful. you might want to try it sometimes. >> it's going to be hard to build on degeneres's ratings, which i think were a ten-year high. no big blockbusters this year. twitter didn't even release the metrics. they might still do it. >> i know. i think that's maybe the story of the day. i thought that twitter would blow it out. >> when we come back we'll get

cramer's mad dash. we'll count down to the opening bell. one more look here at the premarket as we're looking at three straight weeks of gains for the major averages. back in a minute. e) hi. i'm rob lowe. and i have directv. (hs lowe) and i'm peaked in high school rob lowe. and i have cable. (lowe) directv is wireless, so you can put your tvs anywhere without having to look at those ugly wires and boxes in every room. (hs lowe) cable isn't wireless but you just gotta put something in front of them. (lowe) i'm still in awe of how great my tvs look. (hs lowe) and i'm still captain of the team. (lowe) don't be like this me. get rid of cable and upgrade to directv. call 1-800-directv. sfx: common city background noise ♪ credit belongs to the man who strives valiantly who errs who spends himself in a worthy cause and who, if he fails at least fails, while daring greatly sfx: background city noise

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that really is you? if they're not a cfp pro you just don't know. find a certified financial planner professional who's thoroughly vetted at letsmakeaplan.org. cfp -- work with the highest standard. it's a monday morning. good time far mad dash. about eight minutes before the opening bell. where do you want to start? >> jp morgan downgrades a supporting actor. the supporting actor is cyber arc. the lead is palo alto. and they're saying palo alto has

a much bigger market just a total adjustable market. but cyber arc has been way too hot. this is all since they reported. they're saying cool it. it's a little boeing-like in the sense that the stock is so so up. i totally get that. pacific crest raises its target for palo alto, which has been the broader one. cyber arc has the master key that's supposed to stop -- it allows you to be sure that you can lock your system at the top. palo alto's is -- >> let me just stop you for one second. i'm looking at the one-year performance. 320% in a year. earlier we were having a discussion about the nasdaq. both of us were concurring i think -- we concurred that it's not reminiscent of 2000. this group is hard to value. fire eye had a good quarter. these are our netflix. they -- sign-ups. if you sign up a lot, they had a lot of customers. now, on the other side lower

valuation, colgate hold the buy, citigroup. underperformed yet in many ways it's better than the group. all these companies are faced with venezuela issues. very negative article in the papers today about how bad it is. venezuela, if it were ever to have a change of government which they were always thinking these stocks would fly. but i think this one's back. and david, i know you love these patterns. while head and shoulders is a procter product, i believe -- >> more like mustache. >> i didn't know you took technical analysis. >> good to know. >> it's got the best technology. i'm not kidding. it works better. that's what they claim. >> as long as it comes out of the tube. that's technology right there. i have a hard enough time with that. we've got the opening bell a few minutes away. a lot more stocks to keep an eye on. we'll hit all of it after the bell.

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on the street" on this monday. the opening bell in a little more than two minutes. interesting week setting up. got some retail earnings. yellen will be on the hill. greece we tabled for four months. i think the saying now is extend pretend lend and amend. >> you know, greece there was -- i know everyone says germany won, but it's so not over. the numbers that are involved with greece versus just the average daily deal that we won't even talk about are extraordinary. how little. >> we're not talking about a great deal. it's more about the principle, i would guess. >> spain has joined germany in cracking the whip, which is interesting. obviously suffered from austerity. i think that we're going to be stuck with this issue forever until they're either kicked out or they're bought. maybe they need to be bought by valiant. >> valiant could buy greece and immediately cut costs. >> the numbers are so small that i look at this deal this morning, and i think well this number's bigger than what all these countries are squabbling about in greece. but it is the principle. >> that's a good point.

nikkei, another 15-year high. >> nikkei a japanese company. it's rather amazing to see this because in the old days, the yen was very strong and they came in and bought our companies in the '88-'89 period. now there's a japanese company that doesn't have a strong currency out there buying one of us. >> stock was down 6% in the pre-market. their new target ori, ten-plus versus a prior 12-plus. some of these legacy issues continue. >> they have a line which basically says legal. it's like a line item now. it really is incredible. goldman had to up its legal exposure number. i'm not sure exactly how relevant that is. you dig through a filing it makes it sound worse than it seems. meantime one other headline crossing today, target. lowering the minimum for free shipping to $25 as the retail

wars online continue. >> fabulous piece about brian cornell in "fortune" magazine that came out today. fabulous piece. know this man. he is incredible. >> there's the opening bell. a look at the s&p in the top of your screen. at the big board, celebrating its recent ipo, and at the nasdaq, it's zillow and the zillow rental network doing some of the honors over there. >> it's been a good stock since that merger. a lot of that is the sense that they can -- you know two companies better than one. i still think it's amazing that housing starts -- you know housing's kind of moribund and they're still putting up the number. >> right. >> i think he's very candid about how they make the numbers. it's still early adoption for this product. a lot of shorts have been battling him forever. he does a good job combatting the shorts. >> want to take a crack at crude oil here? people thought 53 beginning the process anyway. >> went over -- i have simerx on which is a top-notch

operator that has a fantastic balance sheet. a lot of people are taking the eog. their conference call that maybe eog is saying we're going to get that in pricing. what i would point out is there is still no pickup in demand. there is a very big addition to supply in the first quarter. it's a rather remarkable addition to supply. the refineries are running full out to be able to export gasoline gasoline, which is still a very good business. but they can't produce it fast enough and it's stuck here. the rest is stuck here. permian is just -- the gulf of mexico, these places are producing so much oil and no one knows where to put it. there's still some tankers hedge funds out there, you can still buy some tankers if you're very bullish. i know north american tankers. i checked, they have room. i was trying to rent one of their ships for a giant party i wanted to hold because that way you get use of them. but there is a remarkable glut and it is weighing on this group because the refineries can't

produce enough. they have full-out, and that's a dangerous thing. >> we mentioned dish a lot on this program largely because of charlie and their spectrum position. but they did report financial results worth mentioning as well. remember, of course, the key part of the business where they make money still is a tv signal or tv service. stocks up although i'm looking at john here the ubs analyst. he said paid tv subscriber loss is worse than in the fourth quarter, losing 63,000 video subs. versus what was -- well it was more losses than he anticipated. subscriber related revenues up 2.9% year over year were less than it perhaps had been

anticipated. also ceo joe clayton going to be retiring in the spring, and charlie ergin just going to take on the ceo title. why not? why wouldn't she? >> we remember joe from sirius xm. >> that's right. >> very genial terrific guy. >> he'll be retiring as of then. so those are the numbers from dish. >> talking about it for a long time. >> the worst-performing s&p. >> when the countries are pulling back from offshore drilling, and the day rates keep falling, there is just very little room for you to be able to do anything other than cut number, cut numbers, cut numbers. cut numbers, cut numbers cut

numbers. it was much higher which is really amazing. energy services it's another one that has been just a nightmare. just a cessation of a lot of the drilling. brazil is a major problem here. a lot of people built riggs in order to be able to get brazilian orders. >> their break even is well higher than anything we're talking about here in this country when it comes to fracking. >> being concerned that brazil doesn't become uber socialist country. >> i think you're absolutely right. >> i have to check the numbers. it's probably not far off. >> people talk about our oil companies that might be in

trouble. no one can come in and take over. >> no. >> and that one -- i'm not saying it's going to happen, but i'm saying that brazil government, not stable when it comes to finances. maybe it's stable in terms of what the people united want, but jeez, in terms of business it's the number one worry. >> i don't know how much we want to talk about discovery, but it's hard to look past a 7% gain this morning. >> is it up that much, carl? it was a reuters story, which has been completely and categorically denied by fox, which said that there had been some talks between the two companies. the consolidation in this industry is not exactly something that would be unfamiliar to those who follow it. but whether, in fact that would ever happen between these two, i had not heard anything i believe the denial is a real

denial. >> right. the next time, there's a story, if we don't deny, we know it's true. >> everybody denies it but they ran with the story anyway. or did they source it? >> i can't comment on the reporting of other organizations. i've got to just worry about my own. i've got enough issues. >> that's a very good point. we all have enough issues but i saw that and said okay look the stock's down a lot. >> it is down a lot. >> people want to believe anything. >> yeah, their last quarter, they just reported -- >> that reuters, my prediction is that reuters reporter will not be invited to david's party at the end of summer. >> that may, in fact be the case. >> did want to mention darden, because they're keeping the interim ceo. starboard ran the table, so to speak, with the board of directors in a proxy fight. took over the company essentially with its own nominees. but gene lee has been in there as ceo and he's going to stay as ceo. i just spoke to jeff smith this

morning. he simply said listen this is a portfolio of restaurant companies that we have here. gene's got a great view for the future. and he applauded the board for his decision to say yeah we looked at a lot of external candidates, but the guy we've got is the guy we want. when i asked what exactly is the plan for the future mr. smith, who is on the board as well said, you know we're working on it, and i'm not going to tell you right now. >> i'll tell you, here's my advice to darden. just open your doors every day, because what's happened is every restaurant company is doing great, with the exception of noodles and panera. i wish i were running darden right now, i would look like a restaurant genius. >> by the way, you do run a restaurant bar, and there are many -- >> packed this weekend. >> who say that maybe genius is something to think about. >> i was clearing tables. nothing's beneath me. i'm clearing the tables. and i had some juevos. it was perfect. a little salad on the side. >> disney of course there's some chatter about ticket prices

to disney world crossing the $100 mark. the stock, it went to 101. again, hasn't looked back. >> you tweeted something really interesting, which was something that bob iger has talked about very often. the technology. now, what is that? i have not gone back in a long time. >> i think it's the wristband. wristband is no tickets. you just put your wrist in front of a sensor and you're in. it tracks your times. and the data they must collect. >> absolutely. >> and they can manage the experience better for you conceivably. >> is the jungle cruise run better? >> i must humbly say it's not as good as when i was on it but it's pretty good. >> it's so funny, they make these changes, and this is something, by the way, that six flags is doing. you kind of say well so what. and then you remember when you were with your kids in the line for a captain nemo and your kids are angry and you're buying the turkey legs and birds are attacking you. and you just say i want to get through. who do i have to pay to get

through? technology. >> by the way, speaking of all that sort of mobile payment stuff, apple is going to hit 130. we're seven cents away. big story in the "times" about -- they're calling it car play, which apparently is apple's system for bringing developers to the dashboard of your car. google has a competing one called android auto. >> i still think that the guy that owns the technology in the car is harmon. harmon has a huge amount of intellectual property. >> that stock -- every day i struggle. >> it's considered to be a money loser. no one ever thinks that google ever decides to make money in anything else other than search. >> except that i would argue you do want them looking at the

automobile. you do want them -- >> absolutely. >> having android as an available -- >> i totally agree. but i'm saying that the market just doesn't care for anything they do. by the way merrill lynch is now cutting its tesla from 70 to 65. they're a little bit off on that. back and forth this weekend, a number of things. until someone delivers a, not plug in hybrid. a jaguar bmw, where it does everything tesla does and costs less. tesla is going to be the winner. i don't like the stock. i like the car. great car. great car. >> with all of that the dow is down 71 and bob pisani is on the floor. >> the weakness not surprising in energy. oil dropping below $50. so energy stocks are weak. but let's put up the major indices and remind everybody that on friday at the close

which seemed a long time ago, all the major indices were at historic highs. i'm talking about the s&p 500. the dow industrials. the russell 2,000. and the s&p mid cap. we had the wilshire 5,000 at an historic high. but 83 stocks in the s&p 500 hit 52-week highs on friday. that's a very unusually large number. not sure if it's a record but it's certainly very close here. the only thing that's been missing, that's been lagging is the dow transports and guess what's up today. it's the only major indices to the upside. we're getting close to new highs here on this one. we're knocking right at the door. of course, if that would happen, you get a confirmation of transports. the stock market isn't nervous. we were at the lowest level of the year on friday.

big energy names are to the downside again. talk about rig earlier. haliburton is also to the downside as well. these are all 2% 3% declines. the historic rallies overseas, too, by the way. the ftse 100 over in the uk also a historic high. dax is at a historic high as well. some of the banks, a little bit on the disappointing side. in the japan, the nikkei we talked about that earlier. hong kong reopened. it was up fractionally after the new year holiday, although mainland china is still closed along with vietnam. friday, just want to mention something that happened after the close on friday. the market maker virtu filed an

amended s-1. this may be having very quickly now. they were going to go public back in march when they filed their s-1, but they postponed that due to the controversy surrounding michael lewis's flash boys that came out around that time. friday after the close, they filed an amended s-1. they updated their financials. not a lot else changed, but it looks to me that they're now in compliance in terms of updating their financial statements and risk factors. at this point, they could go public very quickly now, within two to three weeks. so we'll keep an eye on that. elsewhere -- and they'll be trading on the nasdaq under vit. they're seeking to raise $100 million here. it has been a very slow start for ipos. year to date we've only had 25. last year at this time we've had 35. what's missing is we've got the biotech, but we don't have the energy names. and that's what hasn't been around for the ipo business so far this year. back to you.

>> crude oil down 3%. let's get to jackie. >> we're seeing a big move to the downside today. we've got wti under $50 a barrel. brent crude trading under 60 and we're at 49.30 right now with the domestic price. technically setting up here for another leg to the downside. traders are talking about production. still at record highs. it is going to take time to work through that inventory. and there are two factors that are contributing, and we could see more builds to come. the first would be that refiners are producing less, so they're using less crude. if you look out to the curve by december they're looking at a $60 price. still talk about traders scoring cheap crude to sell it later at a higher price. meantime, we're also talking about retail gas prices. triple-a saying that national average is $2.30. it's up 26 from just a month ago. so very interesting to see how

the refinery strikes, and the fact that utilization rates are down and we're switching over to that more expensive summer blend. impacting those prices at the pump. even if crude oil takes a leg lower, you could still see retail prices go up and that will have an impact on the consumer. back to you. when we come back, more on the deal of the day. valeant buying salix. david will have an exclusive with michael pearson. dow is down 72 points. a lot of that due to boeing on that goldman downgrade to sell. we're back in a minute. can it make a dentist appointment when my teeth are ready? ♪ ♪ can it tell the doctor how long you have to wear this thing? ♪ ♪ can it tell the flight attendant to please not wake me this time? ♪ ♪ the answer is yes, it can.

so, the question your customers are really asking is can your business deliver?

take a look at apple. $130.19. a year ago it was 75. split adjusted that's a 74% gain in 12 months. >> the pressure to take apple pay is just going to grow and grow and grow. >> they're debuting a new ipad ad during the oscars last night. take a look at this. >> you can't do your work

according to the people's values. i'm not talking about valuing your dream either. i never liked the inspirational value of that phrase. dreaming is a way of trivializing the process of the obsession that carries you through the failure as well as the successes, which could be harder to get through. if you're dreaming or sleeping -- >> if that voice sounds familiar, it's martin scorsese doing the narration, similar to the ad we saw during the grammys. >> i think the watch is going to be huge if it has the health care functionality and the apps that can be built when you talk to retailers, they feel very pressured about apple pay. they'll say listen we take apple pay. not on all parts of operation, but we take it. no. i think apple pay is going to be the way that younger people like to pay, so you have no choice. i keep thinking about what rob told me at whole foods. he goes what are we going to not offer it? it's what the customer wants. that in the end, the customer is

always right even at a place like wal-mart. >> so for those who say time to short, time to sell you think that's folly? >> we're going to revisit the whole thing. and then we might say instead of just owning apple, maybe it's different. but it's so far from the market what am i going to do? pull a boeing and say sell by? hey, 120 and i'm right back in? no. you own it. it's not an expensive stock and it's got two new products that could be the biggest products it's ever had. >> ever had? >> apple pay could be -- apple pay could be -- >> i just think apple -- well when i say iteration, because apple pay is part of the -- it's the universe. it's the ecosystem. no thing will ever top the phone. but when i watch the ipad ad i think apple pay could be bigger for them in terms of money. so you have two, not one product cycles. it's not like the company is out there every day telling you, listen, raise numbers. the company is very quiet. >> yes, they are. >> they're speaking softly.

>> absolutely. >> we will get stock trading with jim in just a minute. don't go away.

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time for cramer and stock trading. >> dollar tree obviously got the winner. very important piece today from jp morgan, which moved over away from whole. very compelling reason why sales are just accelerating. i think it's a very good piece. then the other one just going to compliment david again. i'm putting some pen to paper. back to envelope. i thought that valeant could earn ten bucks. now obviously selling at 20 times earnings here. when you add on who knows how much they can cut out of salix. i think it's possible to get a $21 number. again, a $12 number. maybe $11. you see why it's going right to $220. >> they've hid 200 already.

i can't remember the last time we saw a stock react this way to a deal. they all react positively. but friday investors had an opportunity to respond to this. >> talking about buy valeant off of this deal. it was right there for the taking. if they can do 11 12 this stock is very cheap. >> what's on tonight? >> we got dow chemical. they haven't really talked that much. host the new board members and what's going on. we've got john chisholm. and tom jorden is considered to be one of the great oilmen. he's said we're going to cut our capital budget very big. we are looking to be able to capitalize off the decline of others. he's a very good oil man. >> one last question on yellen

tomorrow. people say this testimony is not where you tend to see policy change. but others say she might sound a little more hawkish than the minutes felt last week. >> well i mean i think that there's the consumer is doing well. i don't know how you hide that story, frankly. i just don't know how you hide it. it's just a compelling story. see you tonight, jim. >> thank you. >> when we come back breaking news on existing homes. plus valeant's ceo michael pearson on that deal to buy salix. don't go away. or nothing. the sleekest... ...sexiest ...baddest ...safest, ...tightest, ...quickest... ...harshest... ...or nothing. at mercedes-benz, we do things one way or we don't do them at all. the 2015 c-class. see your authorized mercedes- benz dealer for exceptional offers through mercedes-benz financial services.

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good morning. welcome back to "squawk on the street." i'm carl quintanilla along with simon hobbs, david faber at the new york stock exchange. dow having some trouble getting out of the gate. largely due to a downgrade at goldman. boeing to sell. oil not helping matters either. we do have quite a bit of health care m&a. >> the first nationwide oil refinery strike in 30 years intensifying over the weekend. we'll talk about when it could start to affect gas prices. plus the nasdaq hovering near record territory, within 2% of its all-time high.

should investors be worried about a bubble or buy, buy, buy? and valeant pharmaceuticals agreeing to acquire salix in an all-cash deal worth $10.1 billion. valeant's ceo will be here live for an exclusive interview with david faber. >> let's get to diana in washington. some breaking news on existing homes. >> reporter: carl existing home sales down 4.9% in january to a seasonally adjusted annual rate of 4.82 million units. that's a big miss. december was revised slightly higher but the street was expecting 4.98. so again, 4.82 million units. a big miss. the realtors chief economist calling it "a notable speed bump." before you start blaming cold weather, the biggest drop in existing home sales in january was out west where weather was not a factor down 7.1%. overall, this is the slowest month since april of 2014. what's the problem? no supply of existing homes for sale. that is pushing prices higher.

the median existing home price, $199,600 up 6.2% year over year. we had talked last year about these big price gains being a mix of home sales, that is higher end home sales. this is not the case anymore. the realtors are saying these are real price gains due to the fact that inventory is dropping for the second straight month. we're now seeing decline in 1.87 million homes for sale. that's down 0.5% year over year. doesn't sound like a lot. but we should be seeing homes increase on the market. new listings should be increasing now. we had seen inventory up for 16 straight months now. two straight months of falling inventory. not a good sign going into the spring market. >> that's a little worrisome. thanks so much. let's bring in jim paulson, from wells capital management. it's good to have you back on the program. good morning. >> good morning, carl. >> i would love to take your temperature on housing. i'm just thinking of the things that have disappointed in housing the past couple of

weeks. obviously what diana just told us, starts sentiment, lumber prices are down architect buildings are down. is this a big liability for the economy? >> i think it's concerning a little bit, too. we are in the part of the year carl where weather does impact that construction industry, so it's difficult to interpret it all. but i do think when you've got mortgage rates where they're at and how much they've fallen to not see a bigger surge in new mortgage purchase apps, and we did see a brief surge in reidentify forrefi for a while, but that went down. it's a little disturbing. even if it's a supply restriction, that's still going to hold back real growth. it's a little concerning. i think there's enough other data to suggest things still look pretty good. and i still think the u.s. economy is growing north of 3% and will likely show that as we move into spring. >> how does that feed into yellen's testimony tomorrow? >> well i think that given the

recent weak data that we've had, particularly here in the united states, even more so than overseas, you're probably going to maintain somewhat of a neutral commentary out of her, i think. that would be my guess. but i still believe that by spring, we're going to see some pretty good data coming out of the united states. but more importantly i think we're going to see a bounce in data from europe and japan. i think that's going to force the fed's hand to maybe tighten in the early summer. >> in the meantime jim, from the performance that we got last week, the breakout from a technical perspective on the markets, there are some big calls this morning as to where we could go. oppenheimer suggesting we could put 5% on here. btig on a technical basis saying you could put 7% on the s&p because of the way that we broke out last week. would you agree with that? they're basically saying there is no major top here in the markets. would you agree? >> well i see their point, in

breaking through a major resistance levels and holding that now for a little period of time. i've been of the view and i continue to be simon, that we may go above 2,200 this year but we may also visit 1,850 before the year's out. right now i think we go higher as we solve some of the issues so to speak, that we came into the year with. oil, i know it's down today, but it seems to be putting a bottom in the last couple months. greece, that's the least resolved for a period of time. better growth reports out of europe. and i think we're back at all-time highs. i think ultimately i still think the market faces challenges this year in the sense that sentiment's a little too strong. valuations now at 18.5 times trail earnings are very very high. and the fed and the bond market i think it's going to start to reset interest rates this year. and i still think that's going to -- those things are going to be challenging for the stock market. it might start from the 2,200

level rather than 21,100 but i think it's going to be volatile and flat year overall. >> 2,200 wouldn't be a flat year. >> it might pull back from that is what i'm saying simon. it might go up to there and have a more difficult period later in the year as rate pressures arise. >> i'm just interested. the point that you make and the way that we're characterizing where we are, is this sense of calm. if you look at the volatility the volumes that we had last week, it does feel calmer to the point that you make him unwind that later. >> i think so. i think that's one of the major challenges. if you think about, what is the biggest foundation of this bull market in the last five six years? it's been -- we've been climbing the perpetual wall of worry. that's been the driving force. that's sort of absent this year. it really is. it wouldn't surprise me -- people couldn't figure out why wall street was doing so well in the last few years when mainstream was so poor. now that main street is looking

a little better it wouldn't surprise me if wall street struggles a little bit. >> why is it mutually exclusive? jim, why would that be mutually exclusive? if wages really pick up for instance, why would that necessarily be bad for stocks? >> i think ultimately it won't be. i think ultimately, this has further to go in the next several years. but initially, i think it's going to be a shock. this market's been predicated on falling and low yields. this market's been predicated on falling inflation. and we're going to -- i think we're at inflection point when we're changing those. you're seeing labor strife and union strikes. you're seeing minimum wage hikes. i think wages are coming up, and i think we're going to have more of an inflationary feel in the second half this year that's going to force the fed to start raising rates and it's going to make that 2% ten-year treasury look a little ridiculous. and i think we'll get through that. but i do think we're going to have to reset rates closer to an economy which is back if you

will. growing more than 3%. close to full employment. than one that's still being priced for a crisis that i think is long past. >> yeah a lot of our viewers would have no problem with that, jim. that's the interesting part of it as well. we'll see you soon. great to have you back. >> thanks a lot. in the meantime west coast ports are back at full operations after a tentative labor deal was reached on friday night. but things are still backed up. that's something of an understatement. jay wells is live on a boat in the port of l.a. with the very latest. you can see the clogging there, jane, i assume. >> oh it's -- somebody compared it to d-day with all the ships out here. now, back in full force here with the nation's largest port container complex. but not back to normal. this ship i was live by that ship last wednesday during closing bell. it has been here ten days. i know it's a little -- we've got some swells out here. china shipping line back there, also been here ten days. management is saying it's

beginning to take six weeks to three months to unclog the log jam. i want you to take a look at these photos comparing last wednesday and now. this is from maritime traffic. that's l.a. last wednesday. the green squares are container ships. here's the same spot this morning. i count there had are even more ships. look at seattle one week ago. again, the green squares are container ships. now this morning it's better out there. the five-year deal has yet to be voted on by the rank and file. tom perez says the fact that all 25 people last friday in that negotiating room agreed to it gives him hope. because he said this has to stop. >> it was being felt by farmers in the midwest, by small business owners large business owners retailers, and others with whom i spoke who were trying to do their jobs and take advantage of this tail wind that is the u.s. economy. >> now, the final sticking point was the union wanted to fire the

arbitrator down here in long beach. perez says the change, the compromise there will now be arbitration panels during disputes. sort of a different opinion. whoo! captain don, we are having a ride out here. on what this means going forward. thinks everything speeding up in march and april is going to tighten prices for trucking. on the other hand, jp morgan has initiated with neutral based on lost market share to the east coast, and what it thinks will take a longer time get back to normal than most guys expect. guys, back to you. >> we'll let you get your land legs back. >> i'm on dramamine. >> up next more labor disruption. the first nationwide oil refinery strike in more than three decades expanding over the weekend. and it could start to impact gas prices at some point. more on that when this show comes back. your dog's definitely got your back. but who's got your back when you need legal help? we do.

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enjoy over wifi or on verizon wireless 4g lte. plus enjoy special savings when you purchase any new verizon wireless smartphone or tablet from comcast. visit comcast.com/wireless to learn more. oil beginning the week in the red. the first oil refinery strike in more than 30 years, entering now its fourth week of protests. so far, the united steel workers labor union, which represents about 30,000 workers in the oil industry, and the lead negotiator shell have failed to reach an agreement on wage rises

and the use of contract maintenance workers. let's bring in the chief economist with the american petroleum institute, and the senior energy analyst with raymond james. good morning to you both. thank you very much for joining us here on cnbc. john, let me kick off with you. this strike now doesn't appear to be affecting demand but this is now -- for oil. but it is now 20% of the refining capacity in the country that potentially could be impacted. that presumably is an oil negative potentially moving forward. >> i'd have to defer any questions on individual refineries to the operators themselves. but if you look at the data for the last four weeks, production of fuel has been relatively constant and at very high levels. so far, things are looking very good. >> is morgan stanley right when they warned the u.s. crude stocks will build right the way through until may? is that the profile of what you see? >> well so far we've seen crude stocks build in the united

states to over 400 million barrels. that's data from both the iea and api. remember, this is only part of the world's supply in stocks. we only have good data for the united states, and good data for the oecd. we really don't know what's going on outside of those areas. >> so what does that mean in practice? that sounds like a codified way of saying something. what do you mean to say there? >> well we just don't have enough information. it really is a world supply and demand market that you're looking at. and we have some information. we've seen inventories build in tus the u.s. which suggests that quantity supplied is greater than quantity demanded. but that's only part of the world. you know, it's a much bigger picture than what you see from the u.s. statistics. >> so pavel, where do you think prices will go? >> prices will ultimately go higher, but right now, what we're seeing is they're bouncing along the bottom. you know whether we've seen the

lows back in january or not, that doesn't make a huge difference because we're still in this bouncing stage. we think a more durable recovery will emerge after the middle of the year in the second half with prices you know probably exiting the year in the 60s. and then higher than that you know, throughout 2016. but obviously there's going to be volatility in the meantime. >> john, we've seen tiny little supply scares centered in the middle east. is there any supply scare that can be big enough to offset what we're seeing in the broader dynamic? >> well remember the reason why we've had sharp increases in supply is because of u.s. production. and u.s. production by most forecasts suggest it's going to continue through 2015, ever increasing. now, you have places like libya south sudan, iran iraq that can have negative impacts. remember, even a small impact on supply can have a

disproportionate impact on world markets. >> as far as most people are concerned, watching the program they're probably more concerned with gasoline prices and heating oil, which of course spiked because of the weather last week. where do you think both of those are going? >> look in the short run, as you said they're going to trade up and down with weather. not unlike natural gas. there is that dynamic in the wintertime. but ultimately they correlate with crude, right? if crude goes up ten bucks, for example, from current levels. by the second half of the year that means everything else being equal, price of gasoline will go up 25, 30 cents. there is only seasonality, but it follows crude in the long run. >> today the gop will deliver the keystone pipeline bill to the white house and one assumes that -- they assume that immediately the white house will veto that so the president

retains his authority on the project. that seems to be how the white house is describing what's going on. where are you now as an organization as to whether the president will allow keystone to go ahead, or the northern stretch of keystone? >> unfortunately, the president doesn't consult me on these matters, but the key thing is the keystone pipeline should go through. it will generate 42,000 jobs. it will be significant improvement in terms of security. it will have a positive economic impact because of our trade relationships with canada. let's move forward and do it now. >> thank you, guys. when we come back the nasdaq within 2% of its all-time closing high. the index gaining 10% in just the last six months. are we in fact in bubble territory? we'll talk about that in just a moment.

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eclipsing its record high. the tech heavy index has continued to outperform the s&p and the dow. is the nasdaq returning to its prime of the internet bubble era? joining us this morning, rich peterson, senior director over at s&p capital. we had you on -- it was around new year's eve. and you said tech would be the leader going into the first quarter. it has certainly turned out to be that way. >> we look at the numbers from capital iq earnings. while first quarter earnings expectations offer like a negativeneg n'guemotiveneg negtive 2%. talking about whether or not we're going to hit a bubble, i mean our 15-year anniversary of the peak for nasdaq. if you use capital markets as a proxy, the difference is day and night. back in the heyday, many of the deals had no revenue, let alone earnings. but in terms of just raw numbers, there are 46 tech ipos in 2000 last year about 34 which actually was declined from

2013. >> do you think apple is shrouding it in some sort of cloak? it's hard to see the underlying tech economy because apple is so big? >> as the s&p is in the market index, the fact is the earnings from apple very much influenced the raw numbers from the fourth quarter. that being said, there are gainers. if you look at performance, netflix has done very well in terms of year to date performance. we're finding winners among the tech sector. >> journal's got an interesting chart this morning, looking at cash balances by sector. tech is still far and away the biggest. >> well, again because of apple. apple has to make $140 billion, so if you look at aggregate, but the reflector account for about 2/3 of that. technology, health care, and industrials. the health care, a lot of the insurance companies and being one, in terms of industrials. ge. you go back to cisco, apple,

amazon. >> just on the subject of apple, goldman sachs put a note out where they said it's becoming increasingly particular amongst the hedge funds and one in five is holding apple, 12% of the funds hold it as a top ten position. for a long time, say a year, 18 months ago, we used to talk about how apple was under-owned by the institutions. this is hedge funds opposed to the ones we really are most interested in. do you think, does it still have upside from a positioning standpoint or could we be topping out? >> i think that was a story for 2014. a lot of active managers underperformed by virtue of not having apple in the portfolio. the 13-f the third most active buy was the s&p index. many hedge funds saying we're just going to buy the index. >> yeah that's been a good idea lately. health care mna. still number one? >> we have a $14 billion deal this morning.

second biggest this year. piggy backing on the pfizer acquisition for 17 billion. salix was trying to do the inversion last year that got scuttled thanks to the department of the treasury. the fact is 40 billion of the 160 billion or so in activity year to date is in health care. that's going to be a driver. whether companies are trying to gain market share, gain new entrance into product lines, aging population, it's a good story. >> who's second behind health care? >> information technology. >> and financials. >> and overall, keeping pace with last year? >> a little bit ahead. >> because we were light. >> i sort of was wringing my hands. early in january, we were running year over year negative. but we had those big deals. had the jms smuckers deal.

>> about 20-plus billion in financials. >> i think you were saying tease were the areas that were going to do very well but there was a flattening of the curve. >> i think naturals rank among the positive sectors for the s&p 500 in terms of earnings for the first quarter. >> aren't they the second-worst performing sector, though? >> in terms of performance, i think it's dragged down by some of the major money center banks, but if you look at the insurance companies have done well. you look at the asset managers have done well. black rock for example. >> really quickly, apple's market cap at 760, is two times any other public u.s. company. i don't know if that's ever happened before. >> i guess you have to go back to maybe when microsoft was at its pinnacle. about 500 million. have to go back into the archives. >> unbelievable. rich, thank you. good to see you. rich peterson. s&p 500. ahead on the show the

eurogroup agree to extend greece's bailout for a few more months, but will it be approved will it hang? charles dallara, the chief negotiator for the greek financial crisis, will be with us shortly.

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now with the xfinity tv go app, you can watch live tv anytime. it's never been easier with so many networks all in one place. get live tv whenever you want. the xfinity tv go app. now with live tv on the go. enjoy over wifi or on verizon wireless 4g lte. plus enjoy special savings when you purchase any new verizon wireless smartphone or tablet from comcast. visit comcast.com/wireless to learn more. here's your cnbc news up date at this hour. greece will try and seal a eurozone financial lifeline but the government has already drawn criticism from leftist and

ruling party members that that deal lets greek voters down. secretary of state john kerry met with iran's foreign minister as talks continued in geneva. both sides working to set up a framework agreement by the end of march. and it will now cost you $105 a day to get into the magic kingdom at walt disney world. the latest increase makes the florida family attraction the first in the industry to break the $100 barrier. for more on that story, you can go to cnbc.com. and target has cut its free shipping eligibility for online orders by half to $25. the company says it follows the strong response to its free shopping offer during the holiday shopping season. that's the cnbc news update for this hour. back to you guys. so greece and the eurogroup reaching an agreement to extend the bailout for four months. but will the deal be approved by the creditors? the national parliaments, the imf, and the ecb.

joining us now in a first on cnbc interview is charles dallara, a chief debt negotiator for the private sector while leading the institute of international finance. charles is working in private equity as executive chairman of the partners group. welcome back to the show. >> good morning, it's good to be with you this morning. >> so how temporary is the relief here over greece? >> well, i think it is unfortunately, quite temporary at the moment. i think the request for the detailed proposals this monday, it was actually a little bit -- setting off what will probably look like a bit of a rugby play for a while. i think they will get through this phase. i think the key question is whether or not this leads ultimately to more balanced and effective reform programs for greece. >> many people believe that we're going to go back to some

brinkmanship here, almost certainly. >> well we are likely to see more brinkmanship. i'm afraid we're going to see continued volatility and uncertainty for quite some time. this is not over yet. at the same time, i do believe that the greeks have a legitimate case, for a little bit more flexibility on the fiscal front, and i think ultimately, despite the hard line that we're hearing today, that europe will grant that additional flexibility. the key question may be whether or not the government in greece is prepared to accept reener reenergation and that remains unclear. >> do you believe that the rest of europe the creditors here the german taxpayer for example, is prepared to accept softer loans, loans to greece lower interest rates and over longer maturities? is that the essence of what you're saying? >> i think that will be one key element of it. longer maturities. i think there is no doubt that

an actual writeoff of greek debt to the governments is off the table now. i do think some stretching out maturities some reduction of interest rates. obviously the great things to do if the greeks recommit and demanding structural reforms. >> in the meantime we kind of sailed through this in a global market sense really quite successfully. there isn't a huge rally on world equity markets today because a deal was done on friday. and i wonder if ultimately the question is whether the hard left politicians in europe are more concerned over a collapse of their local banks than the rest of us. >> well i think there was legitimate concern. i think the government had focus on the debt problem and the overall relations in europe, perhaps not giving quite enough attention to the fragility of the greek banking sector. this is fragile for one reason. because it engaged in a lot of

support of the greek government over the past few years. i think it's appropriate that the ecb come to support the greek banks at this stage. i think it's legitimate that the government actually recognizes the uncertainty and fragility of the banking situation there and moves forward. i think the broader banking system in europe is in pretty solid shape right now. although certainly not outside vulnerability as the whole eurozone comes under pressure again. >> it's good to hear from you, sir. thank you very much for your time. charles dallara with the partners group. getting some word on oscar ratings. being told down 10% to a four-year low per variety. this was obviously going to be a high hurdle for neil patrick harris as the post. lastier's ieryear's oscars by ellen degeneres at a ten-year high.

hard to imagine it affects abc stock. >> nice to see eddie redmayne made it on to our television screens. most of the newspapers don't have a photograph of the brit. >> i've seen him around quite a bit. 40 noms went to a film or talent from the uk believe it or not. >> we are an extraordinary nation now dispersed everywhere around the world. >> when we come back janet yellen facing congress tomorrow. we're going to bring that to you live. what could she say that could surprise investors. we'll talk about that in a moment. plus, more details on the contentious divorce between billionaire ken griffin and his wife specifically about their spending habits and why she is asking, some say, for so much money. "squawk on the street" will be right back. no. aflac! what are you guys looking for? claims! legend has it these hills are full of 'em. it can take months for an insurance claim to surface. claimin' takes patience. aflac paid my claim in one day. they got some new-fangled kinda one day payin' machine? hehehehe

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billionaire ken griffin and his wife in the middle of a contentious divorce battle. our robert frank has some new details. >> good morning, carl. ken griffin's divorce is filled with really big dollar numbers, from his billion-dollar salary to her $25 million prenup. but the most surprising numbers relate to the family's day-to-day spending. according to new filings by ken griffin's attorneys, his ex-wife anne diaz is requesting nearly a million dollars a month in child support and family expenses. that includes $300 a month for intercontinental private jets $160,000 a month for vacations, $60,000 a month for professional staff, $6,800 a month for groceries, $7,200 a month for restaurant meals, $8,000 a month for gifts and $2,000 a month for stationary. diaz also requested $450,000 to take the kids on a ten-day trip to st. bart's during the winter break, but ken turned that down

giving her and the kids only $45,000 for the vacation. now, the legal dispute here centers on child support. illinois law requires child support payments in keeping with the couple's expenses during their marriage. diaz says this is what the couple spent during their marriage and ken is failing to pay adequate child support. ken says that he's basically being asked to fund her "opulent lifestyle by calling it child support." and he says he's paid virtually all "reasonable expenses" relate related to the kids. >> i don't know which is more extraordinary, the $6,800 for groceries a month or $2,000 on stationary. i mean do they write a lot of letters? >> i guess they do. i was amazed at the $450,000 winter break vacation. that's $45,000 a day. now, st. bart's is expensive. but, you know as ken said i think you can take a ten-day winter vacation with the kids

for a mere $45,000. >> i think it's great. robert, thank you very much for that. it is fascinating, as david said. one big clear event from investor investors, janet yellen delivering two days of testimony on capitol hill, kicking off tomorrow morning. joining us now, the chief u.s. economist at deutsche bank. ward mccarthy is also with us the chief u.s. economist with jeffrey's ward. do you think there should be a rate rise in december correct? >> yes. i think the fed will move very slowly towards this. right now the fed talking about raising rates at a time when many other central banks are cutting rates, is somewhat in incongruous incongruous. >> you think they should have moved months ago. >> the economy is doing okay. labor market is healthy. policy should be geared toward where the economy is going, not so rear-view mirror. but certainly, the fed has moved slowly. if they don't go in june or september, they're not going in december. i can't imagine they would wait

all year go on a month around the holidays when markets are liquid. so if they haven't gone bied my year -- by mid year, they're not going. >> there's a lot you can learn from the way they handled tapering. bernanke first started talking about that in may of 2013. the fed got around to doing it in december of 2013. so i think that, you know they've been telling us for a while now that they could start raising rates in the middle of the year or later. and i think they'll stick to that mantra. i think that's what yellen will tell us again tomorrow. and with the inflation picture what it is i just think it's going to take too long for the inflation picture to settle before they can finally get around to deciding to raise rates. i agree with joe, labor markets doing great. by the fourth quarter, we clearly will hit the objective of full employment. but on the inflation picture, they're nowhere. >> the thing is, with the tapering, i'd argue is different

because tapering and tightening are different. the tapering was going to begin in 2014 they just announced it in december. so a hike is a much different story. but the issue really is, seems to me one of the reasons the fed is so ginger with coming off this was worried about market response. if the fed waits until they actually get signs of the rage and price pressure i just don't see at that point how they could control the market. >> some would say don't fire until you see the markets of their eyes. >> but then they risk destabilizing the market. >> are you a fan of the one and done school? >> no. one and done doesn't make any sense at all. typically when they go they move for a period of time. but, i mean look the thing is it's hard for me to believe that the strongest job market in 17 years is going to be hurt by one rate hike or two rate hikes or three rate hikes. that to me is absurd. >> she's going to try to have it both ways. she's going to say look we have to move. i think june. kind of need a rate hike in june. but the rate rises will be slow.

we won't get up to 3% 4% as we had in previous years. she's got to communicate two sides. >> the market right now is priced basically for a move in the back half of the year as ward was saying so if she's neutral or even-handed, the market may sell off on that. people are getting long on the market. >> ward everyone says this testimony is not generally where you see graduations of policy. is that true? >> well it really -- i don't think you can generalize as far as that's concerned. i think her primary motivation really will be to let us know exactly what they are thinking right now. and i don't think that she's going to let any cats out of the bag in terms of the key issues related to the use of patient or exactly the timing on when they're going to raise rates. i think more importantly, she wants to update us on the status of the economy and where she thinks the u.s. is headed. >> so it's not necessarily a chance to alter expectations if they believe people read the minutes, too dovish.

>> well if she thought that she could let something out, but i would be very surprised if she felt strongly enough. i think the reaction to the minutes was a reaction to reality. and i think that she's interested in making sure that the market has a pretty good handle on where the fed is headed. >> the one thing i just want to add, the one difference, the fed did not have the employment report as we all know. they did not have a greek deal as we have. they did not have the ecb. so a lot has changed from the january minutes, and her job is to reflect the views of the committee. and williams was very clear a few weeks ago about moving closer to policy normalization. >> we're going to run out of time. is there a possibility that the markets get upset here? >> absolutely. yes. imagine people lose money on their investment. can the fed actually tolerate such a thing? terrible. >> hey, joe, good to see you. thank you for joining us as well. when we come back valeant buying salix in a $10.1 billion

deal. the ceo of valeant will be here live at post nine for an exclusive interview. dow is down 57. back in just a moment. [ female announcer ] who are we? we are the thinkers. the job jugglers. the up all-nighters. and the ones who turn ideas into action. we've made our passions our life's work. we strive for the moments where we can say, "i did it!" ♪ ♪ we are entrepreneurs who started it all... with a signature. legalzoom has helped start over 1 million businesses, turning dreamers

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welcome back. it is the deal of the day, if

not one of the biggest deals of the year. valeant agreeing to buy salix. valeant's chairman and ceo michael pearson joins us now. thanks for coming down to the exchange. appreciate it. >> delighted. >> your shareholders are responding enthusiastically, i think. it's not an overstatement to say, with the stock up as much as 15% this morning to the deal. i spoke to some of your investors who told me not that long ago when talking to you about the prospect of a salix deal, given the inventory issues, you sort of said i would stay away from that company. what changed? >> people are always asking are you interested in this company or that company? you know we never come out publicly and say we're interested in a company until we actually announce a deal. so i think that what has -- the gi space is quite attractive. these guys are clearly the market leaders. the actual business is performing very well.

if you look at the script trends. we've got full visibility into the inventory. >> you feel like you fully understand it. we've characterized it as an inventory issue. but it could easily be there's a little bit of accounting fraud here. that could be a scary statement. why are you comfortable? >> well we had a lot of due diligence in there. they've actually done their statements so the accounting issues are behind them. the inventory levels we have almost perfect information. we went to the distributors and we know exactly by skew. and by distributor how much inventory they have in the channel. >> you're going to be working that inventory off when? >> this year. by the end of this year we'll be down to normal levels. it will cost us in lost sales, but by '16, all the inventoryies will be down to normal levels. >> one reason you say the cash flows may not approximate what they otherwise could, giving you a leverage ratio i think somewhere around 5.7 times. that's pretty high. why are you comfortable with it?

>> it's 5.6. by the end of '16, we'll be well below four. so no issues at all in terms of we're going to be generating 7.5 billion in 2016. >> i know you were asked this on a call but why not consider doing an equity offering in part to help pay for this all cash deal, where you're obviously borrowing a good deal? >> one of the reasons we went all cash was that was one of the things that salix really wanted. it allowed us to move quickly. secure the business. we can always do an equity offering later if we choose to. but we really -- our equity is there for our investors. and we don't want to dilute our investors. we want that to go to our investors. and we're not a company that likes to issue equity. >> i know that. though you didn't rule it out. you just said you might consider it? >> we always consider things.

it's not likely. >> back to the inventory issue to wrap that up. there is at least some concern perhaps that the s.e.c. might come forward with something. that there might be some residue from that. is that a concern for you? >> well it is a concern. it's something that may happen. and we have evaluated that as well. and we have built into our deal model potential downsides because of that. >> you came out of the allergen fight a loser. and you said you know what we're going to show everybody organic growth and what we can do and the stock responded extremely well since then and you put up numbers today that show that organic growth. but there are those who will say yeah, they did it for a little bit. but ultimately this company is only built to acquire. that's the way it goes. and pearson had to do another deal and here we are again. what do you say to them? >> two things. first, i don't think we're a loser. i think we were disciplined. what we chose not to do is overpay for an asset, because

once you do that then your shareholder returns. so we were disappointed and willing to walk away and we will be in the future on other deals. in terms of being able to see the performance of our base business, we're going to separate. it's different business units. so you'll be able to continue to track our base business. so even though we bought another company, for the next -- well going forward, you're going to see our base business and you'll see multiple multiple quarters and years. >> so you don't need to do deals to continue to have the growth that you've had. >> absolutely don't. >> why to you do them? >> because they create even more value for shareholders and that's my job. it's my board's job, to do whatever we can. >> you talk about organic growth and i looked for your slide presentation this morning. a number of the drugs that you acquired, for example, are showing top line growth or same store sales, that they haven't seen in years. i understand your company cuts

r&d and why margins might be better. but what are you doing differently that these other companies weren't in terms of just selling this stuff? >> i can't speak to what they were doing, but what we have is a great group of people. we're decentralized, so for example, we have someone in charge of our dermatology business, deb shoren. she's a terrific marketer and came up with the jublia ad campaign. we have someone else focusing on our contact lens business mark mckenna. he and his team are -- i think this decentralized approach of having entrepreneurial focused hard working people that are very bright and creative driving each of these businesses, and not a centralized approach really unleashes energy. >> and you've obviously followed a somewhat iconoclastic path in terms of the way you've managed this company. we've discussed it in the past. your approach to r&d which is spent willy nilly and not in a focused way. are more people going to approach this the way you do? >> who knows?

>> are you surprised they haven't? >> well, we really do believe in innovation. i've done a poor job communicating that. i think you can see last year we launched 20 products. this year we'll launch another ten. we believe in innovation but innovation does not equate to large rnd spent.spend. mart r&d spend is a lot less expensive than what is traditionally done in this industry. >> but you're never going to stop doing deals are you? >> life will get boring. >> you're very aggressive. is this company going be as big as pfizer one day? >> i'm not going make predictions. we'll continue to do what is right for shareholders and create value for them and hopefully will continue to grow. >> it's interesting that i noted companies competing for salix yourself, endo all inverted. when it comes to m&a, is it the only way you can go now?

that has the tax rate that competes for other companies? >> i don't think so. when we do our deals we measure them on tax rates. we assume we'll be taxed in the u.s. tax rate in the united states and can still earn a strong return. i took this and can create a lot of value doing deals. what a lower tax rate does is allow shareholders to get a disproportionate return you can do m&a without a return. >> in terms of what a competitor can get in terms of the same property you'll win every time right? >> no we copy those for our shareholders. >> what that the problem when it game to allergen? too much tax benefits delivered to their shareholders? >> combination of all of the returns on the deal. it was getting too expensive and we would have tied up our balance sheet for a number of

years and would have urned a marginal return for our shareholders. that's my job not to do that. >> you spent a lot of time on that deal. did you have regrets? did you learn anything what happened there? >> i learned a great deal. i go every day to work and i'm sure you do too. but the good news our business is fine and continues to perform extremely well and we are still able to get out there and do deals. so we're -- we'll learn from experience and move from there. >> you did one today that investors were reacting very positive to. it was friendly, would you ever do a hostile again? >> try three hostiles. we've lost all three in our way. we won all three because we were disciplined every time. i'll never say never but probably it's not highly likely. >> it's a lot to ask. michael pearson, thank you for coming down here and joining us. appreciate t. >> thank you for having me. >> let's check what is on deck

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