there's no fed in seattle but a branch there there's a branch in miami. if we wanted to we could certainly -- people felt they were underserved -- we could beef up. >> thanks jim. great two hours. thanks dunkin' donuts. >> really? >> right there. join us tomorrow. "squawk on the street" begins right now. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david favor at new york stock exchange. two trading sessions left in the month after we hit intraday highs yesterday. retail earnings driving the bus, upgrade of amex and more. oil on pace for its first up month in eight, but giving back today. back below 50. ten-year yields around 1.97. you saw bullard on "squawk box" this morning. the markets, the dow posting another record high. the nasdaq snapping that ten-day

win streak. data coming out as well. >> ibm kicking off its investor day. ceo ginny rometty. an exclusive interview. >> net neutrality, the fcc taking up what has become a contentious issue. but waiting on important details for internet companies like google and netflix still to be determined. first up wall street digesting economic data ahead of the opening bell. consumer prices down .7. strip out food and energy prices up .2. durables nice, above expectations, above 2.8. weekly jobless claims jumped to 313,000. dow closed at record high. nasdaq ended the ten-session winning streak. within a stone's throw of 5,000. a level at which it's closed only two times in history. >> take it out today because there's a lot of good chatter in individual tech names. i would tell you we had a gauntlet this morning with the

run-through. when you get through a gauntlet nothing that is earth shaking, whether claims durables, inflation. i've got nothing earth shaking. i don't feel it's going to do anything other than be a decent background for individual stocks, whether mergers, david, or whether it be earnings per share beats that we had a number of in the last 24 hours. >> european economy showing some signs of life. jobless down more than expected. economic confident held steady. uk gdp was a beat. >> insanely low yields. i listened to -- on another network, bloomberg -- the irish finance minister talking about you never thought the irish ten-year under 1% they had the best growth in europe. portugal bonds are low. the thing that makes me excited about this market is not just europe but the chinese numbers in the last couple of days. third straight day, up for baltic freight. shanghai up a couple percent. starting to get december

numbers. look, to get to 5000, you've got to str ahave a lot of things going. brazil, i see a lot of things going. i put that in so people don't think i'm nuts because brazil numbers out of petrobras, something's very wrong in brazil. >> scarily wrong. >> have a lot of coffee in brazil, the price is down. frank sinatra 100. >> hiring jpmorgan to sell off assets too. bullard this morning on "squawk box," two hours with bullard, amazing amount of time in which they talked about a lot of things monetary policy. but where bullard sees jobless rates going in the second half of this year. take a listen. these labor markets are improving rapidly that i think unemployment will be down below 5% in the second half of this year. so if you're sitting around you know, you haven't come off of zero and the unemployment rate's come down below 5% that seems

extreme. >> bottomed out at 4.9 in '06. imagine going back there again. >> a lot of numbers prerecession numbers that we're seeing but tend to be on a micro. it's home depot, lowe's saying things. macro numbers, price of housing going up. housing onning aga great, not great. it's remodel. appreciate what he's saying about job growth. texas, not bad. texas would be the epicenter of what could bring us down job growth it's oil. a lot to like. we do not -- we can handle 100 basis points. >> that's what i was saying. within thing not back to prerecession levels yields on bonds or any bonds out there at all. today talking about europe watchingwatch watching spanish yields down 13 basis points, 1.25. >> a lot of insanity. >> how do you invest there? >> the german bund .29. this is ten-year paper. >> you know paying them to buy

this paper and that's a ridiculous thing. but now i know when you go jim cramer on twitter say we could go to all-time highs but it's the bond market. i come back to the same thing over and over. you know what? they don't asterisk those gains. you're in salesforce.com new york one's going to say the reason mark made that number is because of the portuguese ten year. it doesn't happen don't conflate the two. it doesn't work. >> ibm holding its annual investor briefing. the chairman and ceo has taken the stage, beginning some remarks than will go on for some time. the schedule calls for her to sort of present -- there she is -- and you'll hear from the cfo, a number of questions, and answer periods as well for the company. the news out of it thus far, at least, is that they're going to be shifting -- this is their words -- 4 billion in spending to strategic compare sovs of sstive

ss comparatives of cloud. no details where shifting from there from traditional old revenues they'll decline, low single digits. >> it's spending, not revenues. >> i'm saying they're going to starve the stuff, the cash cow, what are you going to say? >> expect growth areas, if you will, reposition the company, will represent as much as $40 billion of revenues by 2018 that's 40% of what they expect total revenues to be in 2018. provided everything else holds in thering exactly. and it was -- they're about 27% we know from last year. and that's the part of the company that's growing. >> right. >> this is the repositioning that she's going to be talking about a great deal today, in terms of what she's trying to done this is a company that divested 7 billion worth of revenues in 2014. >> bought back more than 50% of the stock in the last four years.

>> is the 4 billion in spending? >> claiming absolutely not. dvr will dividend to grow. the problem with ibm is sales force. sales force is mobile, social, cloud, connectivity. this companies 27%. a lot of companies trying to get to where sales force is. they say they're going to be 10 billion in the business there right. >> ibm, if they can pull this off, people will like it. if they can't, the stock cannot go higher. >> also dealing with excuse me carl, currency headwinds. they see currency hurting headwind growth by 7 points first quarter and revenue 6 points for all of 2015 that's a big number. 6%. >> salesforce.com -- >> i feel like they said they gave us some of the guidance when they reported earnings. but it's significant, of course coming on the heels, as it does of hewlett-packard a couple of days ago with its big warning if you will in guidance being

lowered. >> i believe sooner -- >> it was tuesday afternoon. >> hewlett-packard -- >> feels like a lifetime ago. >> so challenged. they're challenged by these companies that you're seeing way higher on the ticker if you're at home. it's difficult to catch up. i mean oracle and s.a.p. have to catch up. ibm needs to talk about apple and twitter. that sounds strange. apple and twitter mentioned on the conference call. it helps their multiple. it's not a bogus narrative. they're doing a lot of business with apple and mobile. >> down two years in row. buffett on monday we hope to get clarity of his opinion of ibm and exxon mobil and all of his holdings along with the fact that he says he eats like a 6-year-old. saw that yesterday. >> we know that right? dairy queen and candy, and coca-colas. >> i like things explained to me like a 5-year-old reddit.

>> i say that he increases position, berkshire increased its position in ibm, something of a surprise i think to those who perhaps thought that given the questions surrounding his decision to go in there in the first place, because he didn't love technology stories or buybacks. >> i know. >> but he's been there. it's 11 plus billion stake for berkshire. >> incredble. they own a lot of ibm in they have -- 27% has to go to 40 it's got to be done in a way that it's not because of the revenues dropped to 800 -- to 80 billion -- >> right. >> they have this challenge, which is how quickly is the other part going to be bleed off. >> no doubt. talking 25 billion in revenues now to what they say will be 40 billion by 2018. do the math. 15 billion in incremental revenue growth. >> they could go to 100% social mobile cloud security but that's because of rest of it just disappears. >> maybe they'd get a higher multiple and it goes -- >> that's the -- the play where

they have three engines out and the fourth is still working. the fourth goes out, maybe they can still fly. >> take them longer to get there. >> need captain sully in the cockpit. >> yes. >> the fcc expected to approve new nul ruhle new rules. the new rules providers prohibit prohibited in providing fast lanes. cable and telecom companies expected to launch a number of lawsuits if new rules are passed. highly politicized. all of the talk about unprecedented cooperation between the fcc and the white house, the fact there was no testimony on capitol hill some commissioners calling for a delay in the vote. it's going to be interesting today. >> in terms of irony, i'm talking irony, it's funny netflix, we have "house of cards" this weekend, your big enemy is the buffer. >> yeah. >> it's a well-timed political issue. >> i don't think there's a great deal of question as to the vote.

it's expected to go 3-2, in favor, of course. the question will be the rules. we're not necessarily going to be getting those -- we'll get them soon. >> right. >> not probably today i don't believe. >> people understand the issue in general? >> i don't think they fully do. the question is so you regulate broadband, you're determining by wait that broadband means 25 megabits coming down the pike which means it's more or less cable's product. 55% as defined, no competition within a given market. will there be in i price controls is the question? we've been told no. forbearance on that maybe not but sort of a commitment there won't be. this is why the rules become very important as they pertain to what is now going to be treated as telecommunications service. >> war of words between various companies. yesterday netflix tweeting out, what if the internet was so slow

it loaded one word at a time in don't let comcast win. battle for the net.com. that's where it's at. >> netflix already won the battle. they won it. that guy from tumblr -- >> from tumblr -- >> they made it work for them. >> tumblr, did you have it to -- >> google on the netflix side but not sure where they want to be. >> you say the guy from tumblr won because i think he -- did he get a note from his mom to be out of middle school when he was on? it's amazing. >> he's a grown man. >> is he? >> not to mention he could buy and sell you. >> ten times over. most of these people there are youngsters and don't augment themselves, they're not going with the brione. they're going with the russell, the champion hanes brand. >> like the greek finance minister ticked everybody off wearing tight jeans.

>> that guy -- i told you, everyone says he's got pants by germany. they agree to absolutely nothing. the germans say fine europe wants growth. >> i don't know. >> when we come back salesforce surging in reaction to company's guidance. hear what mark told cramer last night. premarket. we've not gotten to kohl's sears, l brands this brutal downgrade of abercrombie & fitch. more "squawk on the street."

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♪ ♪ i've got the power♪ salesforce.com, up sharply in the premarket after raising full-year guidance posting quarterly earnings in line with estimates for the fiscal year. salesforce became the fastest enterprise software company to reach $5 billion in revenue. last night on "mad money," mark sees more milestones ahead. >> next quarter we're going to be the fastest to 6 billion and you're right, jim, it's absolutely ply dream and i'm dedicated to being the fastest to 10 billion you can see that. look at deferred revenue number. look at the amount that's already on the balance sheet that is not yet billed. it's amazing. >> set to open at 70 bucks or above. never been there in no 9 billion he's talking about on the books. the 10 billion goal should --

maybe reached faster than people think. things stood out for me in the conference call was he's doing well in the consumer package goods business. and then doing very well in the financial vertical really took it in a lot of ways to s.a.p. by talking about coca-cola, germany winning that. talking about abb winning. winning big partnerships in germany, s.a.p. we're coming for you. a moment he's back and forth, old friends with larry ellison but he says we're coming after oracle, they're the embedded. he said oracle has a fusion product. he goes they turn fusion into confusion. analysts cloud doing well exactly where ibm's going to try to position themselves in the analytics cloud. 177 billion in transactions. ge doing all of its stuff on its hand-held, with salesforce as is cisco. a remarkable conference call. last year salesforce opened up in the aftermarket and went

down. the big pyrowet led to two-month decline in cloud social mobile stocks i'm betting the opposite today. why the nasdaq 5000 is in sight. >> workday's not going to get the same kind of love. >> 68% revenue growth never sneer at that. but gross margins down big for one part of the business and negative free cash flow for the year 11%. 11 million free cash flow this quarter. guys are going to stan by because the human capital segment is very fast. i think it was a good quarter but not a salesforce quarter. they're doing something to point out marc is not doing, profitability can be sacrificed because the opportunity's so great and that became something that people turned on last year. still profitability not as important as opportunity, and negative cash flow is what people didn't like last year. maybe they can pull it off this

year, i don't know. the stock's had a good move there how badly do you crave profit in this space? >> i need operating cash flow. >> for starters? >> yeah. that's good. you'll see a tab low data giving people what they want d.a.t.a. the part that ibm's gunning for. you will see that company go up and the opportunity's great. people feel they're doing both. what is great, a lot of people critical, when is he going to make money? operating cash flow is money. froe cash free cash flow is money. >> the best kind of money. >> you cover cable companies. >> people wondered whether cable would be free cash flow positive. then it did turn quite positive. >> people bet again telecommunications when they didn't understand. workday's more challenged because revenue growth is twice what benioff's delivered, twice. but one company's a 5 billion company but one's smaller.

work workday. >> one final point on cloud and web services at least, amazon 385. it getting close to levels it's not seen. >> i saw something cross the wire about we got an obama official joining the company, according to politico. >> i didn't see that. >> i tell you amazon here's the chatter, right now people are saying when they break amazon web services innate profitability in the company you did the documentary on amazon. i thought the amazon web services, that's a separate company that may be the greatest. >> it's growing very quickly. now, they do cut price all the time. so margins are not particularly high. but they are dominant provider to a certain extent of those services. >> people love to hate it. carney, jay carney apparently. >> jay carney going over. >> talk where he would go. >> the human face now because

they -- they've got more pr. >> stock hasn't seen 400 since last january. >> it's going there. netflix and amazon foot race. >> when we come back cramer's "mad dash," count down to the opening bell. another look at the premarket. "squawk on the street" from post 9 in a minute. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. we live in a pick and choose world. choose

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all right. about 6:30 before the opening bell. takeover thursday here? >> calling it today. emulex kicking around forever. good number. abgo great number last night. a raising of margins by buying emulex, a part of the very esoteric storage business. abgo more than a chip play. that's very important because they rely on a bunch of big suppliers like apple, if you want to blow the numbers away. i would say this company has been forever for sale. i don't think it's -- that's why -- one of the reasons. >> how is the acquirer doing? >> abgo should be up 11 12 points. >> wow, look at that. >> yeah. now, here's one, david, free money here we've got free money in spain. you referenced spanish bonds. >> i did. >> how about this? uil gets a bid. this is the old united alumnated, spanish company's

buying them today. i regard that as takeover thursday. and also merger thursday because we've got this cyberonics merger with soren. sorin, no "k." creating a new medical device company located in europe. famously trying to do the brain in medical device. >> a lot of activity. >> just a lot of excitement. >> decent activity in m&a. no blockbusters but a good heartbeat. >> a very important interview for ibm. ibm coupled with what you're hearing from buffett monday, it's a one-two punch. i've got to know -- that stock would be substantial. ly lower if it weren't or warren buffett. >> more "squawk on the street" for you. back after this.

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intraday highs for the s&p, closing high for the dow and russell. nasdaq within 29 points of 5000 waiting on a vote of net neutrality. cross milestones potentially today. amazon 15 bucks from 400. netflix 20 bucks from 500. facebook 80. >> a lot of reaction is to hewlett-packard. hewlett-packard, western digital digital, micron, they captured the fancy. put in intel, very negative note about intel, one analyst believes intel will have a down year. out of the old into the new. and you're seeing that salesforce versus hewlett setting the tone and those stocks are high growth stocks what people want right now. >> you like a good pullback. we've not gotten one though the ten year has come in. what does that say. >> we have stocks that rested like facebook and google. and they've rested now ready.

we saw that happen with mastercard ready after resting, under armour. high growth stocks resting. now they can bust out. >> google is resting? that's what you call it? >> interesting that piece, google in "the journal" youtube can't make money with it. >> we'll talk about that. >> if we got together we could make money. >> facebook manages to cobble together $3 billion. >> facebook there was insider selling that got people down. >> opening bell. at the big board, etf securities and zack's investment research celebrating two new etfs. a new comedy sear is on abc. you mentioned the google story's interesting in "the journal." youtube with 4 billion in revenue, a billion viewers, no profit. and they sort of asked themselves, if ever is that going to happen. >> it's funny, i did a video for bar san miguel of me trying to pour a margarita.

instead the waitress takes over. i'm thinking i've seen google call me, listen pay us $500. you know if you take an image of the nfl for a second you've got to pay them. let's go through all of these things see who's using it to promote and say, we'll charge you. in my lifetime i want to run twitter google and i guarantee higher eps. >> really. >> yes, let me run those companies. talking about clones and cybereye. >> offcamera. >> cyborgs. >> dick c. listen ways to make money. i've got the google charge method going to blow you away. >> if that's your goal -- >> making money in. >> no. running either of the two companies. i'd get on that. >> on the confrienderence qualify can say we care about the stock price, going higher call me in. i can maybe change the attitude of the company.

we care about the stock. you know what? we care about winning. >> let's not forget that google has done fairly well in making money. >> without your help. >> yes. >> since its inception. >> we know we can make more money. >> what are you giving up for the long term as you go for short-term gains? >> david, i have both short-term and long-term philosophy. >> you do? the same or completely different? >> amex the top performing dow component. it's the best performing component of the week. >> well -- >> deutsche takes it to a buy. they say you lose costco lose jetblue, you can make it up by managing expenses in other things. >> my charitable trust owns the stock. the deutsche bank note they -- costco cost them 75 cents, how is that -- how did we not know that. >> amazing. >> 75 cents? >> a share. >> i call that material. yes. >> that's material. there, i can't help them.

i'm a member since '82. >> kohl's 1.83 beat business 3 cents. comps up 3.7. >> stock's had a big run. so has dillard'sing back from the kind of who cares? those are gasoline plays. a bit of remodeling at kohl's. >> l brands beating by nine cents with 1.89. comps up six. div hike by 46%. >> i like that people didn't like guidance. you'll see that go down. these are the revenge -- the shorts -- the stocks ran so much that they're all coming in. but all of these companies are very good at managing expectations. i think you'll find lb will be back up not long from now. >> will sears ever be back up? let me give you numbers from the quart that sears reported. domestic sales 4.4% comprised of decrease of 2% at kmart and 7% at sears domestic. they did generate $125 million

in adjusted ebitda in the fourth quarter, which eddie lampert says, chairman and ceo of the company, improvement, certainly significant improvement year-over-year. they are continuing to move ahead with creating a reit out of number of the stores 200 to 300 sears and kmart sold to reit with proceeds going in excess of 2 million. >> positive in the release. very positive about that minus 7% comp sales number. look everyone's -- in the end, you can just keep putting balls in the air and satisfy the shareholder base, which is largely the hedge fund manager. >> it's eddie, it's burke cowits. not much -- talking about 4 billion market cap i understand it's small but it's still sears, still employs many thousands of people. >> yes. and look they keep the balls in the air. i mean the year-over-year was good. better than last year.

>> trans oceanocean's going to have a good day. x items beat the street. ceo's out, dividend's cut, moody's cut, and now taking impairment charges. no more goodwill left on the balance sheet. >> look at energy services look at esv, here's -- this is an example of a stock one of the worst performing stocks like transocean in the s&p. they had said over and over don't worry about the dividend. they slashed the dividend by 80%. 75 cents goes to 15. these are one quarter behib tran hibhibnd transocean. look at the esv deck the amount of rigs coming on are incredible. this directly jives with what we thought was going to be petrobras and pamex huge drilling programs, no. >> fleet utilization, 72. year ago 83. >> it's going so much lower. look some numbers coming out

about onshore drilling. let's get to it. i mean how many equity offerings can you have. noble, very good announced big equity offering. how come -- planes all american big equity offering. nfx, 18 million coming at you. if you want to buy oil companies, newfield exploration, 18 million. discount. nice discount. cleaning up balance sheet, maybe setting the tone for acquisition acquisitions. i thought the balance sheet was pretty darn good. >> we haven't gotten to the morgan stanley downgrade of abercrombie & fitch underweight. international business seven quarters of minus double digit comps, forex getting worse. but broadly teen retailing in structural decline. >> yeah. you know i read the piece. i think abercrombie could go down more. it's funny to realize, take a look, i'm sorry to look at my

computer, if you look at what's been going on in american eagle you think teen apparel isn't that bad. that's making a comeback. i've felt teens are fickle. abercrombie is a tainted franchise from jeffrey's, i believe. i believe the image got out of control. retailers have gotten together really figured it out. brian cornell talked about baby yesterday, big analyst meeting. i'm promoting this guy. it's going to come back and bite me. but teen apparel in his sights too. >> shares of t-mobile up this morning. >> yes. >> at a meeting deutsche telekom's management team outspoken in terms of saying we'll consider doing a deal that is for their controlling stake conceivably with anybody, whether it's sprint of course they talked about potentially trying to do something and decided against it given the antitrust.

but dish. >> google. >> or amazon. they go through a lot of names here. citi, for its part weighs in the stock trades 5 1/2 times, 16 ebitda versus peers, sprint trading 7 times. significant upset here despite showing great results recently. and the fact you've got a parent that's willing seller i get. >> dish -- >> i don't want to say that but they certainly -- i should take that back. certainly being open about the possibilities. >> it's been a great stock. i mean it's been a great stock. it's a renrent renegade john legere. it's impressive. >> citi does upgrade. >> important upgrade, i thought. >> yeah. >> let's get to bob pisani on the floor. the dow down 11 points. >> good morning. flat open energy is lagging exploration production on the downside.

west texas intermediate below 50. the thing that's worrying me the continuing drop in earnings expectations. i understand there's no alternative, you've got to put in stocks and united states qe and europe. but the numbers are coming down really fast. stocks ultimately trade on a multiple of earnings what i still believe. take a look at numbers. the way i look at it total numbers are for the s&p 500, right now for 2015 which is what everybody's talking about, the numbers, this is -- down to 120. now, there were people at $130 for 2015 people at $125 for 2014. you can say, they're going up every year since 2009. you can see the numbers keep going up. but going up very slowly now. and $120 for 2015 that's a very iffy number. a lot loaded towards the fourth quarter. my point it's very possible that we could go negative on earnings

growth in 2015. that would be a significant event. the first time since 2009 that it's happened. and the rate of declines in earnings expectations for the fourth quarter and for the first quarter have been much more rapid than normal. they normally do come down going into the quarter, we all know that. but these declines have been more rapid than normal. so keep your eye on this because i have been concerned about it for a while now. let's move on talk about other things. kohl's keeps improving. yeef year every year the earnings get better. they have traffic problems. fixing a lot of that. positive comments in earnings report. same-store sales guidance for 2015 1.5% 2%. that's respectable. lower than some other ones but not bad. guidance 440 to 460 within the consensus. overall, excellent report for them. i know you made a comment, jim, about keeping the balls in the air for sears and that's certainly true. they are doing that. i want to reiterate what david pointed out about the same-store

sales decline. down 7% for sears, domestic and 2% for kmart. spinning off this reit, announcing this reit, it will happen may or june try to raise in excess $2 billion. what i can see, sears has a cash balance of $250 million, something around there. they're likely going to need money from the reit to keep funding their operations. that's certainly not a very good sign. you see sears down about 3%. finally, a lot of debt in the energy business. particularly in the e&p end of the business. noble energy trying to do something about it late yesterday announced secondary offering, 24 million shares. pay down a bunch of debt and revolving credit facilities. but it's down today here. remainder's used for general corporate purposes. this is going to increase share count about 7%. and that's a major reason why the stock's down today at this point with the debt a lot of

the companies have that may in fact be the most prudent policy. now, the dow down 15 points. back to you. >> bob pisani. let's go to chicago, welcome back rick santelli. rick? >> absolutely. lots of data. what's fascinating we did see a better durables and softer headline, no surprise on the inflation front. but if you look at intraday of tens we rocketed up a bit. but you know put it in context. intraday extremes aren't where it's at for treasuries of late. they do get volatility. it's about closes. the closes are compacting and consolidating, as you look at year-to-date chart, under 2%. the significant support is 18. where do we fail? on a closing basis of 2.14 on the 17th of this month, and keep in mind, 2.17 closed last year. we fail to get yields above last year's close. hugely significant. bunds, under 30 basis points.

20-year of 7s in the eurozone flirting with negative yields. negative five year note auction with negative yields something to pay attention to. if we look at the bourses in europe a good idea how getting ready to buy securities that are already in tight supply in europe. look at italian, best level since june of last year but moving up. the cac moving up best level since the beginning of the second quarter in 2008. if you look at the dax, of course the german stock market, it's off to the races. what is it now? 11250 and climbing all-time records. back to the european currency you know we lost 113 and 114 handles. approaching 112. you see on this chart that going back to the ecb meet on the 22nd, very significant. slowly drifting below the range. as of course we go closer to march when qe starts the last chart a dollar/yen. talk about flat as a pancake. 120 seems ensurmountable at this

point. we are slowly creeping back above 119. carl, back to you. >> thank you very much. rick santelli. oil may finally have a profitable month but we are giving some back today. jackie at the nymex. >> good morning to you, carl. watching prices lower this morning, not surprising after the bounce to the upside that we saw yesterday. wti trading at 4998ing under that $50 mark than seem to be where oil wants to hang out, trading in these upside and downside ranges. but pretty tight ranges having said that. let me talk to you about crude stocks. traders are talking about those saying the bottom line is this if we build stocks we have to see crude go lower. but now it's hanging out here because we're watching refinery issues and seeing what happens in the landscape. you have the products down a little bit today and crude is down on the back of that as well. but back to that stock number. eia crude stocks reported 63 million barrels above levels a year ago. 72 million over the 5-year

average. we are stocked with oil right now. fundamentally, this market could go lower. it doesn't necessarily mean it has to because, as i said refinery issues could take us back up. waiting for natural gas inventories inventories to come out at 10:30. trading 2.81. those time last year well over $6. if we get a big draw this week or the next couple of weeks while the cold weather persists we have enough stocks to not take this nat gas trade over $3. we'll be watching that number and see where we go on the nat gas trade from here. back to you. >> jackie deangelis. when we come back dana brunetti. "house of cards," the series gets ready to debut its third season. we're back in a moment.

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ibm ceo ginni rometty stepped off the stage. it's half of the day in where their watson unit is placed. setting rather -- that's martin schroeder, the cfo. setting aggressive revenue targets for cloud, security, they want it to be 40% of reb knews by 2018. that would indicate 40 billion. efforts are generating 25 billion. so talking about incremental 15 billion in revenues over three years. that's a lot. growing from 25 to 40 percentagewise. the top line is not growing at all at ibm. in fact shrinking a bit. and they did, as last time i spoke to ginni rometty october suffered a significant blow in the stock price.

$20 a share in earnings this year which they're not going to hit. >> salesforce is a revenue store. that's what people want revenue growth. ibm can give you revenue growth within a segment but if they don't give you revenue growth through the whole, the sales forces win. >> rometty, reminder will join us today 1:15 on "power lunch." >> i will be watching. >> mean time adding to his position in ibm, warren buffett will release his annual letter celebrating 50 years at helm of berkshire hathaway. "squawk box" live with buffett monday morning. buffett tells "fortune" i'm one quarter coca-cola, if i eat 2700 calories a day, a quarter is cokeca-cola coca-cola. i drink 5 12-ounce servings. >> maybe that's why that stock hangs in there. >> what is he 83 84. >> god love him. >> his mind is incredible.

>> i'll eat whatever he's eating. >> amazing. >> i may switch. >> the best walking advertisement cokeca-cola has, 84. >> the salesforce cokeca-cola in germany. >> the 50th anniversary, see what that brings. >> i've been reading letters since '83. they are brilliant. and becky will do a fabulous job. that will be must-watch tv. >> "stop trading" with jim in a moment. don't go away. sometimes the present looked bright. sometimes romantic. there were tears in my eyes. and tears in my eyes. and so many little things that we learned were really the biggest things. through it all, we saved and had a retirement plan.

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purchase any new verizon wireless smartphone or tablet from comcast. visit comcast.com/wireless to learn more. time for cramer and "stop trading." >> not everything in the food business that says they're natural and organic is. bdbd, much more gluten free. people want natural or began knit. buy wwav andhani. people want to know the highest growth. we thought it was health we thought human capital, it's disappointing today. but it's palo alto that people want. people want cybersecurity. they want cyber, downgraded to sell. doesn't matter. they want palo alto fort net, they want this group. >> cybersecurity remains the

hottest thing in tech. >> unbelievable. question, for frustrated bears out there watching this market go get away from them today albert edwards famous bear calling for massive slides in the s&p writes i must be missing something big. we're in that cycle where i begin to doubt my own sanity. what do you say to those guys? >> i think again the price to earnings multiple versus cash flows versus the ten year versus earnings per share upgrade, versus china getting better europe is getting better a world where brazil is sinking and russia and those are by choice lose the b and r, what wayne goldberg said yesterday, you have no idea you don't talk about what it means to have energy. all costs are down. customers are up. this is what the energy decline is meaning for the world. he's not factoring in energy

decline and how it's restarting worldwide. >> good point. what's on "mad" tonight? >> interesting show. rcpt david and i joke about, one of the biotech people think's going to be taken over. the fundamentals of receptos. alan mckim, lean harbors, oil service business. find out what the split means. alan hasn't been on in a long time he's an honest guy who had trouble with businesses, they were all clean. i can't wait to talk to him. he's a good man. a lot going on. >> a lot going on. 1:15, ginni rometty, i've got to tell you, ten points on the dow either way. yeah. >> not on the down. ten points for ibm. >> not easy to transform a company but have done it before. >> that's why writing them off

before you listen to them is a mistake. >> see you tonight. how much bigger can apple get? tom mcclellan with eye opening thoughts about the company's surging market cap how it compares to global stock markets around the world. also chairman jason chaffetz on regulating the internet as fcc gets ready to vote on net neutrality. back in a moment. ♪ there's confidence. then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts mean your peace of mind. now you can get the works, a multi-point inspection with a synthetic blend oil change tire rotation,

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♪ good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with simon hobbs, david faber at the new york stock exchange. the markets nasdaq in particular, close to 5000 yesterday. still crawling back a little bit here. dow's down about 43. s&p's giving back almost 7 to 2106. oil having trouble getting out of the gate. >> here we go. the road map for the next 60 minutes the nasdaq inching closer to 5000. s&p racks up big gains for february. we'll have more on how you should play the market action. retail index seeing a 9% rise over the month. find out which names you should

be watching now. and apple's market cap makes it worth more than all of mexico. can it really keep growing at this pace? we'll talk to tom mcclelgen about that. >> jason chaffetz the chairman of the fcc refused to of it before a congressional hearing yesterday which sought to learn more about the fcc's net neutrality rules. of course as the fcc gets ready to vote on the rules today. congressman chafe fets will join us live. >> the chart, worth pausing and marking that just for the month of february the market has risen by almost 6%. not a great open today but still positive 9 of 10 sectors positive through february. consumer discretionary that's leaping ahead, 9% gain. we'll break that down shortly. >> jeff rosenberg blackrock's chief investment strategist for fixed income. bill stone joins us pnc's asset

investment strategist. kohl's, coach, disney surging on the month. what is happening here? >> you know i think a lot of it is just the realization that a lot of companies will benefit from the lower oil prices. it's taken longer than some expected but certainly between that and the improving labor market a tailwind to the u.s. consumer. >> what happens now? >> well probably gets rougher because a lot is priced in here. but i do think you are going to see some improvement. i don't know if everything's priced in. we're not overweight discretionary at the moment. but i do think at least they will benefit. >> it is a broad-based rally, though. it's been a phenomenal month, bill. where are you calling the market to the year-end. if every month could be like february, we'd all be incredibly wealthy. >> i wouldn't be prized that we run into turbulence soon.

i probably say that every time we get at highs or near highs but we still think the market can be up high single digits by the end of the year in total. maybe higher but i think that's a fair place to think about it. >> so we kind of trade sideways to the end of the year, then? >> well we could. i mean you will collect the dividends and certainly we have upside chances. i mean i think you've talked a lot about the fact that earnings estimates have come down a lot. i know actually earlier today you know they were talking about it on cnbc and i think we actually have some now that we've revised those, although chances to see some upside to that particularly with the tailwind around oil and perhaps maybe some of the strong dollar coming off of it. >> jeff the flip side for fixed income during this period is that these super plumped up treasuries have lost ground, therefore you have yields rising. it's been a long journey for the ten-year yield during the course

of the month, the range over 50 basis basisesis point. where do we go. >> it's about what the fed's going to done the last couple of days that's been the focus. we're going to into march focused around the fed's fomc meeting and talking about getting off of zero interest rates, and what that mean. for the bond market that's not priced in. a big disconnect shorter maturities, that's your source of market volatility as we reprice fed expectations. >> i guess the point there would be the question to whether the market will accurately price when the european central bank is about to start buying bonds majorly. what is it $70 billion a month as of next thursday, i mean that's when potentially they could come through the announcement. yields driven negatively in europe. that's got to keep the yields

suppressed here which argue what you foresee may not be realized. >> i'm not sure about that. that's the popular narrative that negative yields the rest of the world, what the ecb's doing, has to hold u.s. interest rates down. i think we've got to be very careful about thinking about the global impact balanced against what the fed is going to done what janet yellen emphasized yesterday is the means to which they're going to raise interest rates is something very different. this time is about paying interest on excess reserves. what that means is that there's going to be a new source of yield in the market. we're not going to just simply look at global relative yields when determining what our treasury yields. we'll look at what the fed is paying on interest and that's going to change perspective whether or not yields can stay capped. certainly yields will stay low. it's low inflation, low growth world but it doesn't mean yields can't rise. we have to be careful about that consensus view. >> for both of you, for those seeking to protect their

portfolio, protect potentially being the operative word with maximum gain maximum return what would you advise? jeff? >> well i think the most important issue for fixed income investors, and here we're talking about where people are looking for safety preservation of principal, investors have to take a close look at what they've been doing in the short end of the yield curve. with the fed moving interest rates the most vulnerable part of an investor's portfolio is going to be the shorter maturity. investors have to take another look how much risk they're taking and what they're expecting. expect more price volatility more price declines there and avoid surprises in that part of the portfolio. >> bill, how do i protect, how do i grow? >> so i think, you know since jeff talked about the fixed income side, let me talk about the equity side. i'd highlight three sectors, health care, consumer staples and financials. i'll focus on financials because i think it ties in well with

jeff. they should benefit, i believe, from when the fed finally hikes the rates. i think the steep yield curve and finally getting off the zero interest rates and the u.s. economy, frankly, continuing to be relatively solid, should help there. i think that's a place to watch. >> bill stone, jeff rosenberg, thank you for your time. >> thanks. >> thanks. >> fireworks going off between gop house members and fed chair janet yellen in that testimony yesterday prompting a debate on the fed's role in politics. steve liesman joins us with more. great morning with bullard, by the way. but this was a big part of the conversation yesterday. >> it was. substantial part of. that controversy continuing today. jim bullard defending yellen against charges of political bias and representative scott garrett, doubling down on his comments that he made yesterday against yellen and the fed. >> what the little clips that you have here talking about is this myth that's been out there that they've been promulgating

for decades the fed's independent of partisan politics entirely and for that reason they should not be held accountable on either front on the monetary side or the regulatory side. >> meanwhile, bullard on "squawk box" saying the fed's very much in play politically but took particular issue with criticism of yellen for meeting with treasury secretary jack lew. >> i think she's a very balanced and careful thinker on monetary policy. i really don't see the charges being well founded. >> one of the charges was the meetings with treasury secretary, jack lew. >> wait a minute, now on that every chairman has met with the treasury secretary all the time. greenspan did it bernanke did it. >> mean while, the spokesman for representative bill high zynga criticized yellen withholding twice as many meetings. a spokesman told us he never

requested a meeting with the chair. the fed chair almost honors such requests from congress. we will ask these questions and more of loretta mester later today. i talked to our colleague, david wessel covered the fed for years, now at brookings. he said this is more partisan yesterday's hearing, than anything he could remember. >> that says a lot. thanks a lot. when we come back house oversight committee wants an explanation from the fcc from the net neutrality rules than will not come soon since the chairman refused to testify yesterday. jason chaffetz will join us live to explain why he's questioning the chairman's motives when "squawk on the street" continues. the lightest or nothing. the smartest or nothing. the quietest or nothing. the sleekest... ...sexiest ...baddest ...safest,

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commission set to meet later this hour to cast its all-important vote on the issue of net neutrality. the five-member board expected to approve fcc chairman tom wheeler's new rules which, among other things would allow the commission to inregular late the internet like a public utility. sought to learn details about the proposal and how rules were developed, joining us house oversight chairman utah republican congressman jason chaffetz. good to have you with us. >> good morning. >> you wrote that this process is at the chairman's discretion. what do you hope to accomplish

here? >> we warrant to learn how this came about, evidently the chairman of the fcc supposedly an independent agency was having regular communication interaction with the white house. and yet we in congress want to see what they're going to vote on ask them a few questions and he refuses to show up. quick to communicate with the white house and frequently but won't talk to congress. are you in favor of this vote? would you vote yes or no? >> i think the public including myself, should be able to see what they're voting on. one of the things fundamentally wrong about this is you're going to change the internet top to bottom moving it to this utility-type of status under title ii nobody's read it. and so it's hard to say how you would vote. i have deep concerns that treating it as a utility is the right way to go. get washington, d.c. bureaucrats metalling with the internet. that's going to stifle competition in investment. at least show us what you're going to vote on before you vote on it.

>> these reports of unprecedented coordination with the white house, what do you think exactly happened? are we talking what's on one side of what's legal and what's not. >> the "wall street journal" did a fairly good story on this. we have sent requests to the fcc. they have not complied with it yet, in order to provide documents. oversight committee has a constitutional duty and responsibility to provide oversight and yet the fcc still has not provided all of those documents. so, hard to tell. i'm not trying to jump to conclusions, but the lack of openness and transpair sent when senator obama was a senator he argued this very thing. he's the president and i hear nothing out of the white house helping us on this nothing there i read the obama administration has made more than 200 legal filingings to the fcc on 80 proceedingsen this isn't unusual. didn't both reagan and bush lobby over media ownership rule backs in the day? the idea of an independent committee -- and i'm a guest in

the country -- isn't ant independent committee just that the president can't fire commissioners, they're there for fixed terms. that's what an independent committee means, surely. >> absolutely, independent. you're right, back in 2007-2008 the commissioner of the fcc came to congress and testified. they released the rule in advance. senator, then-senator barack obama argued they should have more time so they delayed the vote. they did have openness and transparency. nothing happened with than here we will vote on something you haven't read i haven't read and it fundamentally changes the internet from top to bottom. that's just not right. >> how common is it for a chairman to testify this late in the process? >> there is great precedence to it. and he has discretion on this. the congress has the right to look at these materials. but when there's a big monumental shift in policy the chairman of the fcc has done that in the past. and so there's precedent out

there but it didn't happen in this case. and that causes concern. nobody knows what they're voting on. less than an hour away nobody's even seen it yet. >> mark cuban well well-read tweets, how long before the fcc rules digital tv must be treated like any video offered by any website and tv as we know it is gone? another one, how long after tv's treated like any website video before the fcc steps in and applies its decency standards to all streaming video. cube will join us at 11:00 a.m. eastern time what happen do you make of that point of view. >> i think he's absolutely right. the internet's working. it's one of the things in our economy that's providing jobs and this wild wild west throughout for entrepreneurs to come up with innovation, it's a positive thing. now it's going to be micromanaged by washington, d.c. bureaucrats? i mean that has got to scare the living daylights out of any entrepreneur certainly somebody like mark cuban or anybody watching the program. you have to have fcc people

telling you what you can and can't do on the internet? are you kidding me? let's have more public discourse on this and read it before they vote on it. >> on the subject to public discourse, and i'm taking this directly from a "new york times" article that ran yesterday, congressman, they're describing on the other side of the argument the most sustained campaign of internet activism in history, a swarm, as they put it, small players overwhelming the giants of broadband, tushing complex technical debate into a matter of religion. i wonder how we wait and value that as we go on from today and go into series of legal proceedings and appeals about what actually constitutes title ii. >> well i think they have a very important voice. i look back to what was called the sopa and pipa when congress was trying to change the way that law enforcement can manipulate websites. you had this uprising from all of these people across the country and it stopped that legislation dead in its tracks.

i hope people understand that every level if you change the status of the internet and regulate it as a utility, there are going to be severe consequences. it's going to change the internet as we know it. i don't think that's going to help any entrepreneurs and those young fledgling companies trying to go from nothing to something on the internet. i really do worry about it. >> congressman, vote as you said minutes from now essentially. >> bra. >> isn't this too late? isn't this for show? >> no we've been asking for this for some time. and it just hasn't happened. we called a hearing, did it more than a week in advance. >> you're expecting a midnight call from the governor? i'm not sure what changes. >> well i think the commissioners that are there there's a couple of republicans that are actually on that commission, that called for a delay in that vote so there could be more openness and transparency. the white house has had its say

but congress hasn't the public hasn't. we've been talking generally about net neutrality and the positives and the negatives about that. but the rule that i really worry about is the transfer to title ii. and that, nobody has seen. >> congressman, we've got to go. eventually it's the courts that will have the final say here isn't that -- everything's going to end up there and that's where this is going to be decided and it's going to be years from now that we'll know where this ended up. >> the courts the third branch of government the judicial branch will have its say, yes. no doubt a mammoth legal fight on this no doubt about it. >> congressman, thanks for your time. we'll see what the rest of the day brings. >> thank you. >> congressman jason chaffetz chairman of house oversight. >> what a february. retail index having a blowout month, up 9% outperforming even the broader s&p which is up almost 6. which name should you be watching and which are potentially buying? we'll talk retail when we come back.

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february has been a great month for the retailers, retail index up 9%. a number of companies obvious pli reporting overnight. some good some bad. mixed picture overall. there you see, the chart to really hang on to, 9% gain in retail in a mark that's up broadly s&p, almost 6% for the month. oliver chen joins, managing director at cohen covering retail. >> good morning. >> why is this happening? why is the index moving like that. >> traffic is back in stores gas prices have been positively impacted consumers' pockets. walmart, target the best traffic in two years and that's a great thing as consumer retraces and comes back to stores. >> the top gainer, one of the top, the s&p this month is kohl's coming into its earnings figures, up 17 18%.

what do people do with that stock now what do you make of the detail? >> they had a great call this morning. we're on the phone with kohl's. loyalty program, beauty as well as just focus on national brands and athleticism. it's working for that company. we do have a market perform on the stock. we think the value's fair at this level. houfr we however we acknowledge the business the greatness agenda are taking hold. >> l brands victoria's secret bath and body works, raised estimates multiple times, correct me if i'm wrong. what was a disappointment overnight. >> exciting story. intimate apparel great category to be in also bath and body works the market share they have the global story. a big theme is giving money back to shareholders. >> no kidding. >> special dividends, precash flow. it's a legendary team executing with clean inventories. >> are we in a stage where they start to spend?

how worry something is that. >> to be honest a lot of retailers are spending and the big question omni channel and online. but there's no channel. >> what does that mean in. >> ingration ingration of bricks plus click. we heard from limited brands the customer's smarter than ever with price transparency. familiarity with the mall. >> coming where the labor market's heating up and walmart and tj and gap play paying for employees. >> people need to invest in employees and loyal, motivated people. and retail is a hard-working sector. i check the mall every two weeks. i admire all of the standing folding. >> i find it unproductive. what's your best idea. >> i like michael kors. a sexy stock, trading towards

lower end of the range. we like target. brian cornell will drive traffic. he has investor day next week. focus on signature categories. >> where do you think it could go to. >> low 80s. >> wow. >> price target right up there. we see this as a great story continues to be really american take on fashion, global great price points sexy jet set style. >> speaking of which, oliver chen, thank you very much. when we come back apple dipping lower today. down 2% for the week. steadily inching closer to the 1 trillion mark. that is growth sustainable? tom mcclellan will compare the market cap of apple to global stock market total capitalizations after the break.

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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. here's your cnbc news update at this hour. the identity of the masks executioner clutching a knife in those isis beheading videos has been revealed. a london man is the person known as jihady john traveled to syria in 2012. there's a new head honcho at standard charter. former jpmorgan chase excusive bill winters. winters left jpmorgan in 20009 called standard charter a special bank. the stock is up about 3%. barnes & noble plans to spin

off the college book store unit from retail and nook operations it scrap the plan for the ebook business. the stock's up 5%. it's legal to smoke marijuana in washington, d.c. 21 and older to possess and use two ounces of pot on private property in the district. back to you. welcome back to "squawk on the street." i'm jackie deangelis, reporting from the nymex, waiting on the department of energy's eia weekly nat gas storage report. the number a draw down of 219 billion cubic feet. that is a little bit less than expectations. but makes sense in terms of the cold that we've been seeing across the country and demand increaseing from last week i'm point out, traders are looking at overall picture here. there's two things to consider. the weather, which hopefully will start to be getting better soon, at the end of the winter season. but at the same time we're

looking at overall stocks. the eia said last week we were sitting a little bit above 2 trillion cubic feet which was 50% higher than where we were last year. that's why these prices continue to go lower. $2.75, down from 2.83 before the report came out. what's really interesting here you've got products rising. rbob gasoline heating oil, rising and nat gas is going down. we'll be watching prices today. traders are not bullish in the nat gas pits. back to you. >> thank you very much. it's been almost a year finally we're here. decision time, looking at a live shot of the fcc's open meeting in washington getting under way now. there will be a vote on net neutrality probably before this program comes off air. eamon javers live in d.c. with more on what we can expect. good morning. >> reporter: good morning, simon. it's a cold day here in washington, d.c. most of those protesters out here a little while ago have

gone inside got a couple of stragglers here. they're going to watch for this vote on net neutrality later on this afternoon. just under way here inside the fcc. what we're expecting is a vote here that's going to pass by democratic votes in the fcc on net neutrality. what they're doing is using title ii authority to regulate the internet as if it was a utility. so they're telling big internet service providers here that they can't do things like throttle or provide fast lanes for specific web companies to get faster access to their customers. that's something that big companies like comcast, parent company of this network, have been opposed to and fighting in a lobbying battle. looks like they will lose at the fcc this afternoon and the vote will have to wait and see when the vote comes, exactly how it goes down. after that about a three-month period before the new policy becomes absolutely operational. so there's a little bit more time to dissenters to get opinions in to the final product. if this vote passes today, that

will be it and then we'll get an operational date some point in the next three months or so. >> what about moves on capitol hill? obviously the republicans are opposed to to the way that this is likely to go. they've called it obamacare for the internet. where are they trying to get some bill passed and bring democrats on board? >> reporter: yeah, what we've seen on capitol hill simon, the sense that we're not likely now to see republicans offer any legislative solution to this to back the fcc off. there are some republicans on capitol hill who are upset about this. they say it's regulating the internet it's government overreach, some criticism this is like the dmv taking over the internet. but whether or not they have appetite or ability to pass something up on capitol hill is an open question. the guess now is probably not. >> we'll get the vote shortly. eamon, thank you. meantime apple's market cap 750 billion this morning.

for comparison nearly $200 billion more than the total cap tailization of mexico's market half of that in germany. joining us tom mcclellan. great to talk to you again. good morning. >> good morning. >> numbers aren't perfect. apple's market cap current and some of the numbers from global stock markets are dated. but you posted this the other day, what point are you trying to make? >> well there's not a real great actionable conclusion you can draw from that but it's staggering to think this great company that makes a little thing you put in your pocket is worth all of the stocks and all of the companies traded in mexico. it's just a really staggering idea. and points to the vulnerability that if apple should stumble, what's that going to do to the entire u.s. mark where there's a big weighting in the indyexicesndices. >> you mentioned mexico closing in on russia spain, maybe half of germany, france what happen does a technician do with all of

this? >> observe it and smile and think about it and then get back to the charts and look what the charts are saying. right now we're seeing a turndown in apple's price oscillators and indicators showing a correction which is ordinary and merited, it seems to be beginning. >> yeah. you've also taken a look at crude. looking at backwardation versus contango. >> there's a huge contango in crude oil. if you look out a year it's up around 60. that says crude oil futures traders are not believing we're sticking around $50 for very long. they don't want to bet on that for the deliverables a year from now. when you see that much of a spread between near-month and far month contracts that is a big find the near month will be going up. we do not expect crude oil hanging around at 49 bucks very

long. >> what's the performance on that spread. >> we've been at this big contango a couple of times in last 20 years. one at 2009 bottom after the financial crisis. another time in 2011. in each case a big rally the month that followed in crude oil prices. how much of a rally, it's not able to tell you. it's going to tell you the direction well but how much of a magnitude you just don't know. but if you can get the direction right, the magnitude takes care of itself. >> right. we have talked a lot about what amazing month the markets have put together. s&p 2110 obviously nasdaq 5000 within sight. all of this chatter, talked about the presidential cycle pattern. how does that fit into the dynamic we're in now. >> we're in the third year of a presidential term and ever since the late 1930s the third year has. an upyear. we're in also a second-term president which usually sees the stock market top out earlier in the third year than if you have a first-term president. typically on average, s&p 500

will top out in july of the third year and then you have a struggle during the summer and into the autumn then we get into the more iffy period of the election year. but for now, that's not what we have to worry about. for now we have an up trend between now and july. >> i'm sorry, i have great difficulty on taking that sort of patent matching over time when we've come out of a financial crisis and i almost destroyed the stock market and have a huge move back. surely that overrides any kind of old housewives' tales about presidential elections. >> well, except it keeps working. the only time we haven't had the third year being up year was 1931, in the middle of the great depression and 1939 when hitler's army marching through poland. if you don't have a condition like that third year is an upyear, the president will try to get the bad news out during the first two years so he can spend the last two years declaring victory and running for re-election. it's different in a second term because the president can't run

for re-election. but the third-year effect is there and it's working now. i hate to bet against something that has worked well and is working at the moment. >> june and july will be interesting, especially if that's fed time. as we're speak, the nasdaq has gone positive once again, 27 points from 5000. tom, good to talk to you. >> thanks, carl. season three "house of cards" live at 3:00 a.m. eastern. midnight on the west coast. but before it debuts here from the show's producer, on what you can expect tomorrow. also coming up mark cuban, outspoken critic of the net neutrality rules likely to be voted on in the next hour. that interview on "squawk alley" in 20 minutes.

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marks in a range as we await the net neutrality vote. let get the santelli exchange with rick santelli. rick? >> well thank you, carl. i'd like to welcome my special guest, daniel quinn mills. thank you for taking the time today. >> my pleasure. >> listen a lot's changed over the last five or ten decades. you know every time you check your e-mail or send out a tweet, everybody pretty much knows than but when it it comes to seasonality, seasonal adjustments and the way our data's calculated not a lot has changed. why seasonal adjustments were created, why they were created, are they still a valid calculation at this point in time? >> we started adjusting monthly data for a seasonal pattern over the year in the late 1930s and '40s and '50s, when we first

developed gross national product data, et cetera. it was necessary to do that because at that time we had a primarily goods producing economy, construction and manufacturing were well over 50% of all employment and economic activity. both had a very strong seasonal pattern, construction shut down in the winter months essentially and manufacturing also slowed in the auto industry you shut down the whole industry essential lil in january for model change turnover. now we're -- >> let me interinterrupt you there auto cycles still somewhat continue. there's still, you know many different industries that have to shut down for maintenance, whatnot. much of that still may be the same. what else has changed that makes your perspective on these data points seem out of date on the seasonal process? >> now, we're really a service economy now. probably 80% of employment and

gross national product activity gdp activity is service. and so as a result of that we still have the seasonal patterns built into our adjustments of date and they're pretty badly out of date. >> so what you're saying is our economy's changes and we need seasonalities but the industries that represent that need are a smaller percentage. lieu of that you saw the last employment data really we're going to focus on seasonties in the employment, first friday bureau of labor statistics did you agree with the 257,000 shown on the screen the different models trade off of? >> no, noknot at all. data showed the american economy gave up 2.5 million jobs from december to january of this year. the government reported instead increase of 257,000 jobs so they adjusted the amount of employment in the economy up by

over 3 million jobs. we ought to report the honest data and let the government argue it should be adjusted in this way. >> we're out of time. very quickly, isn't there ever a time seasonal adjustments intersects and we make adjustment once a year every six months? final answer. >> yes, we have to do that and we do do that. >> doesn't it pick it up then? aren't we arguing that it gets out of whack for many months but ultimately comes back in line? no? >> well, yes. but everything in economic policy and in investment depends on what happens go on now. >> i see. so what you're saying is those periods when it's out of whack they may come in but we may do the wrong thing at the wrong time because of it. listen we're out of time. thank you. fascinating discussion. next time we'll take this to dotcom and get into it. simon hobbs, back to you. >> santelli exchange.

up next, putting money into start-ups with multibillion dollar valuations the rage in silicon valley. one investor says that strategy could kill their returns. john baucus joins us live to tell us why when we come back.

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welcome back to "squawk on the street." shares of semiconductor company avago, soaring at the open after reporting better than expected earnings after the bell yesterday. $2.09 versus estimates of 1.04. acquire networking company emulex for $606 million which will boost its enterprise storage portfolio. shares stronger up 14%. >> all morning drawing your attention how well the stock market has done during february. consumer discretionary at the top. in fact at the top of the gainers the online travel agencies, priceline and tripadvisors which during the course of this month have surged as you can see, priceline arguably a longer story, about

exchange rates and growth elsewhere. tripadvisor which this week celebrates its 15th anniversary, more confidence in its business model moving forward. and amazon weren't always so giant. both going public with market caps if you recall below $1 billion. but in the age of uber and snapchat when private companies are fetching multibillion dollar valuations are vcs placing too much emphasis on what they call unicorns and how could this impact investors. john baucus the founder and managing parter at new atlantic partners who argues it is better to hunt dragons a term he coined rather than try to bag a unikorn. >> thank you. >> this term unicorn has become so low on the cover of magazines. your argument the funds want to be in it because it is a so-called unicorn. >> right. a unicorn is a great company. a dragon is a great investment. every unicorn is not a great investment. money is made in the private

capital world by starting investing with a company small and continuing over time. it's not made just piling in at the very end. >> why is there this huge bottleneck in the late stage? why is that going on? >> well, a lot of people want to be able to brag about i invested in snapchat i invested in linkedin, i invested in uber. facebook and twitter both had 15 or more venture capital funds invested in those companies that all claimed parenting. >> i would just add that the -- i always find it quite amusing when you get one of these companies that is arguably overvalued and the discussion continues one or two sovereign wealth funds that always come in at the end, i won't mention their names, but to the point you're making need to go back to headquarters in asia and say look we're with the big guys. >> ultimately, the public markets value profitability. the private markets value growth and market dominance. and you have to translate that into profitability in the public market. so there's a chasm. these companies have to cross to be good, successful public

companies. >> you think facebook was the first of these? you mentioned it as the one that got a lot of where it had the logo was enough for some. >> but facebook you know, twitter is one, uber is one where the logo is important because in our industry you're known by the companies that you fund. now, what everyone doesn't understand there's a difference coming into the first round in facebook when it's valued in the tens of millions versus coming in the last round when valued at $40 billion. so you're not the one who's really creating the value at facebook. the early people are. >> you don't think this is going to change do you? you think at the very least these companies will remain private for longer? >> absolutely. there's a seismic shift going on right now in a transfer of value creation from the public markets to the private markets. you mentioned a couple of those great companies that were started 20 years ago. cisco, amazon oracle all have gone up 300 x in the public markets. no one is saying facebook will do 300 x from an ipo. >> the important thing about

facebook may have been the game changer it came to market and still people watching now who are not on the inside were able to make money, more than doubled, more than made $100 billion. it was the first one that demonstrated the power of the business mod until social media, very small costs, massive network effects. >> right. >> presumably that's why they're holding them back. this has a long way to run, look what's happening externally. >> we're doing that too. we -- our average time from our first dollar in to our exit is about eight years now. it was about five years. >> wow. >> five years ago. about four years, ten years ago. so we're holding them longer. >> even with exponential growth? >> our portfolio is growing revenue about 70% a year. it will do 250 million this year, did nothing eight years ago for the class of companies. >> how much do you think is due to the amount of money going into vc and how much is due to the fact that at least the perception of being public is that it's more onerous than it used to be? >> it is hard. i started a company that i took public 20 years ago and it was

lot easier than than it would be now. i think people are thinking twice about going public. the jobs act which the national venture capital association helpeds pass get passed two or three years ago, has made it easier to stay private longer because it lifted the restriction that said you can only have so many shareholders before you have to go public. >> i think -- i mean ken langown will tell you they don't think they could have taken depot public today. do you believe that's true? >> don't know enough about that story but i'm not sure. >> in general, the legal costs, the hype around the road show i don't know. a tougher -- >> the sarbanes-oxley it's a $2 millions cost you lay on to any company today. >> john, what about people watching at home saying this sounds if i'm getting locked out of the value creation in the economy. how do they get in on that? what would you advise them to do? >> our investors are endowments pension plans. >> right. >> so -- >> what about the retail investor? >> this is a hard asset class for the retail investor to get

into. it's a hard asset class because it's ill liquid. the jobs act is allowing for crowd funding once the sec decides to put the regulations forward, which they haven't done for the last couple years. it will be a way for people to get in but they have to have their expectations set correctly because every company is not going to be an instagram, won't be worth a billion dollars -- >> what about the accredited networks many will be getting involved with? >> i think they're good idea. having some exposure to the private capital market is important. i would suggest people limit it to 5% or less. >> 5%. >> of the -- 5% or less of the total portfolio should be in private capital. meat where the appreciation is going. these recent ipos and this is going to continue are going out at 3, 5, $10 billion. >> they want to put more than 5% in. >> that's dangerous. it's ill liquid. that's the challenge. >> hard to maintain 5 if the companies keep growing like this. >> right. >> fascinating discussion. thank you for coming? >> thank you very much. >> okay. speaking of techs and start-ups

almost time for "squawk alley." what jon fortt has in store for the next hour on cnbc. >> good morning, simon. big hour fcc set to vote on net neutrality rules. we'll have mark cuban who has made his feelings clear about that dialing in. the hyper loop closer to being a reality elon musk's public transit vision. someone is working on building a piece of it. the "house of cards" produce who worked on "fifty shades of grey" how streaming companies are changing the game. all coming up on "squawk alley." say you're a finance guy. a farmer. a researcher. you used to depend on experience. the internet. your gut. today you can use ibm watson analytics. it can make sense of all kinds of data. uncover hidden correlations and new opportunities. and give recommendations with more confidence on who will buy. what to make. where to plant. which helps you make smarter decisions. there's a new way to work and it's

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. one of the most controversial, one of the most polarizing decisions in this country is about to be made. that's a live picture of the fcc deciding on net neutrality after almost a year of deliberations. that is jeep one of the commissioners who will join us tomorrow on cnbc. the vote from the fcc in washington now imminent. let's send it over to "squawk alley." >> all right. thank you very much. good morning. 8:00 a.m. at youtube headquarters in san bruno, california 11:00 a.m. here on wall street. "squawk alley" is live.

♪ ♪ and welcome to "squawk alley." joining us this morning, henry blojette, the founder, editor and ceo of business insider. >> great to be here. >> jon fortt and kayla tausche on a day where the nasdaq is just inches away from another all-time intraday high. netflix closing in on an all-time high. the fcc as simon said is debating rules that will decide the future of the internet. at any moment the commission is expected to vote and approve new rules that would classify the internet as a public utility. supporters say the best way to