>> live from new york where business never sleeps this is squawk box. >> we're going to miss glenn frey. welcome to squawk box on cnbc. joe, becky and andrew are on a plane headed to the world economic forum in davos. our top story here is actually coming from china. china's economic growth slowing to 6.8% in the fourth quarter. that's the weakest reading since the financial crisis though it was in line with estimates. 2015 full year growth coming in at 6.9%. that is the slowest growth in china in 25 years. but take a look at the boards. stocks in china rising in late trading. strong rally there. expectations that there's going to be more stimulus from the chinese government. we'll check in with eunice in a few moments to get an update. higher by .5%. not quite a rally but they'll take it considering what they

have been through. germany and france higher by 2%. italy higher by .5%. they had a rough session yesterday and a positive territory at this hour. dow would open higher by 253 points. >> quite a sharp futures session given what we have seen in the global markets but i think the u.s. will take it as well given how we ended last week. the imf out with the latest growth forecast. global growth expected to be 3.4%. that's down .2% from october. u.s. growth expected to come in at 2.6% while china remain unchanged at 6.3%. the imf seeing a rise of global risk aversion. scott that would be an understatement i think. >> yeah. no doubt the iea and the agency says there is a risk the oil

market could drown in oversupply. the iea suggests unseasonably warm weather and rising supply will keep the market oversupplied until at least late this year. let's check on the price of oil. wti is up 1.5% just chuy of $30 as brent crude is in the same exact spot. that's bigger by 4.5%. >> both still hovering below $30 barrel. eunice joins us now from beijing with the latest twists and turns over there. eunice. >> thanks so much kayla. the china gdp numbers came in line with expectations of q-4 at 6.8% for the full year. it was 6.9%. this is still the slowest growth we've seen here in a quarter of a century. the expectations are that the -- wait a minute. i'm losing my thoughts here but that actually that number

basically has lead to a lot of expectations because of the december figure actually was the main focus today. they came in lower than expected. the retail sales and industrial output weren't very good. that's lead to expectations that the government is going to come in with some sort of stimulus in the form of interest rate cuts or rrr cuts and a lot of people are saying that this could be before the lunar new year which is in the next couple of weeks. there's also been widespread questions and growing skepticism about the validity of these numbers. just to give you an idea, capital economics which is one research firm that isn't overly bearish believe that the q-4 numbers at 4.5%. so there's a big gap. at the same time, some of the reports that we're hearing here is that the banks are being urged by the authorities here to tighten even further on capital

outflows because of the concerns that they're pressuring the currency. we're hearing about how there's more restrictions on large transactions as well as on corporate businesses. so those are some of the reports that we're hearing right now just because of the concerns that authorities have here about the speculation that's going on in the currency as well as the capital outflows. back to you guys. >> yeah. a lot of things to consider there. we're going to talk about what eunice brought up. thank you so much eunice. let's bring in our market panel to set the big week ahead. and kevin book is managing director at clear view managing partners and michael farr is president of farr, miller and washington and a cnbc contributor. do you believe these numbers? >> if you take a look you have to think that it's probably lower than that. it's china. you expect them to come close to

the number that everybody thought which is going to be 7%. i'll accept it for what it's worth. if you can get china's gdp number within 2% you've hit a bulls eye. >> jim, what do you think? >> jim. >> michelle. >> yeah, how are you? i didn't introduce you. sorry wells capital management. it's early. >> well, i don't disagree. the reality on the ground is probably a little less than what they report but i think that the number comes in pretty close to expectations and world growth is slowing everywhere and in the manufacturer sector so it's not a surprise that china is still struggling on that front put there's already been a lot of stimulus dumped not only in china but across the world and we'll see data improve here as we go forward into the first quarter.

>> are you talking about the united states or china? >> i'm talking about all of it, michelle. >> i think that we're still going to find out that the drop in commodity prices is a stim you lent for the 90% plus that consumes commodities and if you combine that with already very lowered long-term bond yields everywhere including china and then give everyone outside of the united states a big currency devaluations i think that stuff is going to work and we're bog to bounce the global growth rate. >> are we going to look back and say this was nothing more than a growth scare? or are we headed toward a global recession? because it matters to the direction of where the market goes depending on what your belief is. >> it really does and i think we're going to do one of those two things no question about it. it strike mess that this doesn't feel like the global recession coming on. i think that jim's right. i think these low energy prices are probably going to give us the safety margin we all need in terms of growth and getting the consumer going. the thing that people aren't

talking about, people are talking about china and oil and clearly that but the thing that caught me last week was walmart closing stores so that gives me a pause and concern about what's going on with the u.s. consumer in an economy that's 2-thirds driven by that consumer so these oil prices and i think lower energy prices are critical it's worth a good deal of attention but i don't think panic. >> there seems to be few reasons for buyers to step in unless they're potentially covering short positions. >> i couldn't agree more. i don't think anybody would want to step into the midst of this. any strength in the stock market will be short lived. one of the things that i take a look at more than anything is the decline taking place in the adjusted monetary base. the base has fallen off the edge of a cliff. >> that's money supply. >> that's money supply. that's the real money supply. as i like to say that's the stock from which the other soups of monetary aggregates are derived and it's plummeted.

now that's the fed rolling off securities but it's falling and as long as there's less money if the economy is demanding more money it's going to come out of equities. >> we haven't gotten to you yet. >> but there's still an enormous amount of liquidity. >> we haven't heard from him yet. >> i'm starting to feel like the martin o'malley of the panel. from an energy perspective china is chugging away. december was down in terms of crude imports on preliminary numbers. as far as the iea comments go, by the time an international statistical agency starts talking about drowning bodies have been washing up on the shore for weeks the big question is an iran question and has more to do with whether or not the numbers exceed expectations rather than whether iran comes back. farce demand for oil being week that's priced in already. >> what are you assuming about

iran? they're saying a half million barrels right away plus all the stuff sitting in storage that god knows how much there is. >> well, the ships can set sell immediately. the question is really as you say whether it's 500,000 or 300,000 the iea's pick the lower end of the 300 to 500 range. so have we. every 100,000 barrels a day is a month of reductions at their current pace of decline so pushes back by about a month looking at the u.s. alone. >> oil will go to where? >> we're in the 20s now. we can go into the low 20s but when you get down into the low 20s you're below the cost of production for a lot of the higher cost resources. so you don't stay there long. >> what was the china number mean for the fed? >> i don't think it means much, scott. i really don't.

>> it's not like it's a shocking surprise or anything. the fed is going to be more clued in to do the financial markets find some stability between now and the end of march? and do the wage numbers and the job numbers continue to remain fairly strong? and i think if they do the fed is going to go ahead and have another rate hike in april. >> do you think that's going to be the case? how many times do you think the fed is going to move this year? >> if they move more than twice i'll be stunned by that fact. i'm still stunned by the fact that mr. fisher says he expects them to move four times. >> his words i think were in the ballpark. i'm not sure he flat committed to four. >> nonetheless he put that out there. i thought that was stunning. i think two is the most that they can possibly push. >> michael, macy's, the transports, you look at those stocks over the last six months to a year. you've got a pretty benign

outlook for the u.s. economy. were those stocks telling us something over the last year? i mean, everybody talks about how oil was supposed to be the tail wind. we're still talking about it more than a year later and maybe instead it's a tell. and you say economic growth is slowing and you expect that in transports. if you look at retail and if you look atwal mart it's tough to tell how much we blame on the consumer and how much we're going to take a look at shift in buying habits and how much is going to the internet and e-commerce but i don't think they're feeling that robust optimism necessary for fuelling expansion. so even though there's a lot of liquidity there's a lot of

caution and people are still hanging on to their paychecks and they're paying down debt. good thing but gets us into that thrift. >> so michael at what point does this market become a buy? if you think that it's going to correct further, what's the sign you're going to look for that tells you it's gone down enough. now i need to start buying some stocks? >> well, i have been buying some stocks. i started buying a little bit last week. i started nibbling. we have cash in accounts now that have been sitting in some larger positions of cash that have just come in so we look at those and say market goes down 10%. 25 or 30% of that cash is going to get put to work immediately so in another quarter we put another slug of that cash to work or is f the market drops another 5%, more of it goes to work. i think right now you have to think as an individual investor a little bit like warren buffet and say prices are coming anyway. when people are fearful i want to be greedy. he's thinking about what he's going to buy. he's not thinking about selling

and he's not thinking about panicking. this is a time to be strategic. it depends on how much you think the market may fall more from here. larry fink, black rock, was sitting on this very set and said the market could go down another 10 plus%. >> but you're not going to call that bottom. you have to start the nibble on the way down but getting money to work at lower prices and particularly if you're a 401(k) investor you'll be buying more shares in the upcoming months as the prices come lower. take advantage of the lower prices. don't be afraid of them. >> would you put money to work here or would you wait? jim paulson. >> that's all right. >> these '08 comparisons are getting scary. >> i'm going to say -- i feel pretty good now, michelle. that pocketbook. no i would be buying but we'll

probably break 1800 and scare everyone that we're in a recession and convince everyone that we're in a bear market but i don't think that we are. i think that's the critical question. if you don't believe we're going to have recession we're getting close to a buy down here. we'll be at 16 times earnings if we trade down to 1800. that's a very sustainable, moldable, even if core inflation and wages go up to 10%. even if the treasury has to go up to 10%. that's a very good value buy again so i would be starting to think about it adding a little bit and i'd be more aggressive if we broke toward the 1800 level. >> it's interesting because you have been correctly negative on this program for at least the last several months. i recall you coming on repeatedly. >> at least on stocks, scott.

i missed on other markets. >> so it's come to the point now we pulled back far enough that i'm sensing you're sort of changing your tune a little bit. feeling a little more positive about where we are. >> i am. i have been looking for two things. i think this is less about a world recession. i think that's the catalyst but i don't think that's the real risk. i think it's more about evaluation adjustment and sentiment adjustment among investors and we're doing a little bit of both. i always felt that we get down to 16 or 17 times earnings the market can sustain that even with full employment pressures the u.s. is going to deal with now if we continue to grow here. i would -- i'm looking for two things. 16, 17, we're in that ballpark. we're going to go closer to 1800 and a spike in the vix. if it spiked to 40 or 50 and you're selling around that level

then i would be a very much more aggressive buyer at that level. >> it often marks a turn. thanks guys, dennis, kevin, michael, jim. >> thanks. >> a big morning for earnings ahead and we're getting numbers crossing the wire for united health. the dow component beating estimates reporting adjusted earnings per share $1.40 versus thompson reuters estimates of $1.48. the stock is up about 3.25%. they beat slightly on revenue. after tax margins in the quarter declines but they also reaffirmed guidance for the current fiscal year. 760 to 780 per share which is pretty well above existing consensus on the street so the street is going to like that. revenue guidance for the year, $180 billion. that's a little light but certainly appears to be a better than expected fourth quarter for united health and you can see how that stock is performing after that news. >> more earnings on the way

today. two big names with two very different stories. what investors need to know about netflix and ibm. plus the campaign trail goes through squawk box. 7:40 a.m., presidential candidate jeb bush joins us right here live on set. and as we head to break, check out this day in history.

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welcome back to squawk box on this tuesday morning. futures in the u.s. are moving sharply higher here. dow up by 263 points. s&p by 32 and nasdaq by 78. that's following a positive trade in europe as well as asia overnight. >> in corporate news, rio tinto expects to boost iron ore production and shipments this year. the outlook for commodities is sobering but analysts say strong output and low costs should help keep the dividend in place. a noticeable contrast to some of that company's rivals. sun core energy reaching a deal to buy canadian oil sands for $3 billion. they raised it's all stock offer to complete the months long fight for its rival. and royal dutch shell is exiting

a abu dhabi gas field project. major downturns are not expected. >> yielding 8%. if they can hold on to that that's impressive. whatsapp has more than a billion users and may be even more popular. it's dropping it's $1 a year subscription fee. that's the word from the founder. he says they're exploring other ways to monetize itself including charging businesses to communicate directly with users. that could mean your bank could message you about a recent transaction or airline about a flight delay. similar to facebook's ability to hail a ride with uber for example. >> the company said they wouldn't start monetizing it until they had a billion users. now they're almost there and completely switching the model. >> and the strategy. >> yeah. >> interesting. >> so they have seen something that tells them they have to do something else. >> or they'll make the companies pay. not the consumer. maybe that's the answer there. the nasdaq is down more than 10% so far this year and tech will be in focus today.

earnings after the bell are from netflix and ibm. here to break down the rough start to the year is dan morgan. senior portfolio manager and people are wondering how much we should look at intel as a foreshadowing for the rest of the tech sector. it didn't look good. >> intel came out last week, their data center group which was the big growth segment. revenues were only up 11% in the fourth quarter. they have been guiding around mid teen so that was the first big bell weather tech name with earnings and obviously their guidance was weak going into first quarter of 2016. so i think that kind of lead to some of the profit taking and some of the more momentum names like google and amazon even though they haven't reported numbers yet. we'll learn more today obviously with netflix and ibm. hopefully question get better numbers out of them and get tech back on track. >> how much do you think the street recalibrated expectations for ibm and netflix? we have gotten used to the

stories for ibm. years upon years of revenue slow down. for netflix, i think people are not expecting the subscriber growth at least here in the u.s. to be blockbuster but do you think the expectation versus come in enough that these companies can outperform? >> i surely hope so. i'd like to see good momentum back in tech. we look at ibm, it's a transition story. we still have a long way to go in this transition, you know? hopefully they can give us more indications that they're going in the right direction. especially with their strategic imperative initiative up 27% in the third quarter. everybody looking for that. on netflix, like you said, it's 1.3 million domestic subscribers. 3.1 million international. those are the numbers that i see flying around on the street in terms of where they've got a hit. everyone is really looking from netflix to see if they can be profitable in their international group. that's an area that they need to grow to continue with the u.s.

being very mature, getting more mature in terms of penetration raids so, you're right. is the barlow enough now that they can come in and beat the lower numbers so to speak and add positive momentum to technology? we'll have to see. >> i'm glad you said the word momentum dan because this has been called the mother of all momentum stocks, that being netflix at a time when momentum is falling out of favor. >> you're exactly right. netflix at one point in time was not profitable and now they're starting to turn a profit. they're expecting 2 cents a share in this quarter. they're probably one of the biggest momentum stocks. apple used to be. that's fallen from the wayside in terms of momentum but netflix when you look at the multiples and go through all the different evaluations it's a momentum play and at this point it's going to trade on the subscription growth. it's the whole fang thing.

it's the whole fang thing that lead the market up and feels like people are either scared of the valuations or their momentum in general and high growth is fallen out of favor people are looking for more value plays within technology. >> you see a defensive mechanism going to the names that produce dividend income. microsoft would be an example with dividend pulling out of money away from these higher growth momentum plays. i just think it's natural with concerns of what's going on with oil and china and all the things that everyone is worried about now. that's the movement in the market and could switch back to momentum. >> it's been free cash flow negative is worn as a badge of honor. it's been investing in content

to a greater extent than any of its peers are affording the ability to do. we have been asking the question how much longer will investors be giving these companies the benefit of the doubt on those me tricks? do you think this is the quarter where that ends? >> i hope so. the key for netflix is their contribution margin. i think the guidance is about 17%. as i mentioned earlier, they lose money in the international markets and they continue to be positive in the domestic markets. so, you know, how long can they keep kind of telling the story? we'll have to see. obviously people have bought in the past on their subscriber growth. you mention their increase in content. i know that they're doing their own in house type of stuff now but competition is fierce in that space right now. amazon is in that space. a lot of the big cable companies getting that space. it will be interesting to see will investors continue to buy into these different matrix that weren't exactly profits or cash

flow positive and all the things you're mentioning to continue the stocks to go higher we'll have to see at the bell tonight but it may not be as good as we all hope. >> i was surprised to hear you say that people may be interested in the other stocks like microsoft because they pay a dividend which is not a way i heard anybody talk about technology in a long time. that sounds so old school at this point. i look at intel with a dividend yield of a little more than 3%. considering the pc numbers that we've seen lately, is that safe at this point? >> yeah, i mean, you look at all of these old tech names, i call them the old smokestack tech names back in the 90s. the intels, the sis coes, the microsoft. they all pay good dividend income which you switch over to what you call the new tech, the amazons and the googles and so forth which pay zero dividend and are all about growth.

pc vols and intel has been very bad for a very long period of time microsoft is more of a cloud play but you have two sides of technology. you the old smokestack i call them which are the old companies more mature that now pay dividends and you have what i call the more growth momentum plays which we're talking about before. amazon, google, netflix and so forth. so you definitely have two sides of the coin when it comes to tech. >> hard to justify 3% dividend yield when the stock falls by 20% your value is wiped out because of that. are you buying netflix or ibm going into earnings? >> ibm we hold in our equity income model which is a dividend oriented model that we use. so they look at it like a 2.5 to 3% average dividend income so that's something that we look at ibm as we don't own netflix in a

large percentage now. we have been cautious because of some of the things that you mentioned. they just recently really turned positive in terms of making money and we wanted to see if their model came out. they're just starting to finally turn profitable hopefully so we have to get more time and make sure that we feel comfortable before we add that to our list. >> we appreciate your time this morning. we will get those numbers after the bell. >> coming up, china's economic growth slowing to the weakest since the year 2009. is this the settle for a global recession? we'll discuss. and the music world losing another legend. glenn frey passing away. he formed the eagles back in 1971. millions of albums sold. many awards and the eagles are a member of the rock and roll hall of fame. he will be missed. glenn frey dead at the age of 67. a number.to insurance policy has

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. >> china's economic growth slowing to 6.8% in the fourth quarter. that's the weakest reading since the financial crisis though it was in line with estimates. 2015 full year growth came in at 6.9%. that's the slowest in 25 years. is this setting the world stage for another global recession? joining us with the latest is leland miller. president of china beige book international. good to have you here. the title of your company explains what you do. you do a beige book in china. tell me about the gdp out this morning. do you believe them?

>> no. anybody surprised by the fact that it came in at 6.9% and the chinese basically hit their target for the year. i don't know who these people are. at the time they're going to meet their targets they always do and the reality is always something very very different. >> what's the real state of the chinese economy right now? >> we don't do a gdp proxy but this question always gets asked. it's probably 4.5%. >> hold on. that is sharply lower. we'd love 4.5% in this country. but for china that's such a huge buyer of commodities that is very slow growth. >> it's very slow growth. but it's also a number without too much meeting and china wants to hit a certain percentage gdp growth. we want to tear that bridge down and keep going until they hit the gdp number it's just a number. it's a manipulated number but

even if it wasn't it doesn't tell you that much about the underlying conditions of the economy. >> help me understand this, you read all these assessments and journalists ask the question have the chinese lost control of the economy and yet they're supposed to be moving toward the point where they don't control the economy. where are we in that transition and is it a problem that we're still asking that question? >> it is a problem. that's the paradox with chinese reform. everything is two steps forward and two steps back. you want to see a push toward greater consumption and less investment. we tracked capex dropping for a year and a half now in a very strong way. you look at what happened in the stock market. it was essentially households levering up to reinflate corporate balance sheets. that's not reform or reversing financial depression so some of the stuff is positive. a lot of it is negative.

at the end of the day they have to learn to inject risk into defaults, bankruptcies, other things like that or they're not going to have a market system and they're not going to have true reform. >> maybe the west leland is kidding itself and thinking that china can change from an export driven economy to consumption driven economy overnight. in reality it's a decades, many decades long process and what china is going through now is just simply the normal exercise that one would go through in trying to completely change one's economy. >> i think that's exactly right. leaving aside whether they're doing it well or not and i don't think they're doing particularly well this is a long process. it's not something that can be done overnight. it's not helped that people have allowed the chinese government to spread this message that gdp is close to 7 or 8% and then they're going to yield back up to stronger growth.

this is an economy doing a long-term deceleration. it's never going back to the levels of growth it was before. there will be a series of crises as investors try to figure out what's going on. this is going to be a difficult process. >> what can officials be doing better because there has been a ton of commentary that they're less effective than their predecessors in controlling the economy and figuring out the stock market and i'm wondering what you think they should be doing to make this transition more seamless and more transparent if that is even possible. >> well, it would be very hard to be less effective. that administration did nothing but reverse reform for ten years so you can't say he and his team haven't been trying. they have a big task ahead of them but at the end of the day

the most important thing is to create risk. the stock markets, the reliance on the stock market and the government backstopping is not a good thing but until the chinese government allows companies to fail, trust products to fail, businesses to fail across the spectrum, they're not going to have a market economy and they're going to have huge, huge problems a long the way. >> yeah, we're watching it as it happens. thank you, good to have you on. >> pleasure. >> coming up, we're still waiting on results from bank of america and morgan stanley. we'll bring you those numbers as soon as they're released. but first, a weak holiday shopping season. squawk box returns in just a moment. so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep it all digital.

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earning central comes alive bank of america and morgan stanley expected to roll out results this morning. after the bell, netflix and ibm are on the calendar and at 10:00 a.m. the national sentiment survey for the national association of home builders and that's today's squawk planner. >> retail sales declining in december to finish out the weakest year for retailers since 2009. courtney joins us with two special guests. >> we have matt shea who is the national retail federation ceo with us as well as former sachs ceo. you're in town because we have the convention so december was

kind of disappointing for retailers to say the least. why is it so hard to be a retailer? >> we talked about some of the factors. peel talked about the strong dollar and disinflation environment and consumers spending money on other ways. so on hospitality and lodging and the experience side. if you look at it segment by segment you see that on certain categories did very, very well. so there's ways you can compete and be successful but it was a challenging environment and i know you had lots of ceos talk about are they permanent factors or transitory. our number was 3% which is still higher than 13 and 14. >> put you forecast. >> we have and we lost a little wind at the end of the season. >> steve you and i talked about china playing a factor there. do you think it's possible that it could derail the high end consumer? >> i think the high end consumer

is a bit challenged because you the tourism factor. less tourists coming into the luxury stores and the high end consumer as matt was talking about experiences, they're buying a lot more travel. they're going to the hotels. they won boutique differentiated products so some of the luxury brands aren't performing as well. >> tiffany just literally moments ago reported 6% lower than the prior year for their higher sales and for some of the reasons that you guys are talk about. fewer tourists, currency. >> even on a tiffany what you are finding is that their higher end exclusive type of products is performing well. it's the silvers of the world. not performing as well. >> the recent market performance has raised the r word, recession. do you guys see any of that anywhere on the horizon? is that possible in your world?

>> that's not what we talked about this week. we had a couple of economists talk to the board at our meeting. there's a lot still to be learned from 15. people are reinvesting and taking those lessons and putting them back into the business. no one was that pessimistic. there was more optimism and enthusiasm about the opportunities ahead but there's no question there's still challenges in the economy that are maybe more of the macro level. >> i'm a little bit more optimistic relative to the numbers. mastercard numbers showed a 4.7% growth of the consumer spending in the november-december period. what you're seeing is a change. consumers buying smaller, more unique boutique. so it was double the growth rate of the larger companies. so the consumer is actually relatively healthy but they are buying differently. the apparel products that are widely available everywhere that's not what consumers are buying. they're going for something quite different. >> well, the high end consumer

is not necessarily the consumer that's going to be taking $30 in extra savings they got from lower prices at the pump and going to the mall and going to the store or spending so when will we see that consumer come back? >> i think you're seeing it already but they're not necessarily spending it on the same thing. look at restaurant sales. restaurant sales were growing almost double digit. so they're taking some of those dollars and putting it into the experiences, the restaurants, the travel because of low gas prices they're traveling more. things like that are where the dollars are going. >> look at auto sales. think of the way people are replacing durable goods and putting it into home improvement and that kind of thing. there's money to be spent going back into the economy. >> the stocks are acting like maybe they're telling us that there's a peak in auto sales right now. >> could be a peak in auto sales but they're spending on furniture. furniture sales were up almost double digits. >> before we let you go, real quick, jcpenny had a better

holiday season than macy's. what did they do right that macy's missed on. >> i wouldn't say one was right and one was wrong. i think that jcpenney is making a terrific recovery. revenues went from 18 billion to 12 billion and the team have done a terrific job of stabilizing the business, getting back on track. putting inventory in the stores, doing a lot of the right things for the consumer and the consumer is responding and you saw good solid gains in revenue during the fourth quarter. >> thank you for joining us today. you big days ahead. >> i'll see you there. i'll be there in a little bit. thank you both. >> coming up, what do the charts say about the markets? we get technical with the s&p 500 to find out how to play stocks right now. plus nothing says valentine's day like reservations at white castle. feel the love. squawk back in a moment.

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i welcome back to "squawk box." look at bank of america shares this morning. up 1.5% in premarket trading. we're just getting earnings hitting the tape, and bank for the fourth quarter reported earnings of 28 cents a share,

compared with an estimate 26 cents a share. revenues light at 19.53 billion, and estimate was just shy of 19 preponderate 8 billion. we'll make our way through the release, of course, there's heavy focus on exactly what the bank's energy exposure is, how they did in trading, and how margins did in a quarter where we saw the fed rate hike, but we saw yields overall, scott, come in. we'll get the release and more headline. >> they are trying to put a positive spin tennessee o. saying the highest earnings in nearly a decade, and we heard that from so many of the banks this time around, but the stocks did not respond so well. >> citi filed that on friday. best profits in nearly a decade for krrciti, down 17% for the month. investors see the stocks trade close to book value, but given the outlook -- >> most well under. >> some are. >> still can't get any love.

>> equity still sinks. >> the way the banks traded over two weeks alone is unbelievable. most of the big bank stocks are down, right, kayla, double digits? >> double digits. the leverage for growth was the multiple rate hikes coming this year. if that does not happen, margins can't expand, earnings can't expa expand. >> rationale was the ten year steepens, making more on loans than deposits, but don't see that going anywhere. >> yeah. >> all right. the s&p 500 hovering around key support levels, drilling down on the technicals now with the resident chartist. rich ross, head of technical analysis, cnbc contributor as well. good to see you. so assess the market for us here. you know, larry fink said 10% more to go. others disagree. what do the charts tell ya?

>> roughly in line with what larry fink said. looking at the chart of the s&p 500, scott, in our view, the line off the top is not consistent with the collapse seen without commodities, currencies, and high yield credit, so from that standpoint, 4% downside, the weak average coming in at 1780, another 4% from current level which is reasonable given i erosion from around the world and asset classes. >> yeah. so 1780 you think is settles out based on what the technicals are saying? which they are not always correct, obviously. >> like the fundamentals, correct. >> nice dig in there. >> we use the fundmentedals here. we don't want to overplay the importance of levels. looking across asset levels and myriad of instruments here. there's issues out there. it's not just a level s&p 500. there's been erosion in big

sectors, the break down in the btx, bank of america and citi broke down and goldman sachs broke down, and problems in high yield. it's not a level in the s&p, but there's problems all around the world and asset classes. >> do you like at the vix as well and we were talking about the vix this morning, and i think michelle was asking one of the guests about it, so it really spiked in august at the height of the summer fear. where do we see it going now? where is it? 27? you have not gotten nearly back to the uber fear risk. >> great point. look, in august, we were higher, closing at 40, spiked 50 in the flash crash. now 27, 28, and for my money, we could say it's a worse position than august. we're around the same levels in terms of price, but we've seen more dramatic erosion in the currency space, in high yield, so i think the problems are worse, but the visx is not as high. some say glass is half full, but

panic is not there. for me, that says there's further to go downside in terms of stocks, further upside in terms of the vix. >> rich, thank you. >> thank you. >> rich ross, head of technical analysis. coming up, heard from b of a, awaiting results from morgan stanley, and macy's ceo joining us on set with the update on the chain a few weeks after the holiday rush. more "squawk box" in a moment. these are the hands, the hands that drive commerce, that build business across borders.

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futures rallying, and a warning of oversupply in oil. bank of america and morgan stanley quarterly results. breaking out numbers set to hit the tape moments from now. >> a cnbc exclusive, macy's ceo

and chairman on the company's holiday sales and update on mall struggles and its online success straight ahead. countdown to iowa. presidential candidate, jeb bush, joining us on the "squawk box" set. his plan to fix america's education system and blunt assessment of the nation's economy and his war of words with front runner, donald trump. the second hour of "squawk box" begins right now. >> live from the beating hae ii of business, new york, this is "squawk box." i'm scott walker with michelle caruso-cabrera, and the futures this morning point to a higher wall street, dow opening higher reactings to the china gdp number, and so green across

the board, and crude as we do, wti up 2%, and up by 5%, wti, if you score at home, is north of 30 bucks. michelle? >> morgan stanley numbers hitting the tape. we're going to the number 43 cents with revenue of 7.68 billion. the number in the prerelease is 39 cents, but excludeing expenses, it comes in, either number a beat at this point. should point out that year ago revenue was 8 billion so there's light compared to a year ago. not as positive from james gorman compared to brian moments ago when the b of a numbers came out. they had a strong overall performance in the first half of the year, but impacted by difficult market conditions in the second half of the year that dampened trading activity there.

and 40 quarter, we took action to restructure the fixed income business on capital and expense basis, which, of course, we reported on and read in the paper. entering 2016 managing expenses across the firm. b of a doing the same thing, numbers coming in the way they did. right now, stock higher by 3.5% in premarket trading at this point. positive result on what appears to be a big beat on bottom lines. meanwhile, bank of america earnings hit the tape moments ago. bank beat by 2 cents. bottom line 26 cents. revenu revenues, depending how you look at it, looks like they were just shy of the estimates by 19.53 billion, and estimates for 19.8, and looking at the bank's net revenue, net of interest expense, it looked like it came just in line, pretty good performance in the trading unit, revenues in fixed income trading up 20%.

equities trading revenues 3%. overall, the unit saw units rise 11%. expense cutting, a story at the bank, expenses down 16%. net interest income, which is the amount of money that the bank makes on loans and yields, that was up just a very slight 2% noninterest income, which is pretty much everything else rose 7%. margins exactly in line with analysts' estimate, 2.16%. they did outline their exact exposure to the energy sector saying in the fourth quarter, exposure to energy was 21.3 billion and saw a credit provision, and large portion of that for energy, and they said they will continue to reserve. they will continue to be very critical of the portfolio and reserve accordingly, but that's a big focus of the media call beginning in a half hour's time as well as on the analysts' call which begins at 8:30. michelle? >> maybe it helps change the

tide of how financial stocks have traded, morgan stanley and bank of america unless you think they are getting the lift they are because the overall market picture this morning looks good adds well. >> i think the tape this morning helps the investment community be able to interpret the results for what they are and not necessarily the backdrop they are up against for today. >> reflection on how citi traded in the wake of the earnings and wells fargo as well. still, at the same time, return on equity for all these guys is blah, right? is it getting better any time soon? >> return on equity -- >> why is it trading below book value? is there a reason, right? when i look at the politicians -- >> had it for so long. >> the politics, on both sides of the aisle, they want to cream -- listen to cuomo in the speech, fund the new york state government with bank fines. never ends. i don't know. look at other parts in fact market where i think, if you feel more comfortable moving

forward. >> not a lot of catalysts, that's safe to say. >> wall street set for a rally this morning. that's despite china's slow growth and iaea's glut for oil in 2016. the investment cofounder joining us, david kelly, jpmorgan chief global strategist, and jeremy, chief equity strategist, guys, good to have you here. david kelly, a recession here? the stock market's acting like it. >> no, wii not. if you look at the pieces of the economy, consumer spending is, by far, the biggest, two-thirds of the economy. consumer fendmentals are absolutely fine. low gasoline prices, low confidence, lower debt service calls, pinned up demand. consumer spending grows by 2-3% this year. also, housing, home building, is still way -- way under built, growing 10%. put that together, those are over 70% of the economy.

there's nothing weak enough elsewhere in the economy to push us into recession. slow, but steady growth. >> why is the market selling off? >> market is not rational in the short run. people are scared. people are confused. nobody understands china. also, people are confused about what oil means for the u.s. economy, for the global economy. like last year, a lot of confusion. i think what happened is investors hold back getting invest the because of the confusion, but key thing is look at the economy and look at valuations. if you're okay in the economy an valuations are now cheaper because of what happened last year and the first part of this year, take the opportunity. this is a good time to get in. >> so, jeremy, he's sanguine on the market at this point, are you? >> i tend to agree. i think that what's really been the biggest disconnect between the markets right now and, you know, fundamental picture is not just, are we not going into recessi recession, but what's the outlook for corporate profits? keeping it simple. last year, a flat year for the market, flat year for corporate

profits. i think the market down 8% year to date is an overly negative view what happens to the corporate profit world. mathematically. >> you'd step in here? >> yes. over the next few months, continued volatility because we have a lack of clarity around ultimately will china or will china have a hard landing or not. what's the impact of lower oil prices. are we, you know, there's, you know, negative ramifications in extremely low oil prices of credit losses or financial accident, but the potential hedge funds that is, you know, incorrectly positioned, per se, but, broadly, i think that looks good. earnings flat because energy earnings sector down 60%. take tech, financials, health care, consumer, discretionary, that's two-thirds of s&p profits. year to date through the third quarter of last year and 2015, 10% on year on year growth. even if that's cut in half, you

still have positive growth in corporate profits this year, and cutting in half is overly pessimistic. >> paul, lack of clarity, heard confusion from the two prior guests, and title of your piece entering this year was, we have no idea. [ laughter ] at least you're honest. >> well, i think, when you look at it, what david said about the economy not going in recession, we agree with that. just because the economy is not going in recession doesn't mean you're going to have a strong market. coming into the year, the biggest head wind in our view is valuations, looking at it, valuations are above average, and in some cases, expensive. this was not -- that's not necessarily the fuel for market selloff, but the catalyst, but it is the fuel that once you have the catalyst, which can spur the declines. we saw that, fed hiked rates for the first time in a decade, and when you look back historically, when the fed hikes rates after a long pause, you get short term disruptions in the market. happened in 1994, 1997, 2004,

and it's happening again now. corrections between 8-10%. it's not unkcommon to see this. going forward in the market, valuations came in on the fact that we had a 10% decline, so pes come in, but there's a back and forth market here. >> david, we're in correction territory as paul mentioned in the dow, down 10% from november, and nobody's talking about the manufacturing sector. can we revisit a recession in the country if the manufacturing sector is in recession? >> absolutely. in the 1950s, 30% of the american work force worked in manufacturing. now it's 8-9%. we had an inventory correction that occurred in the fourth quarter. inventory growth is only $45 billion in the fourth quarter compared to 114 in the second. most of the correction is bind us. also on the valuations issue, actually, we disagree a little bit on that. i think that, obviously, with the corrections we've seen so far this year, we're at about

14.9 times forward earnings over the next year. the average over the last 20 years is north of 16, so we're just a little bit cheaper than average, but that's in absolute terms. relative to the return on cash, bonds, and relative to the inflation rate, it's much cheaper. you got to, you know, if you believe the idea it's a new normal and interest rates never go back up, if inflations never go up, pe of 16 is wrong. you shouldn't be able to get -- a pe of 20 makes sense. i think the market is somewhat cheap. it's confusion diminishes, people are invested. >> thank you, guys, appreciate it. jeremy, paul, david. coming up, retail details, speaking exclusively to macy's ceo about the state of the retail sector, holiday sales, and shareholder activism. "squawk box" will be right back. to help pay for her kids' ice time. before earning 1% cash back everywhere, every time.

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macy's announced big numbers over the weekend, generating the first billion dollar monthly sales on the digital platform. courteney has a special guest. >> the ceo joining us on set before we head over to the national retail federation's big show. teri, congratulations on a good december for digital sales. was the billion dollar sales from stores migrating to digital or new dollars, new customers?

>> well, it was a challenging period for us and others as you've seen and heard, but on the digital side, that's the way the customer's shopping today. it's not one or the other. it's no longer the customer shopping online or stores, but completely mixed in an omni channel way, starting the journey with the phone, two-thirds, and confirmed this week, two-thirds of the customers start their journey on their phone and doing the research, and then going and deciding whether to shop, and trying on the product, touching the product, and tour chasing. sometimes in the store, sometimes on line a day or two later. it's mixed, but, obviously, we invested early in the online business. we're now the sixth largest internet company in america and growing at double digits, a big part of the future, but it's not just one channel or the other. >> looking at the future, macy's could be doing something interesting things when it comes to real estate. do you like the proposals? what do you think about the idea

for the joint venture? >> talked to them and all shareholders. it's a time to stay close to all shareholders, and we are doing that, certainly, doing it generally, but certainly now. the ideas coming forward, i think they just came out with an a letter they published that has said they endorsed most of what we are doing so we're pretty much on the same track. i'm all about trying to get value for our company, and if i can do that without disrupting business, without leveraging up the company and staying investment, great. we'll all over the ideas, and so there's good ideas coming through the conversations, and we're pursuing them. >> have you met personally with jeff smith? >> i have. with him and lots of other people who are not in the newspaper. >> you think real estate company looks at the options, how long do you think it takes them and you to go through what's on the table and what's the best outcome? >> good question. i don't know the answer to how long it's going to take, but i know we have a level of professionalism now we never had looking at real estate in the past, and so not only that, but i also announced that i'm hiring

a person to work full-time for us because i love these guys, they are fantastic. >> they are not free. >> they are not free. no, but they are terrific and great adviserings, but i want someone on my team looking out just for us, and for the long term, and can really help us rethink that value opportunity within all of our real estate as well as look at the boxes themselves as they, hey, i have an idea how to make this more productive. keep it, make it more productive. looking for that big-time real estate person. that's an official announcement for all you interested candidates. >> and you're closing number of macy's store, but moving forward with the backstage strategy, which is macy's offprice strategy. are you seeing new customers or not store cannibalization because that was a fear. >> it was a fear, but i have to say, look, first of all, we chose to be slower into that business because we've been very aggressive putting money in the digital business. you only have so much capital. you make decisions. the decision was to go after the

online and omnichannel business first. glad we did that, obviously. that was the right decision. >> we're also looking at now as putting the backstage inside the store. we have not done that yet, but that's not capital plan for 2016. now you're going to see a real test whether it cannibalizes the business or not because it's inside the store. my belief is that we have to make the stores more productive, all of us, all retailers make stores more productive because as we described, customers choose to buy product online, some in stores issue and buying online, returning to the stores as well as a transaction that gets no credit in the store, but it's a transaction that takes time and expense. we have to find more reasons, trips, ideas to make the box more productive. we look at everything like blue mercury shops inside the store, including backstage in the store. sorry. >> formgive me. i didn't mean to interrupt. where do things stand today? >> yes.

i said it's simple fourth quarter is november, december, and january. november, december we're done. good at vision on what the quarter's going to look like because january is a much smaller month than november and december. difficult, difficult period for us and for others, and you're starting to see and hear that, of course, at the nrf show with other retailers. a difficult period for consumer spending in our categories. yet, consumers are -- and i heard you guys talking about, is there are and registraticession don't know the answer to that, nor do any of us, but i know consumers are spending, but in different categories. automobiles, record sales, restaurants, doing well, lodging, doing great. they are spending money on other experiences. all i will tell you all is that i've seen this movie a few times before, and these are cyclical things that do happen and do occur, and that cycle that we're in right now is probably going to last for a bit of time, but not forever.

>> so you said -- >> when people look at the stock or for months, and asked, well, what's the problem? it's the weather? deleveraging? spending on other things? shouldn't read into the performance of what's happening in retail as something bigger beyond your control and just some cyclical move within the economy that suggests a slow down? >> michelle, this is a fair question. it is weather. anybody who says, oh, they talk about weather, that's ridiculous. those people do not understand the retail business. that's a fact. okay. we can directly relate weather to performance. particularly in november and december. >> right. >> no question about that. international tourism. that's real. the dollar is strong. if you are coming from a different currency and spending that money, those impact, but most will -- the dollar's going to stay strong, but we anniversaried that, right? weather's cooler. that's going to be fine too. is there one more thing? >> right. >> i think there is one more thing. i think the consumer behavior and the way they shop is

different today than a year ago than it was two years ago. that is, in fact, a fact, and i think we're in a position probably more than others to take advantage of that because of the investments long term that we've done in the last several years in online retailing. >> you said in august here on this program, retailers will have to face the music, and the music is sometimes tough when you think about some of the head winds, but could you have predictsed head winds would have been as bad as they were? >> we couldn't, but you couldn't have predicted the stock market in the last couple weeks either. i think it's been a pretty aggressive response by investors in terms of pulling back and, like one of the guests earlier talked about the opportunity to invest in good companies and companies whose pe just has gone at a significantly lower level and probably are some opportunities, hopefully that's one of those called -- >> buying back stock here? >> you know, we have been aggressive of buying back stock. you'll see that, when we report,

you can see what we bought back. >> things turned because of the weather turning colder? >> i wish i could talk about current business, but i can't. >> you can't. >> oh you can't. >> exclusively with cnbc. >> 18 degrees. >> it does help. >> snow in the city by the weekend. >> we could. >> come on down. snow on a tuesday night. i got a specific snow pattern. >> there you go. middle of the week. >> thank you so much for joining us. you have a busy day so i'll see you there. >> thanks. >> thank you. coming up, the ride along at the box office, and, later, republican presidential candidate, jeb bush, joining us. revealed plan to fix higher education. that came out just yesterday. he will speak to us in just a couple minute's time. "squawk box" will be light back.

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it was a rough weekend for elon musk. spacex tried to land on a barge

in the pacific, and this was the result. that video posted on his instagram's profile, it claim so close to sticking the landing on water, but ice buildup may have been the cause of the botched landing. if successful, it would have marked a second milestone for the company in just a month after it made history when it launched a rocket in orbit and safely navigated it back down to earth. quite stunning video, but a strike against a company, michelle, that made a lot of progress. >> yeah. amazing to watch. the old joke, it's knot rocket science. it's rocket science, right? >> yeah. >> move over "star wars: "the force awakens" dethroned. this weekend, it made more than $32 million, bringing total earnings to more than $850 million in north america.

ride along 2 was the top performing movie. the picture took in more than 41 million over the long holiday weekend. when we come back, reaction to bank of america quarterly results, what the street thinks issue and education reform, the economy, and the race for the white house. jeb bush is here. as we head to break, look at u.s. equity futures, a big open today. dow would open plus 250 points.

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earnings out, reaction from the street is just minutes away. from iran to education, presidential candidate, jeb bush, joins us to talk about his run to the white house counting down to the iowa caucus, and another rock n' roll legend leaving us too soon. remembering glenn frey. it's tuesday, january 19th, and you're watching "squawk box" on cnbc, first in business worldwide. ♪

welcome back to "squawk box" on cnbc, first in business worldwide. among the stories front and center this morning, johnson and johnson restructuring medical device division, cutting the work force by 4-6% in two years. the company is taking a pretax charge of 2-2.4 billion on restructuring. morgan stanley reported a profit a dime better than expectations. revenue at the bank topping estimates coming in at $7.9 billion. bank of america beating the street by 2 cents. revenues in slightly shy of estimates, global wealth investment revenue $4.4, and revenue at 3.1 billion. let's talk more about the bank earnings from bank of america and morgan stanley.

bank and equity strategies, marty mosby breaks down the numbers. marty, what's your thoughts on your initial read of bank of america and morgan stanley's quarters? >> well, we're seeing from both is that, you know, this was definitely a pressure quarter they had, you know, pre-advertised, so the numbers you report, betting by the dime was the noise negatives were factored and unfavorable things were. as we came out, they netted out more positive. when you look at both banks, what you see is possibility still under pressure in the back half of the year given the, you know, the less trading activity in capital markets revenues that they have experienced in the third and 40 quarters. >> looking at the positive trade in the premarket, marty, for bank of america, up 2%, morgan stanley up 3%. en broaden out the chart, how

hard the companies were hit in 2016 alone, how much do you think the market is discounting the stocks? do you think they are discounting them fairly? >> overly discounted at this point. we get spoo the concerns or anxiety trades, what we see with the banks especially is that pressure pushes down the banks that don't have the dividend support or returns. when you look at bank of america, they are still earning less than 10%, morgan stanley back in the year of earnings where returns were around 7-8%. improvements are necessary to support further appreciation in these types of banks. what we're going to see is rebound as we get into the first half of the year with capital markets activities improving, able to see some benefit from rising interest rates, and in the positive, stocks today, the fact that really, stability and steadiness without a lot of, you know, talk about that charge offs going higher says that that

energy part is very manageable. you put that piece together, and you can see rebound here as we go into the first half of the year. >> well i know you and other analysts are listening to closely to the calls beginning in an hour's time. marty, letting you go this morning, but we appreciate your time. >> thanks. >> marty mosby from vining sparks on bank earnings. final countdown to the iowa caucuses according to the national poll, donald trump holds the lead over ted cruz and rest of the field. jeb bush is pushing forward, releasing the blueprint for the education system and addresses the council on foreign relations later today in new york. he's on set with details of the plan, take on the economy, and also the developments with iran this week. good to have you here, governor. >> great to be here. >> your education plan, but, first, what do you tell the kun si sel and the prison swap?

>> it's flawed in terms of how we're going about it. they are our enemy. they expressed it. they believe that we're still the great satan, and yet we make unilateral concessions. if the president had kept to his negotiating positions in the beginning, we would have had a great deal, but unilaterally conceded everything and only focused on the nuclear program that they had rather than their investments in the region. we see what happens when they are unleashed, in effect, and now they have over $100 billion in short order to continue to be the largest sponsor of terrorism, so, yeah, i mean, i'm happy the hostages are out, in return of people who violated the law. >> would you have done that too? >> i don't know the details. i don't know that i would have, set the stage for having other hostages be taken by countries that are enemies of ours, but at the same time, it's hard to be

harsh on this because people's families are yien mied. a reporter only doing his job sought of prison. a pastor is the same. so, i mean, that's good news, but bad news is we show a position of weakness the way we negotiate with iran, and the net result is former allies or allies like saudi arabia and others now no longer think we have their back, and that creates insecurity. the united states has been a force for good in the world when we're consistent, when we are not necessarily the world's policeman, but when we lead. right now, we are not. >> your education plan. right now, we have 529 college savings plan. you want to make that for everything, right? >> yeah. >> explain. rather than be dedicated for college, it's used for? >> private schools in the k-12 system, for tutoring, for a certification program so you're focused on college and career readiness as long as higher

education, making it easier for people to invest in, particularly low income kids, a tax free basis, invest in people's future. >> the federal government spends $22 billion in federal dollars every year on 44 different programs. >> it does. for only pre-k. >> that's pre-k? okay. you want to take that money and do what? >> if states want it, if florida wanted to expand early childhood literacy base program, we have the largest in the country, we should be able to take that money, if the states want to do it, give it out in the form of a voucher every year, $2500 for low income families every year to allow for people to be ready to go to school. the whole point is all these programs fund the bureaucracy. 44 programs, think of the mind numbing paperwork with that. why not trust people to make decisions for their families? whether it's the k-12 system or pre-k or college, the whole point of this ought to be we

have to empower people rather than bureaucracy so they can rise up. >> what happens to the public school system if you shift students away from the public system to the private school system if families save more and then able to exercise a preference for that system? >> well, the very fact if they had the choice and they would go to a private option means the public schools have to get better. gosh, what a horrible idea? >> how? >> we did it in florida. competition works. it works in every interview in the real world, works in education, has in florida, and net effect of this is putting consumers, in this case, parents in charge of their children's education, will make all schools better. >> you want to give high school -- every single high school graduate a $50,000 line of credit? >> yeah. >> even if you come from a wealthy family? >> yes. >> why? >> because you can access the student loan program right now. there's no difference than what we have. rather than paying back with recourse debt, with --

>> meaning you have to pay it back opposed to -- >> paid it back based on income. >> right. 1% per $10,000 education dollars you spent. net effect is you have more people going to college, graduating without this huge burden. in the last six years, the student loan program has doubled in size. it's now $1.2 trillion, no underwriting criteria. this caps the amount you can have. it makes higher education entities have skin in the game, and focus on lowering costs rather than using the student loan program to finance their college. >> 1% of income for 25 years -- >> 1% per $10,000. >> thank you for clarification. >> you would have to pay it back. you pay it back over a period of time, and you would -- >> what if you never hit $50,000 because you make so little money. taxpayer pick it up? >> as we do now, exactly. people that pay it back overall

in the net basis, this won't be, in terms of cost, this will save money for the taxpayers, but more importantly, it's a market based means by which we access higher education. imagine accounts i described all the way from pre-k up built up over time so families have a choice beyond debt. the system does not work. why are people defending it? i'm curious. the system today has rising default rates, recourse debt on the backs of young people, gramguatigram. >> tuition rates are rising. >> why? because it's financed by the federal government's student loan program. there's no accountability. our system caps the loans and forces people, the institutions, to lower costs rather than raise costs. >> private institutions can only raise tuition as much as inflation or less than inflation? >> markets will do this by themselves. if you have a cap on the amount of money that's financed, which

is what we are proposing at $50,000, you'll see everybody's interest aligning, which is get kids to graduate with a four-year degree in four years and do it at a low e-cost, not a higher cost. >> can i ask you, how come your message is not resinating more? you know, yesterday, i watched donald trump up in new hampshire calling you and hillary clinton puppets for campaign donors, again. >> yeah. >> you have a sort of comprehensive education plan here. how come that message is not heard more than it is? >> it is beginning to be heard. go to new hampshire right now, you see that we're on the rise. polls show in south carolina and iowa, we're rising up. got a long way to go, but at the end of the day, who can sit behind the desk and make tough decisions? who is serious? donald trump has proposed a 45% tariff on imports for china. denies it now, but that's what he proposed. proposed, in effect, a global depression. have you talked about that? you're a business channel, you

have a lot of people that watch. that would be devastating. >> what's the current state of the economy in your mind? >> bumping along. we got to reform how we tax and regulate. we have to embrace the energy revolution. we should be growing at far closer to 4% than 2%. you don't scare people by saying that the chinese are taking advantage of us and we'll have a global depression with the 45% tariff. that hurts iowa agriculture, manufacturers across the country, and consumers pay the heavy price. it's -- this is the kind of thing -- someone needs to pause and say, hey, crazy talk does not help us get out of the mess we're in. >> why does the american public listen to the message if you say it's crazy? >> you don't think it's crazy, a 45% tariff? >> not suggesting either way, but he says what he wants, and the poll numbers are not hurt at all. >> people are anxious. >> you put yourself out there saying you have a more credible message, your numbers do not

improve. >> i do have a more credible message for sure and leadership skills to prove i can do big things, and my job is to go convince people in the early states that that's the case, but simple fact is if people paused and saw his ideas and paused and reflected on them, and if they think that's the strong horse, basically, advocating a global depression or all the other means and things he's suggesting, i think there's a reality check, and either trump's going to change his mind on these summibjects, which i doubt, or pay a price. he's not president of the united states with these attitudes. >> is new hampshire the last stand? >> we're on the ballot in every state. this is a crazy time. you know, this election, there's a lot of people running. we have the resources to go to distance. i can't tell you how it will go. tonight, this night, a town hall meeting in new hampshire, and i got four days up there. we're making really good progress. >> we think about the 2012 primaries, santorum took iowa,

rome you kn and do you see cruz being the rick of this election? >> every election's different. as i said, there's deep disaffection in the country now. people are angry washington's not working, angry with the president and his policies, and i have to make the case we can disrupt the order in washington, d.c., and that's what i do each and every day, and we are making good progress. >> governor, thank you. >> you bet. >> good luck today. >> it'll be fun, thanks. oil glut ahead? a stiff warning. oil markets drown in oversupply? we'll be joined by the manager of fidelity's $2 billion select portfolio next. special coverage of the world economic forum starts tomorrow from davos. joe, becky, and andrew are in the swiss alps to talk to the biggest names in business. fun starts tomorrow at 6:00 a.m.

welcome back to "squawk box" on this tuesday morning. futures have been in the green all morning. dow slated for an open up, and s&p up 28, nasdaq up 69, of

course, following china gdp, positive trade in asia, positive trade in europe. we'll see how we open in a couple hour's time, scott? >> we will. oil prices could fall further according to the international energy agency's first report of the year warning markets could drown in over supply and trimming estimates for global oil demand as china's expansion weakens. price of crude now, it was a bid of wti and brent higher today. there's a look at wti higher, and now with the strategy on playing the energy space is the manager of fidelity's $2 billion select energy portfolio. john, good to see you. >> good to see you, good morning. >> morning. more pain ahead. how do you invest in this environment? >> so the energy markets are stressful right now. that's fair to say. >> you think? >> i think. i think that could be the opportunity. i think if you can stretch out your time horizon one to two

years, there's cheap stocks out there. not all the stocks are the same. if you can find a company that's down a lot, gotten cheaper, and there are many, if you can find a company with a good balance sheet, and there are many, and if you can find a company that's -- if you find the company that's not going to go out of business, it's going to be in business in a couple years, now is a great time to put money to work. >> what's the most recent stock you bought or added to a position you already had? >> i'm not allowed to talk about which stocks i put in the portfolio or taking out. i'm allowed to point to the top ten holdings in the fund as of the end of the year. slumberjay was a big holding in the fund. it's a company that's been generating a significant amount of cash flow and reducing its cost position relative to the peers, one of the best in the industry, and they are working on restructuring to take the cost advantage substantial two years ago and make it strong ee

going forward. >> chevron among others in the top holdings. do you worry about dividends yet? i -- i don't care -- i mean, the ceos say that the dividends are safe and sacred and whatever, but if oil goes down into the 20s or lower, at some point, don't they become at risk? >> so i do think -- look, if the oil price stays at this level, i think dividends are at risk across the industry. the industry is in pain. $50 oil last year was difficult environment. $30 today is a death march for the industry. it's very, very difficult. i estimate that the cash flow per barrel of the industry drops from $17 a barrel last year, which was painful to the industry, down to about $4 today. the industry is trying to hunker

down and ssurvive the cycle. the good news is there's a supply and demand response. the feedback mechanisms are not broken. i think the market is believes that 30 is permanent, but i don't see that. >> john, appreciate the time very much. good to hear from you this morning. >> thank you. >> sobering. well -- >> john, of course, with fidelity. coming up, eagles fans mourn the loss of glenn frey's accomplishments after the break. at the top of the hour, will burr ross on possibilities after market bounce. hear from him and guest host, roger altman. stick around. sure, tv has evolved over the years.

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for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. take a look at the stocks to watch this morning. mcdonalds upgrading the fast food chain to buy from neutral. they expect all day breakfast, promotions and pick two platforms generate improvements. that stock up 1.5% in the premarkets. watch shares of twitter. the social network having technical issues this morning. reports indicating outages in europe, japan, africa, and north ameri america. if you are trying to use direct messaging or search function, it's empty. the stock up slightly in the premarket against a positive tape this morning. it is, though, down, 21% year to

date. sad news in world of music, glenn frey died. he formed the eagles back in 1971. they had 17 top 40 hits selling more than 120 million records. we mean records. as one of the most dominant bands of the 1970s, winning six grammy's, five american music awards, and inducted into the rock n' roll hall of fame in 1998. glenn frey dead at the age of 67. coming up, welcoming evercorp. partners and ross. and we have a positive open, dow higher 250 points, s&p 31 points. "squawk box" returns right after this break. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities.

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global markets are rally mode. stocks jumping after china's gdp matches expectations. still, a world of worry over the markets. guests this hour, veteran investors, wilbur ross and robert altman. why one investor that thinks

the network bringing you "sponge bob square pants" needs change at the top. >> did you imagine buying a gallon of gas less than 50 cents? where there's a price war at the pumps. final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide. i'm michelle caruso-cabrera with scott and kayla. joe, becky, and andrew on the way to davos. hear from them live later this hour in switzerland. we are minutes away from the opening bell, and there's a nice move suggested at the open, higher by 250 points if the dow opens now in the wake of the chinese gdp.

scott? >> more on the macrostory in a moment, but the top corporate stories investors talk about today. united health posting better than expected earnings and revenues. big driver of growth outside of its insurance business. bank of america's earnings topping estimates. revenues, though, falling a bit short. morgan stanley out with results this morning. the firm beating the street on the top and bottom lines, and johnson and johnson plans to put 6% of the work force in the medical devices division. the company is looking to reduce annual costs in that business by a billion dollars. kayla? >> in global market headlines this morning. china's growth slowed to 6.8% in the fourth quarter, though it was in line for estimates. full year growth, 6.9%, lowest since 1990. chinese stocks rise in late trading, partly because the growth numbers prompted more talk of further official stimulus in the market, and you can see what that does.

shanghai up 3.25%, and hong kong up 2%. the rest of asia closed much higher. in other news from china, beijing denied the top market regulator is out. yesterday, a reuters report said the chinese regulatory commission offered to resign coming after critics said his mismanagement was in part to blame for the massive drop inle volatility in chinese stocks in the past few weeks. he was said to be behind that circuit breaker that was reduced with -- revealed with little fanfare this month. we are watching oil closely. a new report says the agency suggests unseasonably warm weather and rising supply will keep the oil market oversupplied at least until later this year. despite that, though, crude is up .75% brent up 3%, helping stocks in the futures markets too. >> yep, absolutely. huge focus right now on what is the state of the global economy.

imf cut global economic forecast for growth, and steve leisman looks through the report, here on set. before that, though, cnbc's most famous guitarist, sad about glenn frey? >> absolutely. they were a hip machine. >> amazing. >> a little, what do you say? >> consternation for those who looked a little less commercial and more to, you know, maybe more -- what's the word i'm looking for? >> economic growth? >> i don't know. >> you know, not commercial music. >> got it. >> offbeat. they were a hit machine and what they added to rock n' roll. >> i apologize for the diversion. >> i'll get yelled on for that. cutting global growth outlook for 2016 to 3.4%, that's down .20% for the u.s. and sharply weaker growth than developing economies due to the decline in oil and commodity prices. chief imf economist says this morning that the global markets are overreacting to lower oil

prices and missing the silver lining for consumers. >> it's not a stretch to suggest that they may be reacting very strongly to rather small bits of evidence in an environment of heightened volatility and risk aversion. >> here's how it breaks down. advanced economies, you know, in a world of low expectations, these guys are meeting it. the u.s. at 2.6%, down .20. europe unchanged. japan, 1%, unchanged from the prior forecast, and the u.k. 2.2%. it would be a wonderful world to add a point to all of those economies. the imf said a modest and uneven recovery expected to continue in the developing economies with a gradual further narrowing of output gaps, that is the amount of slack in the economy. the big story here in the emerging markets, and you can see here, overall down .20%. russia contracting a full

percentage point down .40. china up changed. there's maybe michelle's favorite basket case country right now, brazil down, revision down to the expected growth there, down 3.5. and saudi arabia down a percentage point. imf said the emerging markets confront a new reality of lower growth with cyclical and structural horses undermining the traditional growth paradigm. you can talk structure, not necessarily cyclical. back to focus on the u.s., rapid update tracking focuses on .08% for the first time, below a percent for the first quarter, and probability of recession ticking up to 29%, second highest in the five-year history. so it's not off the charts. we've been higher before. when we were higher, it did not necessarily lead to recession, but the recession probability is higher an the minds of economists out there. >> because of the selloff in the markets, basically? >> i think that's a piece of it.

i really think it's the slower growth. there's two factors weighing on the minds of economists. one, when you get down into this, just a percentage point of the growth, there's less cushion for a shock. >> right. >> another shock in the economy, and the second is lack of bullets at the fed. if you go into a recession with a 3% funds rate, you have three percentage points to cut. they don't have that here. less insurance here. there's potential qe, backing off the expected four hikes in terms of fed's am knew in addition, and negative rates. >> don't move. >> talking the global growth picture. we have wilbur ross, and special guest host for the hour, roger with us all hour. wilbur, when you think of the china data overnight, 6.9% growth for 2015, other guests

said it's more like 4.5%. how do you size it up and size up the potential knock on effects of that? >> well, i think the real growth in the sense of the real material economy probably is down around 4%. reason is that if you look at physical indicators, rail carloadings, truckloadings, cement consumption, steel consumption, exports, natural gas consumption, electricity consumption, none of those are consistent with 6.8 or 6.9. what's been happening at best is a massive shift from capital investment driven and export in manufacturing driven to service industry driven. china's economy is now mainly being driven by service industries. why that's important is that service industries are much less raw material consumption per

dollar of gdp than manufacturing in capital investment. so it's both the slowdown in the rate and the change in the mix that's driving problems elsewhere in the world. >> roger, for a long time, though, we've thought about these makeshift indicators in china because we don't necessarily trust the official headline number. air-conditioning units, elevators, escalators, crane leasing, what do you look at when you look at the overall health of china, and how do you square that with the numbers we get? 11% in retail sales, 6% growth in industrial output. >> well, first of all as wilbur alluded, investors do not have confidence in the official statistics. we know that. you just referred to speculation that the real growth rate is in the vicinity of 4.5%. you hear that everywhere. so, number one, there's uncertainty as to what the real numbers are and the business leaders i speak to invariably

say i don't know whether china's growing at 4-6%. i really don't note, despite having business there. uncertainty as to what the actual economic data is. second of all, i think the chinese economic and monetary authorities have done themselves no favors in recent weeks with this stop-and-go lurching, now you see it, now you don't management of markets. the currency to valuation was out of the blue. the stop-go approach on the stock markets itself, circuit breakers on and off, strange statements, ahead of the csrc said it's, quote, impossible, unquote, for the yuan to fall further. everyone in the markets know you don't say things like that because it's not true. there's a lot of -- after many, many, many years of a sense in markets that the chinese authorities were skillful and

consistent, now there's a sense they really don't know what they are doing. >> to roger's point over the weekend, treasury secretary, jack lew, had a conversation with a leading chinese official in which he said, you guys need to be transparent about this policy that's going on, and that's really added to global risk, i think, just ecoing what roger said. the thought chinese were run by capable, technical regime, and we're finding out that maybe they are but they don't have the power to enact policies or they're not as official as we thought or the talks too much, and look at china. >> oh, this technical regime, are they in control? they are supposed to be moving to an economy they don't control. right? >> i know. they have gone backwards, michelle, in two ways. first is what you said, which is this micromanagement of markets. >> they love it. it's amazing. >> i'm not sure they do.

>> now they see the downside. right. >> they messed it up. second is, i don't entirely agree with wilbur. the data closely, a moment at face value, the chinese, i think, go back for the moment to our, quote, brute force investment approach to growth. investment share of gdp to fall steadily at 1% is actually depending on what exact survey you see about 45% of gdp. they really have not made the move to a service centered, consumer centered economy, at least in recent months, i think they are going backwards, just pouring more concrete, undermining confidence. >> wilbur, your reaction? >> i think the problem is less transparency than it is consistency. look at the way they've been dealing with stock market plunges. they'll announce dozens and dozens of policy, and almost immediately revoke a large portion of them even going in reverse direction. i think what's happened is they have been communicating a sense

of confusion. that's really a novel experience. people have not been looking for chinese government to be showing signs of confusion. i think that's the worse thing from the market point of view. markets can deal with good news. they can deal with bad news. they have a terrible time dealing with uncertainty. when you have vacillating policy, you are dealing with uncertainty. >> wilbur, it's scottwa walkner. oil's a mess, in correction territo territory, a time when we hear astute investors come on and say they see great opportunity. i spoke with mark a week ago who said, energy debt is the opportunity of a lifetime. what do you see today as the opportunity, if any? >> well, we've been buying energy debt, particularly the

obligations that have been blasted to smithereens by the smaller exploration and production companies. there are some of these names that had been, let's say, 80 cents on the dollar as recently as may, got to 35 cents in november, and now they are trading at 20 cents. most of them are not going to go to zero. most of them are probably worth more than the 20 cents. in some cases, the price refleblreflec reflects two years worth of coupo coupons. we think even though are there problems, we think some sectors have been overdone. energy bonds being one. second one, which is stranger, is marine transport. rates for shipping, particularly crude tankers and product ta tangers are way up from a year ago, but the values of the assets essentially have not changed, and most of the stocks are trading at very large

discounts from what we think are already depressed net asset values. that's in the context where somebody has to ship all access oil. it mostly goes by vessel, and in addition to having more physical demand, the largest cost of operating a ship is bunker fuel, and that's, obviously, weighed down. it's a perfect environment for very good earnings in marine transport. yet, the stocks act as if they are broken down oil and gas producer. >> wilbur, how about the regional banks in the oil patch that have done the financing? they have been beat up pretty badly. is there value there? from the regionals, what about the national banks beat up as china has come off oil as well? >> well, i don't think the banks are that over exposed. generally speaking, the banks, both the regionals and the

nationals, make their loans based on their estimate of the value of the crude developed reserves. those are relatively stable even in a declining price environment because they cover such a long duration. they had a redetermination last october. they'll be another redetermination of values coming up in april, probably those reduce some lines of credit. they'll be some more going into bankruptcy, but most of the ones that are well run have already done debt-for-debt swaps, done debt for equity swaps. they are living within their reduced cash flows so while there will be bankruptcies, we don't think it's going to be anything like half the industry going bust or any of these extreme forecasts, even if oil stays down at these levels for a while. >> that's what the banks are

modelling right now, so we'll see how it plays out. wilbur, appreciate your time. >> good to see you. >> thank you. >> thank you. roger is with us the rest of the shoed. coming up, joe, becky, and andrew are in davos, switzerland. going to the alps for the news makers set to join "squawk box" in the coming days. later this hour, listen to have, a gas station selling a gallon of gas of regular for less than 50 cents. the top pimco manager where he's putting money, and an activist targets a media giant. stay tuned. a packed hour straight ahead.

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futures look good, dow open higher, and s&p higher by 29, and the nasdaq by 70. or thereabout. it's a decent open on the street. tiffany, the jeweler's holiday season sales dropped 6% year over year, citing stronger dollar and drop in spending by tourists in the united states, and as a result, tiffany's cut the full year view. michelle? >> business and government leaders in davos, switzerland

this week for the economic forum, and that's why joe, andrew, and becky are now too, joining us live. how is the jet lag, guys? >> hey, it's just me. the jet lag is okay. becky and joe are joining us tomorrow morning. we did all just arrive literally within the last couple of hours. i tell you, security is tighter than ever here. 5,000 members just of the swiss army alone, double from what it was a year ago. helicopters every which way. i should mention joe biden is here today. he's going to be here at least through tomorrow along with a number of, of course, world leaders, amid all of this market turmo turmoil, no better place to be than switzerland to speak with leaders about where we are and where we are going. just to give you a sense of what we have coming up on the show for the next three days starting tomorrow, big iconic companies and their ceos, jamie dimon, jameis gorman reported enings today, a lot to talk to him

about. and mutar kent from coca-cola, and mary barra, at&t, and hp, and cisco's chuck robins, and a number of other big names in the investing world. larry fink from blackrock, and on the other side, ray dalio joining us. a lot to talk about where the market is going, what it means, and also, a number of geopolitical issues. north korea, which was invited here for the first time in 18 years, they got their invitation, and then got disinvited in the beginning of january. that's become a bit of a scuffle here in terms of bringing the global community together, but, apparently, a number of the members of the community including the united states, and david cameron's here, would not necessarily be here if north korea would be here as well. a lot of to talk about and bringing that to you throughout the rest of the week, michelle. >> i guess that's something they don't like about bragging about

hydrogen bombs, amazing. thank you, adrew. will be great. see you tomorrow. >> thank you. coming up, gas prices below a buck. how about 50 cents a gallon? find out where you can fill up for that cheap. up next. as we head to break, check out crude prices right now, brent up nearly 3%. crude up about half of 1% helping equities in the premarket. "squawk box" will be right back.

check this out. gas prices have been sliding, as you know, but you might not know how low they have gone if parts of the country, and in michigan, gas is 47 cents. the bridge market dropped prices to 78 cents a gallon for regular after marathon and another slashed prices to 95 cents a gallon, and then in the gas war, the same station went lower, going all the way down to 47 cents. i guess it's true, guys, when you're driving along, you see the gas price in neon lights, you wait for the one that looks

a little bit more appetizing. i filled up for 2.30. >> paid 2.19 in westchester. >> we don't get the same tax break in new york, but it's better than it was, for sure. >> take a picture of the pump because 2.19, like, wow, lowest i remember in a long time. >> yeah. >> thanks. you just trying to avoid reading it? >> no. it's yours. >> i know. american all-pro, another item added to the resume. the defensive tackle appointed to the board of directors of valentine strong. the firm is a holing company focused on receivering the financial and government markets. friend and mentor warren buffet commented, quote, once said i'm glad he's not running against me for a board spot. i believe it. he has a bright future as a businessman, and i look forward to hearing about his many successes. funny because he's got a

reputation on the field of being such a tough guy. >> good defense against activists. >> right? >> send him to the office. >> viacom might need to hire him. >> they might. >> interesting story. certainly, the way he plays football, wouldn't want to be in his way. >> what do you think of the markets here? overdone? how much more? larry fink says another 10%. >> well, at one level i think all the top about the u.s. recession is overdone. the chances of a u.s. recession, i think, are quite low. our own internal assessment is 20%. i saw there was a figure minutes ago mentioning the high 20s, but it's not the likely scenario at all. why? because the consumer sector, which, after all, two-thirds of gdp, one of the earliest guests an hour, hour and a half said, is resilient. it's doing fine. the consumer confidence levels, impact of lower gasoline oil, heating home prices, on

consumers, it's powerful. >> 20% is not zero. >> it's not, but the likelihood of a u.s. recession talked about as if it starts next week is really low. >> that's the deal, though, right? can you talk yourself into one? >> well -- >> can you tell people the economy's getting so bad, so bad, so bad, they say -- >> i don't think so, scott. it's a big k complex economy. billions of transactions a week in the economy. we can't talk ourselves into recession, but then responding directly to the question, it's probably going to be a difficult year for equities because most of the juice has been squeezed out of corporate profits lemon. our own forecast is only 1% revenue growth for the s&p 500 this year. only 3% profit growth, and then youed add to that that multiples, although, obviously come down here in the first two weeks of 2016, nonetheless, still a touch above historical levels, and when the fed

historically, when the fed is tightening, even if it's tiny, multiples tend to contract. you'd have to say to yourself, this is a challenging year, even from here, from this moment for equities. >> okay. we'll keep discussing this throughout the rest of the show. roundup of the morning's upgrade and downgrades and burger joints as well. as we head to break, doesn't hurt to look at the screen this morning if you're long. dow opening higher by more than 200 points and nasdaq by more than 62 points. flr here at the td ameritrade trader group,

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♪ welcome back to "squawk box." upgrade to talk about, btig upgrading mcdonalds to buy from neutral, expecting the all day breakfast, game time gold, and pick two platforms generate improvements in the business. william blare updated shake shack to outperform.

the premium narrowed substantially against the peer group and see opportunity for strong earnings group, and upgraded michael kors there underweight to neutral comfortable with earnings expectations and seek tighter compa expense controls. >> mary thompson got off the phone with the company's cfo and has the highlights. >> michelle, speaking with the cfo, saying the 40 quarter marked by volatility, oil, and china, and in light of this, the company reported better and expected results embarking on a cost cutting program taking out a billion dollars in cost by 2017 including costs of reducing infrastructure items and also reduction in compensation at the firm, so the firm, again, targeting a billion dollars plus in cost cuts by 2017. they are targeting an roe, return on equity, of 9-11% by 2017, a criticism of morgan stanley, unable to reach the 10% level that had been targeted

earlier by the company's ceo, james gorman. a year in fixed income kmdties and currencies is in tfocus because the third quarter was bad, and last year was in line with expectations, but they say, basically, the year end thick was a tale of two halves, and second half weak for the company. in particular, weakness in certain areas of strength for morgan stanley that being corporate credit and securitized products, both challenged in the fourth quarter. second half of the year is not an appropriate run rate for the business, which, of course, where nay are cutting more than 400 jobs there. they said it will be reshaped for better margins, less capital, and be a more targeted businesses, closing some desks, most outside the u.s. a quick comment on institutional and retail clients. there's a large brokerage as well, and clients remain cautious, of course, given the market environment we're operating in.

back to you. >> thank you so much, mary, for the update, which we have every quarter and love having that. roger altman, ever core on the banking side, you read the changes to the structures, drastic, necessary? >> well, they are a tough kme tor, morgan stanley, and i have a great deal of republic for them in that regard. i don't follow the stock or follow the company, but the obvious issue with the firms like morgan stanley is the core returns. returns on tangible equity and so forth, and mary talked about they are saying they can get it up from 9 to 11%. i'm sure if i was an investor, do i believe that? it that possible? the biggest single issue for the largest financial institutions are core returns, and whether in this still tightening regulatory environment, you know, firms like morgan stanley and firms bigger firms like bank of america and so forth earn returns that are anywhere near what historically they did. earn returns above 10%. the market is unclear about

that. which is one of the reasons -- >> but investors are just discounting the entire sector as a whole. selling everything. >> right. >> down 17% this year. what do you think it takes to get the confidence back? >> well, i think a lot of that has to do with the broad environment, of course, and, you know, if you think, for example, that transaction volume, merger volume, other transaction volume is going to be suppressed by this darkening financial market environment, then you think, oh, you know, this is a difficult time for the firms. i don't personally think that's necessarily true at all, including the environment does not remain as dark is it has been in the week before. there's a lot of concern about that. i think the -- even bigger concern, put aside evercore is the question of returns. there's a lot of doubt as to whether the large institutions can achieve, for example, north of 10% returns and that's one reason these shares, so many of

them, trade right around book value. i mean, jpmorgan trades above book value, and citi below book value. that's pretty tough. >> returns elusive. the majority of large stocks now having dividend yields above the ten-year treasury year, mike sanotolli has a look at what that means. a new phenomena in part. >> it's not that extreme, but the rally in treasuries what we have is 53% as of last thursday with the s&p at or about current levels. of stocks in the s&p, yielded more than the ten-year treasury and index as a whole yields more than the ten-year treasury. here you see the number of or percentage of stocks in the s&p that outyield the treasury. last time it was this high was in 2012, but in 2012, the ten-year treasury spent most of the year under 2%. obviously, absolute yield levels were lower back then. what's it tell us aside from the fact that the stock market seems

oversold is that you might actually find that being one reason buyers are motivated because stocks adds a source of income in scared world is a source. apple, recent low yielding more than the ten-year treasury. ten years ago, you couldn't believe that. >> amazing, right? >> you want to do this now quickly? just hold that thought. i want to pull up shares of aig in the premarket to let you know that carl icahn sent ia new letter to the board of directors. breaking as we speak. in the fall, urged the company to break up, something that the company itself has resisted. now mr. icahn sent a new letter to that board saying in part that management's credibility with shareholders is all be gone, that there is only one sensible path for aig to follow, and that is to become a smaller, simpler company with the path to dicife, and there is an update

on january 26th. mr. icahn said in the letter today he expects it will fail to present a drastic strategic shift and limited to only incremental changes. another new letter from carl to the board. >> meaning you are no longer considered a financial institution of systemic importance, and, therefore, subject to less regulatory control by the feds? >> yes. >> metlife just last week or two weeks ago decided to split for that reason. >> which, by the way, in the first sentence of the letter, mike, he mentioned, he says in the wake of the recent shareholder poll, the separation announcement by metlife and continued conversation that icahn had with shareholders saying it's abundantly clear there's one sensible path, and that is to become a simpler, smaller institution. >> how easy is that? aig, all wound up, all businesses together, to pull the strings apart, any sense of how possible that is? >> i don't know the answer to

that as far as aig is concerned, but what metlife did is significant. any institution that can get out from under being a cife with the surcharges and so forth, you know, is looking at that. but whether aig can do that, i don't know. >> life pnc, geographic splits, you know, if you want to split a a company, you can find a way to do it. >> back to apple yielding more than the ten-year. >> yeah. >> astounding to me, right? you see everybody wakes up every morning and they can make a choice, buy the ten-year yielding this, or buy some stock that theoretically, hold it long term, could appreciate and i get the yield too, and yet investors choose? the ten year. why is that? >> not clear to me there's many individuals explicitly making that choice to the ten-year, but, yes, a general, market context, it is alarming or at least a different game that we're playing right now. >> shows fear, right? >> back to the 1950s when they yielded more routinely.

it's been rare since 2009 when it happened, stocks have been a better relative bargain for the next five, six, 12 months, but i don't know if it's the thing that says this the reason the stock market takes off higher from here. you're right. i think stocks as bonds are something that's going to be a theme for a while. >> you know, we heard with the oil guy this morning making that point, choose it for technology, too. >> depending on what type of investor you are. >> right. >> the ten year is seen as cash. apple is not. >> is not. >> right. >> very good point. >> good question for the investors. >> talk about bonds in general, joining us now, mark, the cio of pimco, overseeing $300 million in asset. talking about high yield and number of other things, but what do you think about the idea of stocks providing competition with bonds because of the dividends at these levels, mark? >> well, we think interest rates are going modestly higher. the economy's actually doing

okay, so stocks look decent, but within the sweet spot of investor right now, we think corporate bonds look the best. corporate bonds today can yield 5-8%, so you are getting essentially an equity return with a half to a third the volatility of equities, so, in fact, you don't want to own treasuries. you want to own corporate bonds. corporate bonds deliver equity return with a lot less risk. >> what total return do you expect? willing to absorb loss in the underlying bond? >> ultimately, given where bonds are, corporate bonds, meaning high quality investment grade and even select high yield bonds, looking at basically a 5-8% return given where bond prices are today. that's really a huge opportunity in the market today. >> you're recommending tips. tell me why. >> well, ultimately, we think that tips valuations right now are only pricing in 1.4% inflation over the next ten

years. that does not make sense to us. the fed is targeting 2%. in fact, that target rate is actually core pce. there's a 30 basis point spread between core pce and cpi, and yet the market's only pricing in 1.4%. we think the underlying fundamentals of the economy warrant higher inflation over time given a strong labor market, so, basically, the reality is that this economy's doing better than what tips are priced in. tips are a buy here. >> control room's rushing me to go, but i have to underline what you said. all the talk we do this morning on whether or not there's a recession coming, you have a benign outlook. >> yes. we don't see a recession coming. the economy's growing at 2-2.5%. the consumer's strong. bank's are healthy. government's contributed to gdp. overhang is yesterday's news, and energy's 1% of the economy. the consumer's 70%. the consumer's strong. that's going to drive economic

growth this year. >> mark, thanks so much for joining us, up early from newport, california this morning. >> thank you. all right, up next, activist takes aim at viacom. find out why one hedge fund manager says the media giant should be valued at $90 a share if if make it makes big changes. eric jackson joining us when "squawk box" comes right back. mmm, a perfect 177-degrees. and that's why this road warrior rents from national. i can bypass the counter and go straight to my car. and i don't have to talk to any humans, unless i want to. and i don't. and national lets me choose any car in the aisle. control. it's so, what's the word?... sexy. go national. go like a pro. the market.redict... but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us

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all right, welcome back. asset management out with a report this morning on viacom

confirms it's taken a position in the stock. the report says in part, quote, viacom is an asset that should be trading over $90 that's trading were less than $40, and the ceo has been, quote, running the company for over ten years and failed by every metric relative to his peers, end quote. the assets under management are 300 million, position size unclo unclosed. with more details on the 99-page report, is eric jackson, the managing director, eric, good to see you again. >> hey, scot. >> so what is the size of the position? will you reveal it right here and now? >> we have not disclosed it. >> why have you released 99 pages on viacom, particularly against the ceo? >> look, this is an asset that was split up from cbs ten years ago now. over ten years the stock has dope nothing. it's been far outpaced by cps as

well as the s&p 500 as well as all the media peers. even though in the last six months there's been kind of a page six side show going on with regards to the state of the chairman and controlling shareholder of viacom, we think the side show has taken attention away from where the real focus should be, on the ceo. we put in the report in great detail how he has failed as a leader of the company and why shareholders deserve new management, and if there was new management in the executive office, there's no single thing that, this company could do to increase stock price more than that one change. >> all right. what conversation, if any, have you had with other shareholders, should let you know we've reached out to viacom itself this morning for reaction to your 99 pages. >> listen, we talked with

several, you know, there's one prominent shareholder in viacom speaking publicly on the matter, and that's mario, owning 10% of the voting share, and over the last couple months, he has come out with his questions about, can we really, as shareholders, get a clear answer what's happening to redstone? what about some other value creating actions that the company could take? unusual for someone like him to do that, and i think it just shows how frustrated he is with the company. >> we are hearing from viacom, and they'll have an official comment once they get through your report. what -- i mean, let's not be sort of naive, eric, to the sort of the state of play when it comes to activists taking on a large company and a well-established ceo. you're a small fund as they go, what do you really expect the company to say and even do? >> listen, i mean, obviously,

this is a controlling shareholder situation, and so if this company wants to tell any shareholder whether it's spring owl or mario to pound sand, that's their right, and that's what all shareholders sign up for when they decide to buy shares. however, you know, we've, obviously, been looking for closely at the media landscape. we think a lot of names are interesting, some as potential shorts, others potential longs like time warner. viacom is a great buy at these levels, we think, even if phillipe stick its around, which we hope he does not do. there are great actions needed to double the value in stock price. we think it's important shareholders speak occupy and have a debate about the issues. the management of the company has not been open to engaging with us about the ideas and other shareholders, and that's wrong. we think that the more shareholders speak up, the better off all shareholders are, and the more likely it is that

we'll all see a higher stock price. >> roger altman has something for you. >> as eric said, as a technical matter, you can't force any change here because he controls the majority of the voting shares. this is a question, ultimately, for the board of directors of viacom, but the root many activists take, which is threatening a proxy fight, which he said, is not available in this case. >> one thing on the board of directors, second in the list of terms of changes need to be made is great change to the board of directors. right now, there's a woman named debra norval, host of "inside edition," a tv show produced by cbs television, on the board of director, listed as an independent director, although the show is produced by cross-examinaticbs, a channel controlled by redstone. we think the board needs a refresh. we don't think there's enough

shareholders on the board or big media experience as well as digital, and ott experience, which has been another great failure of documents. and just one quick antedote to dowman took over as ceo, viacom owned 50% of vice media. they invested $3 million to buy that stake. vice came afterwards and said we want to sell that stake back to you, we would rather go our own way. they took $3 million back. now that vice media is worth $4.5 billion. viacom has made no other significant acquisitions in part of the whole digital media space. that is why he was brought in in the first place. >> let me ask you about yahoo!. i'm assuming you still have your position in yahoo!? >> we do. we continue to push the company and other shareholders. >> you and these 99 pages.

you release 99 pages on yahoo! before the end of the year calling for a cut of the work force, fire marissa mayer, starboard, the other activist in that name urged the company to sell its core business, to consider that, which the board now says that it will do. that's not good enough for you? >> listen, we -- we really like the last letter from starboard, starboard said they want to see either a sale of the asset or new management, which is something we called for earlier. great respect for jeff smith at starboard. we think all the shareholders are speaking up. making their voices known to the board like we're doing with viacom. and we think the right answers for yahoo! share holders is coming up. >> eric, we'll catch up with you soon. >> thanks. >> media stocks by in large not

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welcome back. big rally at the open. dow opening higher by 237 points. don't know if it's a sigh of relief about china, gdp or expectations they'll stimulate the place again to drive grove. futures are higher, roger. everything is okay again, right? no? >> that's just one morning. just one morning. i think five years from now, people will look back at $29 oil and all the attendant fallout from that in terms of rig count, rig prices, tanker prices, other hard assets that are affected by the oil price as having been a strong buying opportunity. this is wilber's kind of market,

isn't it? he waits for this moment. >> a lot of other smart people are look at these hard assets, where soon you can buy the asset, not too far from scrap value, so you have collateral protection as well as the upside. >> join the squawk team in davos tomorrow. "squawk on the street" right now. ♪ good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. u.s. markets catching up after the long weekend. futures making up for some of friday's big losses. bank earnings are out in force. seven dow stocks with earnings. china did post a gain overnight, gdp for the year at 68 is the slowest in a quarter century. and iran is officially able to start adding supply. the parade of bank earnings continues today with morgan an