we should tell you one other stock to watch today. caterpillar to downgrade. the price cut well below the 58.40 where the stock closed. >> wasn't it over 100 at one point? all right. we're done. make sure you join us tomorrow. we're all done. "squawk on the street" is next. good morning. welcome to "squawk on the street." i'm david faber along with jim cramer. carl quintanilla is off this week. you can see we're looking down right now. european markets, well, they're not helping. if you take a look at this point, we're down across the board there. all less than 1%. as for that ten-year note yield which, of course, crossed below the 2% note yield last week

during a tumultuous week, we're a bit above that right now. and there, of course, is the all important commodity known as crude oil. 31 down another 3.7%. let's get to our roadmap this morning. it does start with major inversion. johnson controls and tyco getting together, moving to ireland, or that is johnson controls is moving there. we'll get a progress report on the ceo's turnaround plan that seems to be in full force. twitter's losing four high-level executives. we're going to look at jack dorsey's game plan. we're looking at a lot of game plans. we've got a lot of football on our mind. bill belichick's game plan didn't work that well. the guy miss as point for the first time in ten years. >> that was shocking. >> congratulations to cam newton with the panthers. it was an unbelievable effort. cam is just mvp, best in show.

>> they were very, very strong. let's get to the markets. futures are moving lower as we head into the final week of what has been a very volatile month for the markets. oil prices down more than 3%. a big concern over oil supply. opec secretary-general is urging nations to combat the overhang so oil prices will recover. so far this year the nasdaq down 8.3%. the dow down 6.-- 7.6%. and the all portland s&p which, of course, is what hedge fund managers and all money manages s measure themselves against down. so far, of course, this month has been a very difficult one, although last week we did have our first up week in quite some time with that strong rally on friday as oil moved a bit higher. so did our broader markets. as oil moves lower, so does our market today. >> right. i think that people should

understand the big increase in oil was not thursday but friday. and that came on the heels of a very positive schlumberger pool about it. not the industry at all. schlumberger did an amazing quarter. it's the best company in the industry. oil, gas, whatever, and they're trusted. just to point out, this is from the quote, we still believe the underlying balance continues to tighten driven by both solid growth in demand and by weakening supply as the dramatic custs in e & p investments are starting to take a cut. notice they talk about there is increase in demand. a lot of people come on air including bill richardson who says increase in demand. no. schlumberger has it better. >> thank you, of course, exactly. china is going to consume more oil this year than last but not as much as perhaps the increase

in supply is going to be there for them. >> as is often the case, i listen to governor richardson. they say, oh, i guess china is down and demand -- that's not true. we've got to be really careful about our facts here. there is an increase in demand but it's overwhelmed by saudi arabia. they pumped in a huge amount. schlumberger had to take a price concession. the pumping in saudi and kuwait and oman is incredible. not just russia. >> a lot of stories about russia and the budget constraints and the results it find itself under. the budget was hoping for that, but it's not going to be. they're weakening. >> yes, they are. >> they're being weakened significantly. >> schlumberger makes the point. they talk about russia, north america being tapped out. companies are tapped out. >> what does that mean? >> they don't have enough money to finish their budget. it's like, look.

the u.s. is in big trouble. i mean that's kind of like the theme, that the u.s. is in big, big trouble. you've got to be very careful because these guys, no recovery in exploration investment until 2017. that's because -- that's one of the reasons oil can come back. north america is down 39%. land drilling is down 45%. massive overcapacity in the land services business. so just be very careful. what they're saying is there is a -- and i quote -- deepening financial crisis in the e & p of the united states. >> that being said, let's get to halliburton because that was out today, a loss, some write-offs, and we're still waiting for the deal with baker hughes. of course, the justice department is giving that a very close look and it seems a difficult time in terms of them perhaps being able to complete that deal. >> i don't know. after listening to schlumberger, this industry is just shot and

schlumberger has been able to conserve cash, but what they're saying is it is a fight for survival is the way you want to read through this of many of these intermediate, immediate -- >> you're talking revenue is down 42% year over year. >> you're talking about a level of the patch that is extraordinary. but, again, if you extrapolate schlumberger, they're saying, look, oil will bottom this year. that's because u.s. is coming down, russia's coming down, colombia is coming down, mexico is coming down. brazil is coming down. these are the real at the heart -- they let go 34,000 people and they actually had a very good quarter. they are smarts. they're so smart at schlumberger. >> you really like them. >> oh, yeah. >> let's transition to the broader market and the conversation about oil given its broad impact. what does it mean for the new week ahead? >> oil is up so they have to

pull back. schlumberger is saying, listen, it's not going to go below 25, 26. the shocking thing is if you go out multiple years on the oil curve, thank you, rusty, for the smart b.n., it's showing $45 out over five years. you hear them come on, 65, 70 at year end. >> but that's -- >> that's the actual forward curve. that's not somebody saying it. >> right it's indicative of an "l." no "u," no "v," no up. just flanting. 24.44, 25 bucks, david. remember, if you were a believer in that, you should be going in. if you're a delta, you should buy it all the way. but no one is. >> no one is. >> it's different from last year when the forward curve did not come down and people thought it was a blip down in january. now it's like this is a nine-year decline.

>> at some point our wroder market would seem to decouple one would expect if that is the case. >> at a certain point we're not going constantly be focused on level. schlumberger is saying, listen, it's going to go up but not for the reasons you think. i don't want to miss quote schlumberger but because of the crisis in the u.s. which is not reflected in the stocks. >> i want to get to the large deal. johnson controls and tyco getting together emerging in what will become an inversion for johnson controls. the terms call for johnson control shareholders will own 56% of the combination and it will be headquartered in i think it's cork, ireland, is where it's going to end up. yes, cork ireland. they moved to switzerland and then ireland a couple of years back. this deal is being done, in part, of course, for those

purposes. that being an inversion which we poimd out so often is not because of a lower tax rate which is so often what so often happens but it's about it being brought back without having to be taxed. it's the second largest inversion seen in the last couple of months. the last were pfizer and allergan. if you're a tyco shareholder, you're getting .95550 shares. that's it. you're getting a straight ratio. importantly let's keep an eye on shares of j.c. let's call it the last three months which was in stark contrast to what we saw last year. let's keep an eye on jci

shareholders. once it's done, they'll also be paid $3.9 billion for their shares at an average price of $34.88. that represents the average share price of the last five days, trading days of last week essentially. that will have the i affect of having an induced ownership that gets them in. you need to be 40% of the current one. they do that, a american company. another company saying see you later, i'm out of here. >> i want the viewers to recognize when you say cork, it may not have a lot of business in cork. >> no. >> it may be as little as a small operation. >> tyco used to be bermuda.

that was back in the keselowski days. this enthat i moved to switzerland and then ireland. they've been shopping a tax rate for a long time. >> i like the deal because johnson is yaufr loading the automotive. >> that will be a split offthat takes place next year. that's important to keep in mind as well. so as a shareholder of both companies, you'll be receiving shares in the new business. >> it dovetails very well with tyco's fire suppression, fire safety. you're talking 3 million customers, 5 million firefighters that tyco's known be able to do a very good solid job when it comes to fire safety, which doubles with when you're trying to do climate controls. it's interesting by the way. united technologies has very good business in the same area. will there be any trust issues?

i think technologies is getting better and better and better. we'll hear from them later this week. this is the company i regard as the competitor. remember, automatic data -- adp. not automatic -- adp. >> adt. >> adt. the one you have on your lawn. >> yeah. >> that's consumer, and they split that off. >> that's right. >> this is corporate. >> this is all commercial and enterprise. >> adt, don't confuse it. >> that's a separate company. >> that's separate. >> as was ka individualian who converged. tyco took itself apart under ed brain. this is the final step. offered an inversion possibility for the likes of johnson controls, jim. we'll see how they perform. interesting to note the company's doing this deal not on the highs but closer -- or lows if you want to consider it that

way. jci will issue an awful lot of stock at levels that are not high. >> and yet i have to tell you this is the area of the economy and stocks that has been so hard hit. these companies, johnson controls is down gigantically. tyco's down. this would be the beginning of combinations where they say basically, listen, there's no youth in the world so let's just merge. >> cost of operation, $5 million, taxes, 150 billion bucks. coming up, more movers to get to this morning, of course, including mcdonald's. you know jim's got a lot to say about that. and twitter shares. they're down again. let's give you a look at the futures as we get 17 minutes from the opening bell here at post 9 on the nyc. we're back after this.

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breakfast helped to boost sales, jim. you've been positive on mcdonald's on its relatively new ceo when he took the job. it's always interesting from my perspective to see the impact one person can make in an organization. sometimes you wonder if an organization that large can really have that much of an impact or are these things baked in overtime, the ups and downs so many people go through. >> this was a man who turned it around in a very short time. he was deeply focused on getting franchisees to buy in. he simplified it from the get-go. the all-day breakfast which a lot of people just thought he layered on, those of us who have talked with steve, no, that's not true. wit as for real effort. he's starting. he's just unstarting. wait until you see how he unlocked technology. he's got ideas to blow away. the simplified menu when you

have a work force that's not necessarily -- it's a minimum wage work force that's terrific but they need a simplified menu to move faster and mcdonald's has not kept pace like that. we've seen the changes. >> it's amazing mr. estabrook's impact and it's been felt at the sprock price which languished for some time. >> he's not a financial engineer. he is an engineer and he is a great joy and he's brought a great joy to the company which has amazing momentum. a 5% cut. comp. this is really an old dog and it is doing new tricks. when he introduces the new technology that he introduced in australiaing you're going to see remarkable throughput for the drive-through, which many of us have given up on. >> yeah. stock up 32% just over the last year, jim. any impact on some of its competitors? >> no. i think that you would -- you

would think there was a share take from wendys. you would think -- burger king. burger king through some internal very smart guys running burger king. with that tim horton merger, doing good. and shake shack. >> any pressure, of course. there were activists lurking potentially when the stock was in the low 90s. even early on in his tenure pushing again for the idea of separate and a property company, but this obviously alleviates any tension on that. as we pointed out many times, some of the activists like to get involved. >> they say, real estate, are you kidding me? how about better service, better burgers, a better store that is faster. he's a restaurant guy. he's not trying to create wealth out of like splitting the land underneath from the store.

the all-day breakfast has been such a major hit. he's very funny. he's like cam newton. he's having the time of his life. he's winning and he's having the time of his life. no one's seen anything like that except for john legere. he's a little more button down than ledger. ledger has like an ad that is like the verizon ad. >> ledger is so confusing. sprint is using the darn balls running down the thing. >> what is that? >> i don't know. >> get cam newton to endorse you, and i'll switch. >> up next we kweevt jim's mad dash as we count down to the opening bell. let's take one more look at the futures. we're headed for a low open after friday's significant rally. more "squawk" of the street is coming at you right after this. there's no one road out there. no one surface... no one speed... no one way of driving

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we have seven minutes before opening bell on a monday morning, of course. caterpillar was the subject of a downgrade on friday, late on friday. >> yeah. i was leaving the office. the show was done. a lot of times on friday evening you have a little congratulations after we do "mad money." and then a caterpillar downgrade comes up. this is a sell. but, david, don't give up. you see a 16% return, if you sell it. they're talking about really a secular change. right side commodity, capital expenditu expenditures. remember, this company has dividends. i don't know. this was one of those downgrades that if you were -- let's say you were worried about how

someone felt at caterpillar, it eases things that it was done before friday's snowstorm. but here we are talking about it. >> it's not often that you sell. >> why not do it if you're going to do it at 6:00 on a friday. a lot of people are away. i was working. i was waiting for the caterpillar sell at 6:00 p.m. just be ware when you see something like this, say, are you kidding me? are you kidding me? friday evening? >> do you agree with it? >> 100%. >> why? >> there has to be a right sizing with companies. we're really coming to the point where we're recognizing that it's changed world when it comes to commodities. china's changing to more consumer oriented economy. we have dry bulk rates in the

300s which is incredible. and freeport. jim stewart on friday got turned around. >> we haven't talked about it. >> yes. >> we'll talk it. we've got the opening bell about five minutes from now. stay with us. "squawk on the street" back after this. ♪ light piano today i saw a giant. it had no arms, but it welcomed me. (crow cawing) it had no heart, but it was alive. (train wheels on tracks) it had no mouth, but it spoke to me. it said, "rocky mountaineer: all aboard amazing".

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you're watching cnbc's "squawk on the street." the opening bell is going to ring in about two minutes. it's kind of a reprise, something we did many years ago, ask you what the key to this market is. >> look. i can't say anything other than oil. it really doesn't matter. the coming what i call the dissolution of the small and medium size. now, there is a lot of private equity money we have to talk about. we want to come in. >> we do. >> yes, we do. i think we have to stay close to that. here's the example. jpmorgan lowers it. this is a pretty good company.

they lower their target from 58 to 38. that's the kind of thing you've got to get used to. it's the fight to keep the dividend and the fight in some cases to be able to get more capital and to pay debt. and a lot of people were struck about the rally in kinder morgan, which really caused the partner partners to have a very big rally. that's where the real dislocation comes from. let's watch. >> above 15 bucks. it's funny. it comes back to me. the large fight we got in with the activist investor elliott. they won a number of board seats. they also got rid of their gas stations for example which would be actually benefiting them in the environment they're in. >> look at mml. they got rid of their gas stations. that's the worst of their majors. you need that. you have upstream/down stream.

you have to be able to sell it. world deutsche. we didn't talk about shell. >> they're going to get the vote on the bg deal. >> there it is. the opening bell for this monday as we take a look back at the real-time exchange back at headquarters. we look at the big board. birch family services helping children with autism and services. under 30, 2016 list. >> what list is that. >> 30 under 30. >> are they rich? >> 30 is a pretty dynamite time. i pull that back. >> do you want to share any memories. >> i don't think it's pertinent. >> do you want to share it? it might be of interest. >> i'll take it offline.

>> okay. where are we with twitter? >> we haven't talked about it yet. >> let's do it. i mean the engineering chief, all these leads need to conclude all is not well. now, maybe i'm being too judge mental. >> no. i think that might be a farrakhan collusion. they've had five product chiefs in five years. believe that's a the right number. >> it's like the nfl. they go through a lot of head coaches if you're a 2-14 team. kevin was responsible for moments which in many ways was supposed to be the big comeback try. i think it's not growing the way it should. be jack dorsey is trying to put a name on this. it's one more in the line of

what in the heck is going on. >> i remember when they went public. he talked about the scaffolding to use his word. that's what he called it. around the platform. >> scaffolding in new york never comes down. >> we've got local 11 which is the bane of some of our existence every five years. scaffolding never comes down in new york but it makes it harder to access a building or a retailer and that's the point. they have yet to take the scaffolding down. >> look. the main problem i think with twitter is somehow they have not been able to convert with what we all kind of feel is the a greatest free publicitpublicity. you're watching the gape. there's tweets. there's tweets everywhere. how are they not making more money? the answer is it's not growing the way they'd like. now what happens, of course, how can dorsey do both, twitter and

squared. >> i was told the board would not allow him to do both but, of course, they backed off on that when they did choose him to be the chairman. the executive chairman of twitter. >> what are you hearing of the addition to the board? >> i don't know. i know there are some board members who are ready to say, oh -- >> they are. >> yeah. it's time to go. apparently to "the wall street journal" mr. dorsey is happy to see most of them replaced. their reporting, not mine. >> this is a public company which makes it difficult. meaning you're on the fly trying to challenge everything and the company is repudiationing cosolo and his decisions again and again. >> at what point do you sell it? i'm sure he's not interested. >> a charitable trust is small position. >> no, no, no. sell the company. >> i don't think anyone will buy

it. it's too big. >> yeah. >> look. yahoo!. bob king young peck comes out. he says they've given him the heisman. it would -- i don't know. these are troubled companies in a way that we haven't seen in some time. >> yeah. >> publicly traded troubled companies. grubhub was too now. grubhub comes in and they do a buyback. i question how much that's going to be good. there's a lot of questions by the way. how much is uber making? >> they're losing, they're losing big. >> they're losing. but they're making it up in volume. >> always, always. it's interesting how much money they have raised. we forget. in china, they're in a difficult position competing against the incumbent who's the uber of china. so they're sort of like the lift of china. >> the only unicorns i want to see be public is airbnb because

they've been doing well. the house of pain. >> yes, they have. did want to take a look at shares of johnson controls, of course, on the back of this deal to acquire tyco. essentially a merger, almost a merger of equals but not quite. they'll be a combined company at least for the first 18 months after the deal is completed. it is an inversion. it will make johnson kroels an irish company. it will adopt the johnson control name as well. dow dupont. stocks did not perform well. jordan newell, stocks did not perform well. new port, marriott, stocks did not perform well. so it's important to imagine future deals that somebody starts to perform well when they announce a deal.

right now it's not 1%. i'm told the conference call just ended. >> every company you just mentioned they would all disagree with what i say. they would be higher without the deals. >> without the deals. >> yes. the deals seem to have mucked everything up. >> it has been a difficult market broadly speaking. >> terrible. arbs. everybody wants these deals. ultimately the deals would be good, but i think people feel like, wait a second. we do have bad earnings as well as good earnings. i like kimberly-clark. they've been on tonight. if you've done a great job, home depot gets upgraded today. they've done a good job but that stock got hit last week. it's market where it's very hard for even a starbucks to break out on a very good quarter and american express is the

exaggerated theme of what goes wrong. it's just horrible. they're doing just horrible. >> i also reported on friday that value act which is reporting the possibility of at least bringing some change. there is some pressure, even though their approach is not a public one. they're behind the scenes. they're auto. it was supposed to have been a billion dollar journal. they got out in november. >> war rep buffett likes buybacks. they bought back to reduce the share cap by 5% that. isn't what people want anymore, david. >> no. >> they didn't want it with ibm either. they want growth and visa and mastercard have growth. >> it's interesting. mr. buffett's companies, you mentioned two of them, you would think it would help preserve it. >> totally true but the flip side of that is true. if you want to please him, you tend to not be able to offer as

much growth because you're plowing money into the stock, maybe not plowing money into the new initiatives. some say american express say technologies is behind where as mastercard, they've made a fabulous piece. scharf, everyone knows the takeaway at costco versus chenault said it was. chenault, the ceo. they took 2017 hopes away. >> yeah. >> 2017 is far. it's lienld a rebuilding year. the sixers, the 76ers, they have a rebuilding plan. >> every year is a rebuilding plan. >> that's because they have josh harrison. >> apollo actually. >> maybe they should go back to hedge funds and take the guy blatt who was fired from cleveland even though he won 35

and lost 11. it's probably the most outrageous firing i've ever seen. the rebuilding plan has to be quick. you can't come into a board, i think, and have credibility and say, listen, we'll get this thing done in 2017 and cut numbers. that's not what portlands accept. and american express is a troubled company. >> hanging around, up a bit t dow component which did pressure that average on friday. mary thompson is on the floor with more on what is moving broadly this morning. mary. >> good morning, david. the dow jones industrial average now on the worst level of the day. it was down 80 points, holding down about 62 right now. pretty much a broad based decline. we're seeing a bit of retail. of course gold is getting a bid from the dollar and the vix is up a bit just over a point. these are some of the things traders are watching this week. of course, they're keeping an eye on oil because of the tight correlation we've seen on oil and the s&p 500 this year. also, of course, the fed meeting, the statement that

comes out on wednesday to see if there's any indication or change that the fed may not be as aggressive in raising rate this year as some people are anticipating it will be. and lastly, of course, apple results this week, that's a key metric for a number of retail investors. overnight we saw a mixed higher result in asian markets. that didn't spill over into europe, though, where we're seeing a mixed thrower result as the early trading gets under way on wall street. taking a look at early trading, let's take a look at the s&p 500. the index is down. again, very tight correlation between oil being watched. tighter than normal year to date with oil being down a dollar. of course, you can see why it's down. a quick check on some of the sectors. some of the sectors we'll be watching including the energy sector. and financials. keep in mind they understood perform in what was an up week.

the yield curve tends to flatten. and, of course, layered onto that there are a lot of concerns about the exposures to the energy sector as far as loans go. so that group continues under pressure today and consumer stab staples as well. homebuilders, d.r. horton coming in with better than expected results. it's not helped its stocks. pultegroup down 2% as are all the homebuilders and lastly i want to review some of the down stocks in the news today. mcdonald's with those better than expected numbers. american express, a bad year for that, but we're seeing it get a little bit of a bid. we did have an upgraded oppenheimer and morgan stanley. as jim said, really disappoints forecast for the next two years but on a valuation basis if there's a reason to buy it, that's why analysts say you might put some money to work there. but, again, they're gotten

two-year horizon to turn it around. home depot and indicator piller down graded to a sell. it's off about 4%. we have the dow off 73 points, david. back to you. >> thank you very much, mary thompson. let's go from stocks to bonds. for that we go to rick santelli in chicago. good morning, rick. >> good morning. the treasury department for the most part was a bit surprising during the period of equity weakness because of the compensation on the lower yields. it just seemed to with a little bit light. it wasn't that the buyers were gone and turned sellers. it was just saturation to push yields down into this compressed state they've been in for a while. it's been very difficult. the reverse is true. it's not coming back. but significant areas to pay atej to. let's pick september 1st for maturity. let's look at the 2s.

you notice that spike in mid-september. that was an 81 yield. we're still, of course, above that. keep that in mind. let's go to the curve of 5 years that. was 161 and spikes were at 146. look at the ten-year. spikes around 230. we're obviously hovering at 202. look at the end of september, october november congestion around 2%. you can really see what's going on the further down the curve you go. it was around 308, the spike for the 30-year bond which is currently at 729. where is their congestion? right at the mid-280s. we're below the congestion from october to november. you can clearly see the middle part of the curve is very comfy. the long end seems to be giving it up a bit on yields. there's buying interest that makes sense. if the equity markets don't even rally but don't have the kind of volatility intraday, thursday is a good day if you're looking to sit on decent deals.

that, of course, are corporates, and that's the debate. now switch gears a bit. go overseas to the ten-year boon. pick a chart over a one-year. what a different look. very flat. this is about mario draghi and whether there's any horsepower left to some of the strategies that the u.s. fed seems to, of course, be relinquishing at this point. the final dollar, we talk about the strength in the dollar/yen, but in this instance it's more yen strength. their data wasn't necessarily good. they'd rather have a weaker currency. but with it so close to a hundred, it's important to pay attention to this. it looks like there's stability on the weaker dollar and this particular trade. pay close attention to 118. they think the wide range. but 118 as you see all the congestion at the bottom. an important pivot. david faber, back to you. >> thank you very much. let's go to oil prices. jackie deangelis joins us from

the nymex. >> good morning. we dropped down 30. it's not surprising we see pressure as we kick off the week, especially as we finished the week with surging prices last week. nothing's really changed. remember, on the u.s. side, supply is still rising. everyone is waiting for the price to come down. it will eventually have an impact as jim cramer pointed out before but it's taking time to trickle through. on the demand side of things, demand was out forecasting that global demand is going to rise by 25%. but by 2040. guys, 2040 is a long way off. the concern, of course, is demand is going to be flat, only slightly higher. not to offset the production we're seeing at these levels. that's what oil traders will be focused on. they'll also be watching the fed. that's why the trade is a little cautious. >> thank you, jackie. up next, super bowl fever

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it will be the -- i've got this thing. it will be the denver broncos versus the carolina panthers in super bowl 50. the average cost of a 30-second ad slot during the game which airs on cbs this year has jumped to $5 million. that's up 11% from last year's price. that's a significant price. >> football still has the draw. >> yeah. that was tough. >> they didn't quite get it done. i can't believe he missed that extra point. >> let's remember you're dealing with two defenses that are probably the best since the '85 bears. >> do you want to make an early call, carolina versus denver? >> i have to take care of denver. >> got to. >> have to. this is just a team that plays

-- i mean this cam newton. you know, i met cam. i hung around with him a couple of years ago at the super bowl in new orleans. >> oh. i thought it was one of those correspondents dinners. >> no, no. he was standing around, i said, you're cam newton. he said, yeah. no posse. he said, i'm trying to learn, meet media. he was so nice. i kept asking, you are cam newton. he's a different kind of guy. >> a big fellow. that price inflation on ads not bad. this is the most watched broadcast of the year every year. sort of a shared national event these days. >> they're doing a lot more outside the lines to make people comfortable. the game -- you might -- >> how many of these ads do you

think we're going to see with wireless carriers for balls rolling down -- >> geez. that's a verizon app with another way. >> now they're busting their balls i just raid on the screen. sprint did their ad with the balls following verizon having done it. the war is on. sprint probably has a munitions problem there. i'm not sure how much money they have to be spending on marketing. >> jpmorgan said don't worry about the liquidity. >> sprint. >> yeah, print. >> at $23 million in debt, they need to. very much focused the capex decisions. >> i thought the verizon conference call, they're very good. they're big with cbs in terms of the sponsorship.

verizon has always been a big player. >> yeah. the question for verizon is given how often they talk about their streaming service. the one for the wireless phones. >> the skinny package. >> the skinny bundles. do they move even more deeply into programming. >> they made no secret of the fact on their call that if yahoo! were to actually put it up for sale, no interest. >> the guy from "shark tank" is a sharp businessman. he said this is a company to watch. >> verizon. >> i don't know if you watch "shark tank." >> i love "shark tank." >> a lot of girls watch it. verizon. t-mobile. verizon. >> up next, we've got stock trading with jim. we'll be right back.

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60 months plus $2,000 dollars trade-assist cash. only at your local ford dealer. alright. time for stock trading with jim. >> one of the sensitive commodities is kraft paper and then corrugated.

my dad used to sell this, so i'm used to it. this is causing them to downgrade in national paper. for those who watch very closely what commodities determine the future, when you see these declines it usually signifies worldwide recession or major slowdown. you do not get corrugated or kraft to come down like this. it's a rather shocking thing. >> broader read with the ip down? >> same thing with union position. read it. you would say, when is it going to ease because it's really getting critical out there when you see these numbers. you say, when is the fed going to ease. these are bad numbers. >> we talked about -- >> now we see the feds go ing the other way. >> no. >> liquidity, they're doing everything to tighten lid equity right now. it's amazing. all they're saying is the united

states nuts? we sit here with guys talking about how rate hikes are good for the economy. that's just wrong. i'm waiting for someone to say that's wrong. >> what have we got on matt tonightsome. >> okay. kimberly-clark. again, maybe this is the opportunity. this is the kind of company i really like. falk is a great executive. i want people to stay in. don't sell until we listen to mr. falk. it could be like starbucks when we talked to mr. schultz. stocked with were down 57 and then 59. >> right back here tomorrow same bad time, same bad channel. coming up vanguard ceo bill mcnabb. keep it right here. and a passion to build something better. and what an amazing time it's been, decade after decade of innovation, inspiration and wonder. so, we say thank you america for a century of trust, for the privilege of flying higher and higher, together.

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♪ good morning. we're back to "squawk on the street." i'm david faber along with sara eisen. you can see we're down on all the major averages. the key reason, perhaps, because, of course, the bottom there with crude down over 3%.

>> oil setting the tone once again. check out shares of mcdonald's though. biggest gainer seeing a boost following the better than expected results. was the all-day breakfast really the key ingredient? with us now jeffrey bernstein, senior analyst at barclays. no doubt about it, the u.s. comp store sales, up nearly 6%. not what analysts were looking for. was it the all-day breakfast? >> the one that definitely got the most attention was the all-day breakfast. people can't get enough of the egg mcmuffins in the afternoon and evenings. >> what else is driving it? what else are you seeing in terms of progress? >> just over the past few quarters, they've upgraded a number of key ingredients. they've really focused on improving overall customer service. actually this month they relaunched a value platform. the mcpick two platform which

expected to continue into the momentum. breakfast and value would be the key drivers and as we move through 2016 e they'll focus on premium products as well. is the >> is there any where to get a read. is there any other way to characterize the good comps aside from those factors that you just mentioned? >> it's a great question. we hear that from investors all the time. the past quarter has been surprisingly resilient. whether you look at their larger peers like wendys or a smaller one like a sonic or jack in the box. most of the quick service names have actually been putting up strong positive comps. we've seen a few fu years over the past 15 or so where all the big players in the burger category have posted strong comps. you know, definitely when a chipotle shows weakness, that gives shares to some of the other players.

my guess is as we move through 2016, mcdonald's remains strong. >> i know they have a new ceo. steve estabrook. jeffrey, just a year or so ago there were some real existential questions from mcdonald's, is it healthy, have the same millennials. are all these things just magically fixed with the new ceo? >> no. we give a lot of credit to steve estabrook. at the same time those questions are all still valid and i think you'll be hearing those for years to come. but with that said in the short term after years of understand performance from mcdonald's, it seems like they have some brand momentum and most of america is keen to look for good food at good value and i think mcdonald's delivers that. >> obviously investors have given a lot of credit it to this turnaround that's now in evidence. if i look at the stock chart i see it looking at other consumer

staple stocks whether it's smucker's, kimberly-clark, all these good stable businesses. is that's what's going on or are people basically buying in to better performance to come? >> i think it's probably a combination of both. definitely our multi-capped nationals are pretty defensive in nature. they have tremendous turnaround. they give them the benefit from both ends. mcdonald's a decade ago went through a very strong period of many, many years of huge single type comps. i'm not sure whether mcdonald's can sustain that for many years to come but with the short term, with the easy momentums, it's a difficult thing to break. >> maybe as an investor if you missed 12 months the stock is up 32%, is it too late because i'm looking at the valuation here. it's now values the same as chipotle. could mcdonald's still be cheap? >> we tend to look at mcdonald's

versus their quick service peers. they still trade at a modest discount. interestingly we get less question on it. i think investors are willing to look past that. there aren't many stores with that momentum. at the same time mcdonald's is cutting koftss, they're returning cash to shareholders and they have quick service so people think it's a safe way to play a recovery especially with the volatility we're seeing across the broader markets. >> thank you for joining us. jeffrey bernstein analyst at barclays. if you look at it, still pressure, oil still taking the lead. 80s been interesting to note that coming off two strong days, we go back down again and we're looking at the worst month since 2011. >> it didn't seem to be likely

in the near term. the question is was it about the market being over and people being too negative. of course, the chatter over the weekend markets trying to price in higher recession risk. think they's the debate that will be waging for a while. >> the other thing is earnings and the fed. the focus comes back to the u.s. with zbik tech names and a fed decision on wednesday that would otherwise seem pretty boring but now because you've heard dovish commentary from ecb and bank of japan, will the fed join in? >> yes. i think the question now is will they lean aside? they're going to receive dovish noises. maybe that's probably knows bring them closer to what the markets have been saying. again, i don't think earnings

have said much. not special but not falling off the cliff. >> guidance hasn't been particularly strong either. it doesn't seem we've gotten direction one way or the other. >> market down 13% from december 9th to midday wednesday. i don't think things got that much worse that quickly. again, we're catching up to all the weak markets and high yields. >> commodity deflation. >> the markets, speaking of them, have seen an enormous amount of volatility. the vix up more than 20%. how does that affect investors? bob pisani is live in hollywood, florida, at the ctx conference with vanguard. bob. >> bill, joust gave the keynote address down here. obviously people are concerned about the volatility. tell us a little bit about inflows and outflows into

vanguard funds and what are you telling vanguard investors right now? >> in terms of flows we're seeing people be very diversified. we continue to see flows across the board, stocks and bonds, which is a good thing. they're telling us it's important. but stay diversified and keep a long-term perspective. >> so concerns about oil, concerns about strong dollar, concerns about flattish earnings, how did you figure in the mix about what you're advising people? >> bluntly it doesn't. we try to ignore the short-term noise and get people to focus on their long-term goals. all of this is really difficult to time any of those kind of factors, so we try to tell people to be very diversified and take a longer term feel. >> the returns of the last 80, 90 years for the s&p 500, about 8%. 60/40 stock bond portfolio. you say maybe instead of 8%, 5%,

6%. . why lower returns? >> we think stocks are valued pretty highly. bonds you can project yearly prematurely. it's plus or minus 50 basis point as what you're going to goat get. so when you do the math, you end up about 2% lower on an absolute basis long run. it gets to how you think about drawing down when you're in retirement. >> the august 24th volatility, the one dow dropped and then recovered in the space of a morning. a lot of discussions about the role etfs might have played in there. you have been very vole cal about this. do e etfs cause this. >> no. what you saw was some of the new rules in terms of market circuit breakers and so forth.

th while well intentioned they need to work on defining them. >> you think it is about market structure. etfs don't cause volatility that was in effect. >> absolutely. what we saw was the may crow economic events in china really drove the volatility. >> speaking of the s.e.c. there's the suitability about it for investors overall. what's your position on etfs and various classes of etfs and how suitable they are? >> look. i'm actually glad the s.e.c. is looking at this. i think the product proliferation has reached levels and some of these more esoteric ones may not be suitable. i'm particularly not a fan. i think leverage is actually -- it's a great when it's working but when it doesn't, it absolutely wipes people out and they don't expect it. >> what about active management? most of us have watched the etf

business grow up tied to index business. now the whole business is coming into the etf space and saying we can do this business in the etf space. what's your view on that? >> one of the things we like to say is it's different structures doing the same thing. i think active managers may be looking at it as more appropriate for some of their clients. that's a great. if it lowers the price of activists, i'm all for it. >> you've done well simply on passive investing. has it really proven itself in the etf area? >> we don't offer any etfs today but our active funds continue to attract a fair amount of attention especially on the fixed income side. >> carl, i've got to let you go. one thing that will be a surprise. >> 2016 will not be a repeat of

2008. >> thanks so much. thanks for being here. thanks for talking to us. >> thanks, bo snow i'll be here all today and all tonight. the big e tf conference. we'll have a lot more on active management, smart data, all of that and more. back to you. >> thanks very much for the timely conversations. enjoy the weather down there. let's get to meg. >> we hear martin shkreli's hearing has been delayed. that's hearing where he has been s&ped to appear. he would be scheduled to appear along with valium ceo. hearing a letter from his lawyer to the judge for his federal case that that has now been

delayed until february 4th. as a reminder, he's also scheduled to appear in court for a federal case here in new york on february 3rd and there is some argument going on between shkreli and his lawyers and congress over whether he'll be able to appear in d.c. because of his ban to travel due to his court case. that's the update on shkreli. back to you. >> the drama continue. meg tirrell. thanks. up next, speaking of drama, at twitter, four of its executives are leaving and the stock is down another 4% on top of the 40% in the last three months. we'll talk with a shareholder on what they want to see from the company when "squawk" on the street comes right back.

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new is ford. america's best-selling brand. now get into a new focus, fusion, or escape with 0% financing for 60 months plus $2,000 dollars trade-assist cash. only at your local ford dealer. welcome back. jci, the symbol for johnson controls buying tyco for roughly more than $13 billion. it's a company being domiciled in ireland. that's where tyco is currently based, at least for tax purposes, having moved from bermuda to switzerland to eventually ireland. this is not the tyco you may remember from a number of years ago when ed breen took over the company and took it apart.

adt is one. there's a lot left of tyco and it's ghoing to be a larger part of the combination. tyco shareholders will own about 44% of the combined company, the remainder to be held by johnson control shareholders. if you're johnson not that large a premium. 13% at the beginning of trading. we'll keep a close eye on johnson controls. in the current environment we've seen it decline. some wondering if there was -- there was not an auction here. it doesn't appear there was any powe ten dhool at least take look at the broader acquisition part. they'll have $150 million in

savings from that and almost as much as $500 million in operational synergies in the first three years after the close of the deal. the ceo of johnson controls will be the ceo of the combined company giving that role up to tyco manager 18 months out and then becoming executive chairman. that's alex molinaroli. i'm not sure why that screwed me up a little bit. we're going to keep an eye on johnson control shares. the call has end. the complexity of the deal itself. whether or not there was a market check on the part of tyco. >> can we say that the treasury failed at stopping inversions?

remember, they put in all these rules. >> they did. they put in rules and the rules do take place if you're less than -- if the acquired company represents less than 40% of the overall. in this case it will be 44%. so they did leave the ability to structure deals to meet that sfleevl before it was 25? >> they don't stop you from doing it. this case, an old midwestern company choosing to say we will now become an irish company. >> milwaukee. >> interesting. i don't know if that's a big deal. >> i have a feeling with ee going hear about it on the campaign trail. >> we may, we may. although those of us following this for quite some time argue

that it's so screwed up that really if you were to eliminate it, you would simply allow so many foreign companies to come in and buy our own company. something has to be done to change it overall. >> we'll see what happens. >> twitter shares plunging 44%. they announced another major shakeup which includes the departure of several of sit executives. down 26% they're down 44% in the last six months. joining us by phone, do you thi victor anthony. do you think it's key to four executives leaving? >> it's hard to put a kion four executives of any organization. i think what it does is pushes it out on twitter, at least six months.

>> what is it since jack dorsey's come down and shares are down 40% since his return. >> that's a good question. he's supposed to come in and stabilize the company. it depends. there are long driven tirchs on the stock and everyone knows it. i think what happens now is he essentially cleaned house. i can't imagine more negative. it's hard to think anything more negative will come out. but i think it limits it both. >> victor, the way the stock has performed, people have given up on the idea that this is sort of network economics are working really well for twitter, user growth isn't there. how do you value this business, whatever it might be. i think the question, too, might be what would investors want to

see out of product changes and innovation or any other tangible changes to the business? >> the thing think is there's a lot of cast lites ongoing for the company, the stock. we have to let these catalysts play themselves out. the list is long yochl view to double click. you have e-commerce, video adds. you have vine, moment. all of these things, i think, were recently put in place. you have to let them play itself out. if you're patient investor and you want to get in at these depressed prices on the stock, i think ult maltsly you may be rewarded. >> we'll see. so you're sticking with 33. that's the target. >> that's current price i have on the stock at the moment. >> i have to say the south side has been very optimistic. average price is 32. we're a long way from there. vilk tore, we'll see what happens with earnings on

february 10th. victor anthony, thanks for jumping on the line from axiom capital. >> thank you. when we come back, the blizzard might be over but the cleanup just beginning. they're still digging out. we'll get a live report on that for you after the break.

digging out after nearly 30 inches of snow fell on much of the northeast this weekend. seema mody is live in new york and she has the latest. there she is. see see seema. >> reporter: david, that's right. good morning to you. the city rebounding after the second biggest snowstorm in history to hit new york city. business essentially on a standstill after an emergency travel ban was implemented at 2:30 p.m. eastern. restaurants, retailers bars essentially shutting down. then on sunday the city slowly came back to life. here on monday, they're back to business but teams are working on the cleanup of the snow that has accumulating leaving many snow plows similar to this on every block here in southern manhattan. now, economists i speak to say

the impact of the snowstorm will be limited on the economy given that it happened over the weekend, not on a weekday where businesses are fully functional. but still the team at oxford economic expects the economic forecast of around $900 billion on this shaving off 0.1 percentage point off real gdp for the first quart 20e6r 16. history shows us bad weather can have an impact. we saw that in the first quart over 2015 and a similar story in 2014. it's something they seem to be focused on 1. 2 flights canceled. 14,000 more today. the d.c. metro is on a partial schedule. expect work to be slower and a bit messier than usual. back to you, david. >> all right. i'll pick it up. thanks, seema.

seema mody outside new york. look at that. the snow is above her head. when we come back, it's been a rough year for holders but d.r. horton seeing a profrt thanks to rising home sales. we're going to talk about the metrics and whether there are better times ahead for the stocks when we come right back. the future belongs to the fast.

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i'm morgan brennan with your update. he's the current head of the association of southeast asia nation whosz members are becoming more vocal in their complaints about china's assertiveness in the south china sea. marking the first trip by an iranian president in the first 16 years. he's also scheduled to meet with french president hollande and pope francis. they released video of air strikes but did not specify when they took place. they say a thumb ber of isis fighters were killed in the strikes. the u.n. announcing in venezuela along with 14 other countries would have their voting rights temporarily revoked due to unpaid membership dues. venezuela's currently on the security council and that's your cnbc news update at this hour. back over to you guys.

>> thank you very much. shares coming in with earnings better than expected. that's not exactly helping the u.s. home builder's stock this morning under pressure. more than 4 1/2%. the building sector as a whole continues to struggle. the sector is down. joining us by phone to discuss it, steven east who's ranked number one by ins stusal investors. steve stephen, thanks for calling in. is that's what's plugging the stock? it is. it's purely orders from what we can tell. a little bit less than what the street expected. i think what people missed is they had the toughest. the group is only up 15. so it's still pretty strong, but the comps get easier. i think that will help. >> i mentioned that the group as a whole has been under pressure this year. if you look at even the last 12

months or so. homebuilders are flat which doesn't make a whole lot of sense. when we talk about it, one of the bright spots is actually the housing sector. >> that's true. and we were taught that working with those were not. generally the group was flat. i think you just saw some expectation take that the market would cool a bit. we saw it in the builders and building product. >> stephen, a bigger picture, part of it has been the supply demand imbalance, basically not enough homes perhaps at the entry level. is there a risk that the market is saying they're not doing much to increase the supply, in other words, order growth for years to come might not be that a great? >> that's exactly what happened in 2015. there were only a few builders. horton was one of those that really attacked the level.

our field research is showing the builders are starting to rotate toward that entry level. but i think it a going to take a couple of years to get there. when you look at the household formations over the last four quarters, almost 1.7 million, i think there's a lot of level entry demand that's building and we'll probably see it unwind in the next three years. >> it really feels like it's two steps forward, one step back. wednesday we'll get new home sales, pending home sales. on thursday. where are with we in the cycle of recovery? >> i think that's a great explanation. if the economy is only growing 2, 2.5% to turn in like they did in 2015, it's actually a pretty good number. i think the street's expectations are, you know, ourselves included, not matched up with the realities of the broader economy. i would say this year, 10%, 15%

all day long. >> and it sounds like you like d.r. horton. would you be buying on the weakness? it look like with the 35% target you're above the consensus. >> most definitely. we started moving that ba in 2015 when it showed our entry level work was picking up. they're doing the best job as far as any. i think you have to have exposure of that as you go through '16. their margins are beating expectations, that margin is. and the comps get easier like we talked about. i think there's a lot to like about with the name. >> when you think about some of the concerns, one is that the federal reserve has begun to officially tighten. whether it continues do so is a big debate but ho many increases do we have to see before it makes an impact on mortgage rates and become as problem for home sales? >> yeah. if you look at the last 11

cycles, what really strikes you is speed kills. the quicker they move, the more painful on housing. if we get three or four rate hikes 259 bids apiece, that would be the slowest increase we've seen versus the last 11 cycles. question think it would affect the incidentals. >> stephen, thanks for joining us. every core's housing research analyst. when we come back, kari swisher joining us. right now we watch the dow down 65, s&p back half a percent. "squawk on the street" coming right back. can a business have a mind?

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welcome back to "squawk on the street." martin santoli has been watching this. interestingly financials are leading the way lower today. >> yes. financials have been very conspicuous how they have been. while they underperformed, not doing much on the bounces on thursday and friday. i do think that's one of the lingering concerns. one of the things about friday's rally is it was very, very broad based. 9/1, which is a great. everyone asking, you know, was wednesday's low, that big reversal we got down to 1812 on the s&p 500 which was basically

15% down from the all-time hi s highs. >> and way below. >> the question is did we see some kind of final purge. probably not. if you wanted to sigh that fat pitch, you didn't see a lot of the things checked off of the list. good enough for a low right now. i think it's important to recognize we're now at levels in the s&p for example. you've kind of gone back in time in terms of years in terms of levels. that usually means rink is coming out of the market because you're not paying up for it anymore. >> how much do we reduce the multiple? >> exactly. we're not cheap. you've got gone from a pretty overvalued condition. >> interesting you mention financials. some of these names are down dramatically. city do citi down, 22%. bank of america down. the earnings were not quite that bad.

jpmorgan was strong and the others fine. >> it seems like investors just surrendering in that group because, one, you're reducing the number of expected fed rate hikes so it may be pushed off yet again and i think when you look at the investment banks, they're saying we act like we kind of had a cycle. the cycle peaked a well back. no ipos this month, this year, and so therefore if those were your peak returns if you're goldman and morgan stanley and the cycle's at the back end of it -- >> neither has had a good quarter. >> no, they were not. >> you've got a 3% movie in oil. they're look at the length between financials and oil even if the executives are trying to play down how expose they'd are when it comes to loans. >> exactly. the direct doesn't seem that significant but people don't want to really hear it because that is filtering in to risk

aversion in the broader market. >> you wonder what the fundamental driver is. is it oil? >> i mean it's a capital markets convenient right now. you have the overlay of not a great growth. and then err dollar that it goes down. more capital is stranded. i think that's what the markets are trying to come to terms with. >> i do find how much is driven by quantitative strengths, shorting financials when oil is down, whatever it may be. i don't know how much you hear. >> it's clearly that the machines learn what the correlations are. what works today in terms of linkages and they play it until it stops working. that's not going to delink until you have the fundamental markets going their own way. that's what it looks like. it's oil. >> oil and stocks. >> every day until it stops. >> till it doesn't work anymore. then we'll chase something else.

let's get to rick santelli now. he joins us from chicago. rick. >> good morning, david. i'd like to welcome charles biederman from beater man, biederman, biederman from honolulu, hawaii. good morning, charles. >> good morning from hawaii. >> all right, listen. your organization basically believes if we're not in a recession, a recession is inevitable. i remember during the global expansionary years everyone was global -- time lines, everyone's linked, walking the same walk, but many investors try to refute the linkages on the way down. your thoughts about the global dynamics of the economy over the world and the state of recession. >> sure. zero interest rate policy by the world central banks, boosted demand briefly in '11 and '12, and with zero interest rates, suppliers of that -- of that

demand commodity produces primarily just spend billions and billions of money for borrow and supply. it's not growing because we have anti-growth policy and western governments. we have no growth and huge amounts of debt that create thad supply. it's not oil. it's all over the place. tremendous amount of assets, bad loans around the world waiting to be recognized as the tide goes down when the -- you know, the tide runs out. you see all the garbage left and all the bad loans that are really there in china a, in the united states, and europe, and that's where we're starting from here. >> well, you know what? i don't disagree with many of that. many wouldn't. even is up for debate. the other side of the coin is fascinating as well.

having said that, trim tab's monitor flows may be better than most, may be the best. the flows to etfs and equities doesn't look as if investors are nervous about what you just described. finish up in the last minute, charles. >> well, investsers think that the central banks will bail their butts out. i think what happened with the reversal on wednesday, there was this guy mario draghi who said whatever it takes again and the markets reversed. we'll see what happens when the feds speak this week. if they sound like they're going to raise again, i bet you we'll have a major correction after that. if they say, well, maybe we made a mistake and we're going to ease again, maybe we'll see a big rally. i think the markets are going to crack until the central banks start to move and then we'll see a huge upward reversal. it's going to be a roller coaster in the stockmarket. hang on, and it's going to be a fun ride for all. >> well, even though it's a

roller coaster, you seem to get off at a pretty nice setting to get tranquil for the next session. charles, thank you very much for your time. it's early out there. sarah, back to you. >> rick, thank you. let's send it over to dominic chu for a market share. dom? >> all right, sarah. intel up by about 4%. goldman sachs has added the toy maker that mattel earnings are at an inflection point. so as we talk about goldman, they also say that the increased price target on mattel is now $36. so, again, sarah, mattel showing some sights of trade. back over to you guys. >> one of the best performers right now in the s&p 500 which is down about 0.6%. dom, thank you. when we come back, aig's

battle with carl icahn. what he thinks aig's next move should be after a key call this week. we'll talk to him after this break.

♪ aig is holding a call tomorrow morning to give an update on its strategic plan. that, of course, after carl icahn released yet another letter last week renewing his call for the insurance giant to break itself apart. my next guest says it's time for aig to shrink to greatness, or be regulated to irrelevance. here to explain, josh sterling, managing director, senior analyst at sanford bernstein. thanks for coming. >> thanks for having me. >> you have been an outspoken critic, or supporter, said another way of the position of carl icahn to desisting, get out from under the government, and break itself apart. why do you believe that is the right way to go, when management says it isn't? >> well, so if you look back at aig, they have been -- they're this big sprawling conglomerate struggling for ten years.

ever since hank greenberg left, they have had five ceos, blew up during the financial crisis, and i think the current management is realizing, as we have, as we follow the stock, the company is ungovernable. and it's unmanageable sort of firm. >> what does that mean when you say ungovernable and unmanageable? >> i think the problem the company has, it's too big to succeed. and if you think about that from an operational perspective, too many divisions, too much sprawling -- too little focus. at the company. and then from a regulatory perspective, this company has suffered -- it's been at the root of so much of sort of what officially ills wall street, the company is now the nonbank. so one of the clearest implications, they have to hire hundreds if not thousands of people to run around and do risk models, hold tens of billions of extra capital and distracting them from what they need to be doing to fix the company. >> and when the company says to me, for example, this whole idea

that somehow we would be able to get rid of an interlayer of management people dealing with regulation is not true. we already deal with 200 regulators, as a result of being an insurance company already that's regulated by the states. and we already have the scale economies that come from dealing with those regulators we wouldn't otherwise have. >> the management at aig has been dealt a tough deck, i think. but the reality is, they deliver far lower margins, and they simply don't meet care returns so if there is any economy of scale, we simply don't see them. and if you look at the point of regulators, most fundamentally, we think they're at a huge regulatory disadvantage, because they have to hold too much capital. 30% more capital than most peers, which is why we look and say, look, the simple answer to fix the company is for the board of directors to recognize they should sell it off piece by piece to their competitors, because these guys will get financial synergy, whether they have lower costs, less capital, less tax. it's a huge financial

opportunity. >> so this whole argument comes back to a return on equity. we have tax loss carry forwards we don't want to lose. we also operate at a lower leverage ratio than many of our competitors and so it's not fair to judge us on that at this point. >> well, i think those are both important points. the first is technical. you don't want to do something to destroy the company's tax attributes. however, you talk to tax people, there's a lot of ways to create value. if you sell off most of the assets of the firm, you can shelter the gains that would otherwise be due upon those sales and is use up the company's tax attributes, which is a more economically efficient way of harvesting those tax attributes than if you simply earn operating earnings over time. and if you look at the company -- and if you -- the second part of your question. if you look at the company's operating challenges, ultimately they aren't going to be able to -- they aren't going to be able to get themselves -- they aren't going to be able to fix the pnc business until they can make it its primary focus and

fundamentally they have been too distracted running around running risk models. and holding so much excess capital that their leveraged ratio is so much lower than their peers. >> what do you expect coming out of tomorrow, and do you think -- what do you expect, first? >> i think it's a really tough setup. the market isn't discounting anything, so it's an easy opportunity we believe for people to be long into the stock, because it's an easy risk return here. however, shareholders -- i think people would like to see bold action. we did a survey a couple weeks ago. we probably 30 to 40% of the outstanding shares voted. and it was a really clear mandate that people want to see change. they want to see the companies fix p & c, see the company cut costs and the company ultimately sell a bunch of assets to unlock value. >> do you think that survey would be representative then of what icahn would garner? >> we directly asked that question. and we found if they used the

right message, there would be something north of three quarters of the shareholders to support an activist slate. so i think company -- the company can retain -- can regain momentum if they have a good message. but ultimately, they need to listen to the shareholders. >> josh, thanks for joining us. appreciate it. josh sterling from sanford bernstein. we will watch closely tomorrow with aig's investor meeting. back to you. >> thank you. the dow is down 84 points. let's look at what's next on "squawk alley." >> a mild morning in the markets, relatively speaking. but is it the calm before the storm with tech earnings with apple tomorrow? and karen swisher joins us a day after twitter's executive changes. so we'll bring you that. and spencer rascoff. a lot of people are interested in real estate. is that smart, or no? tune into "squawk alley" for all

of that and more.

good monday morning. it is 8:00 a.m. at twitter headquarters in san francisco. 11:00 a.m. here on wall street. and "squawk alley" is live. ♪ changes ♪ turn and face the strain

♪ changes ♪ don't want to be a richer man ♪ ♪ changes ♪ turn and face the strain ♪ changes ♪ it's gonna have to be a different man ♪ ♪ time may change me but i can't trace time ♪ welcome to "squawk alley." with me is john fortt. carl is off. michael santolli also joins us and zillow group spencer rascoff. stocks are lower today despite friday's rally amid the first positive week of the year. it is still an ugly start to 2016. the dow, s&p, nasdaq all down more than 7% on the year. energy prices yet again weighing on the market. oil prices sliding lower. we seem to be repeating these headlines.