in the financial times today. >> i talked about that earlier. >> brilliant. but they're desperate. they'll have reserve numbers coming out february 7th, and it will show more capital outflows. they have to stop the capital outflows so ha-ha. >> we have go. join us tomorrow. "squawk on the street" is next. >> good wednesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at t the new york stock eck exchange. boeing and apple are taking a chunk of the guidance. oil is down 2% as we await an expected inventory build at 10:30 eastern. the road map this morning begins with apple. shares shrinking after yesterday's revenue miss. we'll hear what ceo tim cook has

to say much. >> boeing is falling on earnings what has shares taking a dip? >> and it's fed day what to expect from janet yellen this afternoon and what the global markets want to hear. apple is up first reporting a quarterly revenue miss and the slowest growth for iphone sales since the device was introduced back in 2007. 74.8 million iphones were sold in apple's first fiscal quarter. the company forecasting revenue will drop in the current quarter for the first time in 13 years. tim cook spoke about the china slowdown during last night's conference call. >> we began to see some signs of economic softness in greater china earlier this month, most notably in hong kong. beyond the short-term volatility, we remain very confident about the long-term potential of the china market and the large opportunities ahead of us and we are maintaining our investment

plans. >> cook said we don't live in 90-day quarters, we don't invest in 90-day quarters. some headlines suggest he pulled the band-aid off. >> i think that they don't know what they're talking about. i think what's happened here is this company is doing a fantastic job. but what we're trying to do is the essence of what we all were taught when we got in this business, how do you value a stock. how do you value a stock that may not have numbers, how do you value a stock with this incredible balance sheet, where it may be a patent cliff. i mention that because my analysis will come back to not this industry. if you look at this industry, the technology industry, you look at it on a relative comp, it would be an intel or cisco, which have slowed, still have good numbers, but currency numbers. you would see the stock trade up 10 bucks. if you look at the company and didn't tell you what it was t looks like general motors. has a lot of cash, might be peak

numbers could do a buyback. >> and not growing that fast. >> that would put the stock at $60. let's say now you try to reason those two, you say wait a second. $60, but if you x the cash out, you're talk two times earnings. that's not practical. you can't use f.a.n.g. there's nothing in f.a.n.g. that works at all for this, facebook, amazon, netflix, alphabet. they're growing much faster. i come back and say, it's pfizer. it's a pfizer situation. number peaked, okay. had big currency problem -- >> that doesn't sound so good to me. i have to tell you. pfizer over the last -- i will guess the last ten years, not a great performer. >> not to mention the presume that we're on the cusp of some big m&a to drive growth. >> exactly. if you use pfizer's multiple on this, another company with a patent cliff, so to speak -- >> non-recurring revenues.

>> what multiple do you pay for non-recurring revenues. >> lipitor is the iphone. fabulous balance sheet. fabulous. dividend good. dividend good. you get $130 if you use a down year pfizer, you still get $130. >> i would add in pfizer, many would say, did not innovate after some of those key drugs. here we're waiting still for this innovation. this market cap reflects the expectation of innovation, however we don't have a tv. >> right. >> the watch has not yet taken off. >> no. it's not an upsell. >> the connected car, what is coming on that, what will i see in terms of invasion? >> you will see the iphone 7, which, to me, is -- wait a second. 60% of the people have not upgraded. we got that number last night from tim. they have not upgraded from the lower ends. second, india. third, the macro conditions.

you can say everybody has macro conditions, but the currency here was dramatic. you want to have apple's numbers go up? you repatriate the cash, give us four rate hikes, i'll give you 40% earnings. the reason why i like the pfizer situation, why? because it's so novel. the apple situation is so novel that the traditional tech analysts are just done. they're throwing their hands up. some of them are using guiding down 15%, 20% for iphone sales. let's say you r using a pfizer multiple you will get to a stock that goes to 100. >> it was at 100 yesterday. >> i'm just saying that some people think the stock is going to 80. that was the tenor of the comments. >> understood. >> lots of discussion about the net interest in apple leaning back into it long, because investors in this space are so tired of playing other areas of tech. >> maybe. it sells -- again, i love to do

relative analysis when i'm stumped. this is a stump situation. i worked for hours on this thing. i said should we get the same multiple as qorvo, avago because of suppliers, in that case 105 the multiple of cisco? 114. i have to find -- you have to solve what you'll pay for those earnings. nothing in this industry has had this kind of growth and then plateaued. you have to go outside the industry, enless you want to talk about microsoft/intel where microsoft then morphed into cloud, which brings me to the second thing. the optionality. if apple is going to sit on the $39 in cash, they don't -- they can buy additional revenue stream. they talked about the service revenue stream, people say maybe they're trying to make it more recurring. he's just talking about it. they're not good spinners of their stories.

>> services revenues are incredible. >> nobody cares, all people think if they would have done 76 million, we would have liked them. if you think the cash will do nothing and they won't be able to buy another revenue stream, you get 100 bucks. if you think they get another revenue stream, you get 130. >> cook about address the mother of all balance sheets on the call last night. take a listen to that. >> our financial position has never been stronger. we have the mother of all balance sheets with almost 216 billion in cash, which translates to nearly $39 per diluted share of apple stock. we continue to invest confidently in the future and return capital to shareholders at a rapid pace. >> basically would take a gamble that they would buy in ways they never had bought before. in company. >> they're about the product. if you have that attitude,

everybody else's product is inferior. one thing that was gapped -- i know i'm talking about this, i will talk about it next weekend, i know it's bugging everybody. we had an analyst came on that agreed with me, they need to be in another business unit. they need to be in the other mobile business unit. they have to take over the car. they have not had great luck in the car. if you listen to the conference call, it's about the phone. how bad are pcs that the mac has not -- >> it's not in their dna to acquire. >> no but i think that when you get a chance to have a multiple that's as low as they are, it requires the power of magical thinking. >> it's interesting you mention the lack of upgrades. i had a call this morning with john stevenson, cfo of at&t, he talked about their subscriber base and what he said was we're not seeing a lot of upgrades. consumers choosing in the to upgrade their phone. a part of that reason is the

introduction of these things, these equipment installment plans, where suddenly when you go to the store, it's not 100 bucks 200 bucks for your phone, you're done, people are suddenly aware of the price tag. if that's the case, look out for september. that's great for apple. >> they're saying wait a second, that's a lot. >> stevenson also said lack of a product. >> i think the s7, that means you have a patent valley and go up again. tech tech analogies are not working here. it's not ibm, it's not f.a.n.g., it's not microsoft. what you just told me makes me feel better. >> we're looking at some numbers from at&t which looks like it may be down this morning, supported by dividends. >> it was okay. >> okay. >> they added 214 in subs and directv, but lost about 240 in

u-verse, analysts were out there with a higher bottom line per share estimate, but the guidance is what many had anticipated. the stock looks like it will be off a couple percentage points. >> t-mobile is doing so well an verizon doing so well, that's tough. >> they're also driving costs down in the entire network, moving towards the software focus as opposed to having to replace equipment constantly. >> directv didn't immediately kick in somehow. i was trying to understand the accounting there. >> was the first full quarter that they had that. >> the jets were not turned on there yet. >> you have questions about the sustainability. >> let's squeeze there boeing, the other dow component with a big impact today. company issuing full-year guidance below forecasts as it expects to deliver fewer commercial jets in 2016, that news overshadowing the better than expected fourth quarter

results. 740 to 745 commercial deliveries, down from 762. >> sometimes you come in -- i wasn't surprised. the funny thing about apple, the bulls said it would be x, the bears said it would be x, see how it trades. i was focused on multiple analysis. bowing is not that. 942 for next year -- i was looking for 942. they are saying 845 to 865, that's out of synch with what united technologies told us, what alcoa told us, they have a couple billion screws in every plane, with what general electric told us, out of sync with everyone. there are so many questions to be answered about this boeing call, other than the fact it's certainly not what i wanted to hear. how you could have such a decline in earnings per share with all those orders that we keep talking about? >> they're arguing it has to do

with the transition to the max. >> not buying it. >> really? >> i'm not saying anything about -- i need to hear more. yesterday, lockheed martin, we come n lockheed martin is down eight points. no one knows what's going on. then down nine points, at one point ten points. then they start the conference call and they say we had a problem wiand then it's unchang. i don't want to rush to judgment boeing. >> without boeing and apple, dow futures would be higher. >> where is oil? >> we'll talk about oil. we'll get inventories, the iraqi oil minister saying the russians and saudis are more flexible now. >> yellen versus him. hey, clamation death match. yellen versus the iraqi oil minister who is more important these days? >> i'm going with yellen still. >> are you? >> tough little lady.

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the retreat in oil prices adding pressure to stock futures a day after a rally in both equities and crude. that's ahead of inventories today at 10:30 eastern and the fed is set to wrap up its two-day policy meeting, rate hike is not expected. the focus will be on the policy statement at 2:00 p.m. amid global slowdown concerns. jim, some people think the rally of the last few days is the market expecting them to walk back on inflation expectations. >> the last breakdown came when dudley came out and said we

pretty much agree with what stanley fischer has been saying, we have to go with the four hikes or something like that. a lot of the conference calls that came out yesterday that were good, thinly went over this discussion. the one i want everyone go to, the most sophisticated and brilliant discussion on currency yet is the procter & gamble currency call. fed, without saying fed, you have no idea the havoc you created with the quarter point. we're a big international company, all our emerging markets have been crushed by what you did. a lot of people here will say a quarter point doesn't mean anything. if you're at wall street, it doesn't if you're on main street, you know you got fired because of what happened in argentina because of the fed raising rates. it's that well laid out. i think that they have to walk it back, we were pricing in last wednesday as of today at noon, we were pricing in four rate hikes. i don't think this economy can withstand that given what's happening overseas, given the

peak in autos, the peak in housing. this morning, goldman put out a peak in travel with this priceline downgrade. what's not peaking? tell me what's not peaking other than angst. >> we've done out toeautos, pla. >> cam newton has not peaked. >> what about von miller? >> i don't know that oil prices peaked. >> decline. but the boeing news, only so many cycles going on at once. the banking cycle got crushed. the aerospace cycle, i was clinging to the aerospace cycle? >> you were? holding on? >> clinging. like those helicopters leaving in saigon. >> are you still clinging? >> no, i got in the helicopter, see you later.

every man for himself. >> you're leaving. >> i just -- i'm looking for new places to feel good about, you come back and you come back and you just look at these managements that do great things. th that procter & gamble call, j & j, 3m, we had the streamline, we had the fire, we had to introduce new products, but fed can you understand what's happened in the last 30 days since you decided to kill inflation? >> kill inflation. >> hello. it's like -- there's a boogie man in my closet, he looks like chucky, i beat him -- no, there's no boogie man. we have people who come on air and say it's great the fed hiked because it shows things are good. or we needed it to instill discipline. like the father who beats his kid every day so that one day the kid doesn't do any wrong. >> i love you so much it hurts me more than it hurts you. >> exactly. >> that means that the dad won't necessarily change his ways the

next time you misbehaves. >> one time my dad hit me because i broke a lug nut on a mustang. he said you'll never break another lug nut again. you'll call aaa. done. sometimes the punishment doesn't fit the crime. i tried to fix the flat myself. >> good parallel with what you just said there. >> we'll get cramer's mad dash and count down to the opening bell. we'll look at the premarket. more "squawk on the street" straight ahead. understands the life behind it. lug nut we offer our best service in return. ♪ usaa. we know what it means to serve. get an insurance quote and see why 92% of our members plan to stay for life.

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. we have about seven minutes until the opening bell. where you are headed, jim? >> we need to see one day this oil taking down everything, and it will have to come with the airlines. in other words, the airlines will have to just realize the biggest raw cost is oil, any time oil goes down, it's fabulous for them. ubs goes hold to buy american, american is going to report this week. they have difficult integration with usair. doug parker good ceo. this group is down on the fact that oil -- oil goes down big, this is one of the groups that's gone down the most. that's silly. eight times earnings. if i were an activist, i would say i'm going to come in. i can win when people start realizing that lower oil is good.

i can do a lot with cash flow. these guys are buying back stock. >> how low would you push them to do it. >> maybe give it a 5% yield. >> bigger burn on capital. >> put a dividend in there. we all want income, david. we're not sensitive to buybacks now. >> it's funny, you mentioned activists, united yesterday got a couple share holders upping their stake. >> united? >> yeah. >> well, these stocks are very cheap. can they go up on their own cognizance? that hasn't happened. >> why haven't they gone up with oil prices going down? >> everybody thinks travel is peaking. lack of demand, travel is peaking. if you look at southwest, symbol love, that's 98% domestic. you have to believe that's

peaking because people believe they won't use it that much. if you could lock in, you could lock in 8 years of oil at 45. eight years of oil at 45. look how bad this is. this company reported a great quarter, almost no international exposure, not cutting fares. an incredible job. the best management and it's hated. this has to change before this market can have a move. the hatred of great companies like southwest air with raw costs going down, revenues going up, that's got to end. this will tell you if the tyranny of oil is over! >> all right. >> we can end the show right there. but we do have an opening bell coming up in four minutes. a lot of stocks to watch. stay with us.

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big fed decision at 2:00 p.m. eastern. asia mixed overnight. the nikkei up, china down, report observe their securities chief being in violation of a discipline -- some sort of -- the code for this appears to be on corruption. >> yeah. i'll tell you, something's happened that we have to pay close attention to. we decoupled from that shanghai market. that's in bad straits. it made a little bit of a rally near the end of the session, but that would be a very positive thing, decouple from the chinese stock market. even as tim cook said china slowed in the last month. there was a time we would live and die by that market. no one wants to talk positives. i'll throw that bone in there. >> true enough. one positive, the s&p five-day

moving average is now positive for the first time this year. re let's get to the opening bell. nuvein is there, and at the nasdaq, willis towers watson, a solutions company. we didn't get to ups. 153, beats by a penny, guidance relatively in line, 6.30 to 6.60, estimates were 6.55. they mentioned a tough macro environment. >> this man has come into a situation, greg smith, who i happen to like very much, a regular straight shooter guy. frankly he's got a huge china exposure in otis. people don't realize -- greg hayes. what greg hays has done here, i'll get rid of sikorski.

that's something that lockheed martin found out yet. i know this will sound like a better mousetrap, but hays has the best engine, a new fan engine that is terrific and taking share in an industry -- they have a lot of stuff on airbus. hayes decided let's take out costs throughout the world. he used to be the cfo. he's reenergized the company. the stock, as opposed to boeing, i think represents value here. otis is a service business. >> a recurring revenue stream. >> thank you. as much as the chinese may want to cut back, there's something about those unexamined elevators -- >> you need your elevator certificate signed. >> you want that guy to expect the elevator. i think hayes has got himself set up good here.

the multiple shrunk dramatically. it's not as levered. they are the number one when it comes to safety and fire. that engine saves a huge amount of energy, it's a winner. people say can you believe what hayes has got going? >> it's odd to have utx and boeing out on the same day and they're polar opposites on the dow. >> it's a good quarter by hayes. it's the first of many good ones. people have to recognize that elevator inspection is -- it's great renewable business. will it explode higher? 3. does it make sense on a day when boeing is down big? no. they'll wait. people will say i want to see if someone downgrades boeing tonight, i will buy that tomorrow. this also makes me think of

honeywell, they may be good. let united technologies come down off boeing, but don't give up on greg hayes, he's a new man, he's energizing that company in a way that makes me excited about it. not unlike when dave cody came into honeywell. >> a couple deals to get to. one that's been out there for a while, nexstar's pursuit of media general, that deal broken apart. media general went forward saying we favor the nexstar bid. 10.55 in cash, that had that a nice run and is up again today. that will create a company with 171 full power television stations in 100 markets. digital media as well. nexstar having grown from tiny

operations through acquisition and an aggressive ceo into what is an emerging -- small little power in the local broadcast media. did want to noted that one. >> did you see this chinese bed for terex yesterday? >> yeah. i saw it. i said hit the bid. >> 30 bucks. >> they had a deal with a finnish company that was all stock. the chinese come in and say we'll pay you 50% more, or more than that. the stock is -- >> is it zumileon? >> yeah. >> that stock was up sharply yesterday when the news was released by the company. they have entered into a confidentiality agreement with zulion? >> i don't know. i think steve miller is in play here. >> steve miller?

>> come on, take the money and run. the chinese are aggressive here. >> the chinese are so gloomy what are they doing buying everything in sight? >> get the money out. get it over. >> get it out. i like that. biogen a nice gainer, guidance in line, 4.50, beat 4.08. i'm sure you have more on the internals -- >> my travel trust owns biogen. we felt the ceo -- not that they were sandbagging, but they got ahead of themselves. i remember when the stock was in the 400s, everybody felt they were about to cure the terrible disease that's alzheimer's. they basically said, listen, whoa, we have to rein in the street. they reined in the street in a way that they could beat it. there was an extra week last year, they still beat the numbers.

so they had been conservative. against that i will tell that you this group has become hellish because hillary clinton may, for all i know, bernie sanders, hillary clinton, senator cruz and donald trump may see this biogen increase and it could set them off. they'll all go to twitter and say what a ripoff. these stocks are trading on tweets from presidential -- >> yeah. >> you know, between inversions and drug prices, and martin shkreli -- >> shkreli. >> is he in congress now. >> he's not in jail, right? he's out on bail? >> he's out on bail. >> jail. >> he was supposed to be at the hearing, but the snow delayed the hearing he was supposed to be at. >> speaking of stocks that move on interesting things, i can't help but mention weight watchers. because really all it is now is oprah weight watching. >> right. >> is what that stock has become. yesterday it was up almost 20% on news that oprah lost a lot of weight. >> huge amount. >> yeah. >> 26 pounds?

>> 26 pounds. >> now, as she adds to that or i should say subtracts from her overall weight, can we make an equivalency in terms of percentage moves in the stock price? for every ten pounds, does it increase? >> you can, expanding pe on a shrinking waistline? expansion on shrink? >> what if somebody sees her with a cannoli, is it a -- >> abe vigoda. >> yes. >> 94. >> 94. had been dead for 30 years people thought. >> i know. i don't know. weight watchers is one of those stock stocks. there are stocks in this market that are so insane. i'm putting that in the insane category. a point per pound. >> there's some correlation. >> there's someone figuringing out an algorithm between weight and weight watchers. >> light sweet crude not allowed on that diet. >> recapping apple, as we went

over it earlier, by the way, still the biggest net income for any company ever in a quarter, exceeding gas prom and 2011, $18.4 billion. >> no one knows how to view it. if tim cook had not said the slowing of the last month -- you know, he's an honest guy. he puts it out there. it's interesting how much talk there was about the macro on the call, saying there's turmoil here, there, and it's true. but in the end, it was a question that was a stop trading question on the conference call. he made everyone like this, he goes aren't you guiding down? and then it's a huge amount. 15%, 20%, and that made people feel like, wait a second, how do you put a multiple on a company whose earnings are coming down? the answer is that's why i went back to pfizer. it's hard, unless you want go back to the era where intel and pcs slowed.

i try to paint a masterpiece and i struggle. >> i struggle with the pfizer analogy. >> you have to get outside your industry to find a patent cliff like the way of the apple. >> really? in technology, haven't we seen -- >> the pentium. >> nonrecurring revenue streams, you have to keep selling? >> people suggested microsoft -- >> the thing about microsoft, they did x-box, cloud. i'm saying that apple has the financial flexibility for you to not rule those out. you came back with a dna argument. i would come back and say do you think steve balmer has -- >> steve balmer was the other way, making acquisitions that were deleterious. >> deleterious.

b i do think if tim cook were to watch the show right now and say why are those guys not giving me credit. i am. i'm giving plenty of credit. i'm saying what the market is saying, we don't know how to value you, we are trying to figure out if we do a gm peak sales number which is insulting to am. don't take it personally. without the good revenue stream, will you go to eight times earnings. that goes to 76. i don't think that should happen. i think there is more to the company than that. i believe the contracts you mentioned will make it so the 7 will be big, 60% of the people have not re-upped. >> sounds like piper's argument a few days ago. >> the india argument, i'll put that in. unfortunately the countries they sell iphones in are like the globe. so if you go over -- procter & gamble has their analysis about the argentinean market that's so

brilliant. i called my wife. i said i can't talk because they're discussing gillette on this call, it's unbelievable the way they discuss the gillette, bringing in the mexico peso -- >> i'm listening. i'm listening. i'm trying to -- >> no, you're -- >> i was listening. >> i was hoping you were going to finish that. >> i was genuinely interested in where this was going. >> i question that. >> where it's going that it's so complex that tim cook should listen to what procter did. they're struggling the same as he is. in the end you're losing so much money on every thing you make verses what you sell.igantic fo apple. everyone else gets a pass on currency, apple no pass? what is this no pass? apple gets no pass. i'm giving them a pass. a hall pass, a pass to go do something in autos. here, tim, go.

did you see how many they sold since our show started? >> one a second. >> that doesn't mean a thing to you, you're a skeptic. >> dow is down 98. about 90 of that is apple and boeing alone. let's get to courtney reagan on the floor. >> beyond those movers, the fed is really the focus of the market and traders today, which is not a surprise, not that anybody expects a decision to be made. everything comes down to the wording and the statement as it always does. will yellen dial back the idea of further rate hikes this year? will she be mindful of what's going on in broader markets? yes, the dow components are having a big influence on the markets as well as oil prices which are lower ahead of the eia data. if we look at what we saw overseas, asian markets are mixed overnight. we saw downward pressures for the shanghai. the hang seng and the nikkei seeing a rebound. in europe, things are mixed but marginal. germany, they're slightly

higher. france also higher as well. not a lot of movement over there. a lot of the commentary from the companies, the dow components we're talking about, has to do with what's going on around the world for global economies as well as the stronger dollar. we talked a lot about apple, but morgan stanley points out this morning they're calling tim cook's tone bearish on the call when it has to do with the broader macro environment, also saying that management called out challenges in the macro environment 12 times during the call pointing to international markets. dow componented united technologies did beat on earnings by one penny, still mentioned that currency, the stronger dollar as having a big impact. tupperware under pressure today, shares selling off, down more than 13%. not sure if you knew this, but tupperware has 70% of their business outside the u.s. even though we saw -- they saw double digit increase in china, there was weakness almost

everywhere else and in south america. that's still a struggle for the company. the broader market still weighing on stocks, even here domestically when they're talking about earnings. last but not least, i want to end with the royal bank of scotland. they're putting aside $2.8 billion for legal fees still related back to the 2008 financial crisis with the mortgage-backed bonds as well as the misconduct, i should say, that became involved with the protection being sold to different consumers for the payments, insurance protections. shares down more than 4%. back to you guys. >> courtney, thank you very much. let's get to rick santelli in chicago at the cme on this fed day. good morning, rick. >> good morning, carl. yes, it is a fed day. i don't know, my opinion is some of the markets, many of the big fund managers seem to be acting like spoiled children with regard to the fed. listen, this loop of fed policy has to end some time.

whether it's timing is appropriate or not is the issue. probably the fed advertising data dependant wasn't such a good idea. look at dynamics that were out from mid summer to the end of the year on just about every metric, especially manufacturing. the issue of china, the ships don't turn around in a day, a month, a quarter or a year. to think that the september tightening was avoided by china, only to see how the issues of china not only lingered, but to move from an emerging market to a developed economy is a process. but one thing in that process we see on all the countries economies who have made that transition that, your brogrowth starts to come down even though the girth of the economy has grown. it's a changeoff. look at a one and two-day of tens, 2% yesterday was the second since mid-november -- mid-october, under 2% barely at

199, we're still in that range. 2% is still home base. let's look at a 20 bar of bunds. fed raised rates 16th. let's look at the sentiments on the 15th. tens minus twos, note the pattern, note the flattening. historically flattening is associated with the fed. i keep putting asterisks, who knows what the yelled curve tells us when you have trillions of dollars in treasuries locked down on the balance sheet. let's look at ten-year in general. look similar? let's look at the dollar index? about three quarters of a cent higher, finally the main issue and not necessarily on the chart. but the volatility in the markets may have been big, but do we want do it all again? we're pulling the rate hike, will that give less confidence? these are questions that you, the viewer, have to answer.

carl? >> rick, we'll see you in a bit. rick santelli in chicago. still to come, the critique of twitter today from walt mossberg, their head of product goes to instagram. dow down almost 100 points.

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bill ackman issuing an apology after his hedge fund suffered its worst year last year. in 2015, pershing lost 15% to 20%. he writes when the stock price rose this summer to the mid 200s per share, we did not sell as we believed it was probable the company would likely complete additional transactions that would meaningfully increase in intrinsic value. in retrospect this was a costly mistake. >> a number of others as well, platform, a company which has gone down dramatically, canadian pacific also. interestingly he says valeant had actually considered selling

some this summer but were locked up because they were in possession of knowing the company was considering a large deal of some kind. doesn't give us indication of that. some of the more interesting parts of the letter, after he goes through the portfolio and the disaster that befelled it last year is a build potential bubble taking on the index fund force lack of corporate governance and unwillingness to engage and wondering out loud as to whether if we continue to see these flows into all of these passively managed funds, etfs, whether there will be anything left in the market itself and whether it will lead to an overvalue that reverses itself because it's simply the buying power of the index funds that pushes up prices too far, and there's nothing left and they start to decline and see outflows. an interesting read. >> to me, i always felt that would be nirvana for a stock picker. you can -- the index has 500

stocks, if you can figure out which of the 500 are undervalued, you would buy them. it would be an index fund with a brain, which might justify getting 20%. i -- a bubble, plus if there's a bubble, you take the stocks that have been bid up by the bubble, that don't deserve it, and you short them. >> his key is the investments they've identified have been found out by the s&p 500. >> there's a lot of ways to skin a cat. sometimes a simple apology is good. thank you, my wife, for teaching me that afrnlgchlthat. >> a lot of apology letters. >> united, chipotle, a bunch of others. >> index funds, you don't have to say sorry. that's another way of not saying sorry. >> true. >> we'll get stop trading with jim in a moment. it's hard to find time to keep up on my shows.

that's why i switched from u-verse to xfinity. now i can download my dvr recordings and take them anywhere. ready or not, here i come! (whispers) now hide-and-seek time can also be catch-up-on-my-shows time. here i come! can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. it's time for cramer and stop trading. >> what's happening in united technologies with greg hayes versus boeing is making me feel bullish about honeywell when

dave koning reports friday. we have united technologies, this acquisition that closed at the end of the year, you can talk about synergies, that was 5 billion dollars. as honeywell co honeywell may be your trade of the day into friday. there. >> i always love when you rub your hands together. it's a good sign. >> i pumped a lot of cane down in new orleans, maybe honeywell. >> what's on "mad" tonight. >> i don't even know! just kidding. ppg is on. that stock has been in a world of pain, and david demshur, maybe he will dispute my oil is going back to 45 soon call. thank you, rbn, for help on that. i will go to sleep, then come back.

>> we'll see you at 6:00. >> thank you, tim cook, making it an enjoyable and exciting night. >> "mad money" at 6:00 p.m. when we come back, new home sales and results of apple's outlook.

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good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber. simon hobbs is off today. markets are down largely on guidance out of boeing and apple on a week when guidance from the big large caps has been okay that seems to be changing today. oil is one to watch as we wiwil get inventories in a half hour. apple earnings miss pushing the stocks down sharply. hear what tim cook had to say about the quarter. plus we are counting down until today's fed decision. richard fischer will be joining us to weigh in. and boeing the biggest loser on the dow after a disappointing 2016 outlook. it's 10:00 a.m., so we have

breaking nick news. let's get over to chicago and rick santelli. breaking new home sales, rick? >> yes, sarah. 544,000, that's seasonably adjusted. annualized in terms of new home sales. we missed making a new high for the year by that much. 545,000 was our february read. this is february 15th, and that was the highest level since february of '08. so base clip third best going back to february of '08. last months was dinged 1,000 on a revision, that actually was ding dinged to the upside, 490 versus 491. dia dia diana olick what do you see

inside the numbers? >> these are signed contracts in december. the reason i'm making this point is that we saw big drops, and then a big jump in existing home sales due to mortgage regulations, closing delays that pushed sales up into december. this is based on signed contracts, people shopping in a warmer than usual december and signing contracts. we saw from the dr horton on monday saying they had good traffic and a lot of people coming in at the end of the year. what's interesting here is the median price of a newly built home, 288, $900. that's down. why is that important? price is everything now. affordability, even though we have lower mortgage rates than in a while, people are still looking at price. and they're seeing that existing home prices are rising considerably. so builders, if they can pull that price back, they'll see the sales. that's what we're seeing in these numbers.

inventory will be important because existing home inventories are very low, but dr horton says they have a lot coming on the market for this spring. this is a good read. back to you guys. thank you very much for that. shares of apple continue to fall amid slowing iphone growth, on yesterday's call tim cook did sound confident going forward. >> our financial position has never been stronger. we have the mother of all balance sheets with almost 216 billion in cash which translates to nearly $39 of diluted apple stock. we continue to invest into the future and return capital to shareholders at a rapid pace. >> our next guest is not as optimistic, walt pisac, good morning. >> good morning. >> everyone's strategy is we'll write off the march quarter,

regroup ahead of sechlt you go a step further and say they appear to be struggling to develop in the way of in product categories. why are you willing to say that now? >> we knfocussed on r & d in th past. the iphone is what it is. you have the down years with the s, maybe some timing when the iphone hits, overall it's not that bad for the iphone. the fear is what if gross margins evaporated and wanted to cut price. no idea that they'll do that. if we're in iphone plus or minus 3% every year, that's fine. ten times pe multiple, great stock to own, but if you want to get back to growth, you have to have new product. they're investing 4% of revenue into r & d, spending $10 million a quarter in share repurchase, they could go out and make acquisitions to find new products for growth. without growth they're dumping

into the sherry purchase, which is fine, delivering mid single digits earnings growth as a resul result. >> the 200 billi$200 billion pl growing cash pile largely overseas, you can give us an update on what the plans are, if any, for repurchases and dividends? will it grow? will it shrink? is there a chance they'll use that for acquisitions? growth type acquisitions. >> the share repurchase this quarter is less than half of last quarter. it's possible they knew what the guidance will be like in march. generating $56 billion of free cash flow, spending 10 billion a quart ser reasonable to provide them with the flexibility of 5:queue zigses. they bout beats, that gave them revenue sales, but that's in decline. there's other products tles

could acquire to drive revenue. the company is more focused in investing in r & d and putting up 4% of revenue in r & d, it's up to $8 billion a year to develop any products to stimulate growth. the iwatch, or the apple watch, excuse me, in three quarters it put up $5 billion of revenue, it doesn't take much, as far as a new product, given all the new opportunities their ecosystem allows them to pursue, to put up 5, $10 billion of profit. >> if your target is 140, even though you're talking about a passive share repurchasing giant, you seem to be giving them the benefit of the doubt, they will find something to buy. >> i think we're cutting the numbers, so we're not giving them the benefit of the doubt in revenue. where maybe historically, if you go back to some comments that

management said. eddie q saying the best product lineup he's seen in 20 years. we've taken those numbers out of the estimates. however the opportunities that exist for them are significant. they're investing. the stock is trading at a ten pe multiple. in order to get to target you have to assume the market re-rates this thing up. yes, there's some belief that a company generating 5% earnings growth should trade higher and they will at some point find a product that gives them incremental growth that takes that multiple higher. >> the sell side analyst community has been largely wrong and wildly bullish on this name. you're not alone today. oppenheimer, pacific crest, barclays all lowered their price target from the 160s to the 130s, you're at 140. which still seems optimistic. >> it's optimistic and assumes you're taking a 10 pe multiple

stock right now and assuming it will get a higher multiple over the past year. part of that is delivering on this mid single digit earnings growth, but also providing more confidence that we're not in decline or you don't have this gross margin risk that is out there as an incressmental shoe to drop on the name. >> walt, when it comes to innovation, i hear you about the apple watch. there are those who expect we see a tv product, the car, that's still to come. do you think they delivered on innovation the way they would need to to adjust a higher multiple and the market cap they've seen in the past? >> they haven't to up to date. the watch is -- 5 billion is a big number. the expectation would have been higher. apple tv, that was talked about ad nauseam and the challenges a lot of companies face getting into that space. they have not delivered up to this point. the belief is there are so many opportunities. the ecosystem they developed,

the billion ios devices out there provide this as an opportunity and it shouldn't be difficult to stumble into another $5 billion product which is the failed apple watch, a failed $5 billion product in five quarters. to find products, given their ecosystem and strength in the market shouldn't be that much of a challenge. to your point, it hasn't materialized over the last couple of years. >> yeah. we'll see what summer brings. good to see you again. >> thank you, carl. looking at the broader market. stocks are in the red amid another drop in the price of oil. also investors remaining cautious as they wait to hear the fed's latest decision and what is in that statement on interest rates. let's bring in brooklyn dwyer and ben mandell. brooklyn, i like how your note put it. communication is the challenge here when it comes to the

federal reserve. they have to walk a fine line between inspiring confidence in the economy and decisionmaking but also acknowledging what is happening in the global economy and the market. do you think they'll manage do that in an effective way? >> yeah. we think so. you know, this is definitely a tough spot. they're probably privately scared and publicly confident. they need to show that public confidence now. it's early in the game to shake things up. we've seen, as you mentioned, oil prices down today, but they're up on the week. then down on the longer trends what do we take from that? we take from that that we should be looking at more of the signal than the noise. is this signal or is this noise, right now i think the fed will say this is signal, the way to make sure they're on the right track before they start to defect. >> ben, what are you expecting from the fed today? what do you think the market will tolerate? what do you think will be

acceptable? what will be a surprise? >> there's definitely skittishness ahead of the announcement, in the end it will turn out to be a non-event. the statement will recognize there's been a tightening in global financial conditions, a pothole in growth last year, and we've seen another temporary shock to inflation coming from the oil price. at the end of the day, this is a meeting where they don't change policy stances and they remain resolutely noncommittal regarding what they will do in march. this is an example where it literally costs them nothing to say let's wait and see, see if financial conditions improve. so if you're an investor, i think whether you believe they're going to move in march or not, today's probably not going to change your mind. >> ben, today the "washington post" says that if a recovery does come to a premature end, it will not be because of low oil

or china, it will be the same old story, a federal reserve that underestimated how much it had already tightened policy, and overestimated how strong the economy really was. do you think that's true? i don't see a fed that overestimated the strength of the economy. we had a constellation of reasonably good data even in the face of a soft spot at the end of last year. today's house market data reinforces that point. but you also see a labor market which is fairly strong, the consumer which is fairly well positioned in terms of fundamentals. then you see a fed funds rate which is measured in a few basis points. to say these are tight conditions from policy, i think that is overstating that case. where you do see tightening is from global growth fears, particularly emanating from emerging markets. >> phil, the dollar's rise is

not making that easier. bricklin what do you expect for the u.s. economy? the fourth quarter we hit a soft patch. the question is how much we're rebounding the first quarter, january through march and throughout the year. whether the economy can come back in a time when global growth is slowing. what do you think? >> it's tough. you know? our expectations for q4 growth is basically zero. that's a whole lot of nothing and a whole lot of not much to write home about. for q1, we gitet a bit of a boue back. we get a bounce in inventories in q1, but looking at this morning residualcies, so all this data is seasonally adjusted. you get some second patterns that emerge. in q1, it's typically weak. we know this. we blame it on weather, we blame it on a lot of things, but it turns out we do a poor job of seasonably adjusting data.

while we could get a bit of a rebound that may be a bit muted because of just bad seasonal adjustment. i think the underlying trend here is what matters. we think that the trend coming out of q4 will probably be decent. the fed is on a track to digest the data, look at what things are to come. end up hiking rates in march and take their time and make sure things look good to do that. >> ben, i wanted your thoughts on financials here. the worst performing s&p group. with your optimistic view on the economy and fed, would you be a buyer? they've been largely sold on some of these concerns. >> i mean, what i would do is root that view in what you think interest rates are going to do. it's a fairly low bar for policy rates and particularly short rates to outperform what markets are pricing in. 86 basis points on the two-year note is extremely low relative

to a plausible not even so aggressive path for policy. if you're looking at interest rate sensitive sectors, that's something to keep in mind. >> all right, thanks for sharing with the s&p now down 0.8%. bricklin dwyer and ben mandel. when we come back on "squawk on the street," counting you down to the fed decision. a live report from washington. to find out exactly what kind of language investors should be expecting. later we'll talk about it with former dallas fed president, richard phifisher. he'll have his latest thoughts on the selloff.

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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. the dow is down about 165. a few hours away from the big federal reserve decision. steve liesman is live in washington with a look at just what we can expect from this all-important statement. steve? >> sara, a lot riding on this statement. markets are looking to the fed to feel its pain and see the world in a lousy way that they see it. it's a world of weaker growth, lower inflation and heightened risk that doesn't need more rate hikes from the fed. so it boils down to this, how much empathy does the fed show today? how much if it is too much is it a wishy-washy institution that turns tail as soon as it sees

trouble. joe ma rshg if it does too little, it risks seeming callous and detached and not aware of new realities. some of those new realities, stocks have sank, volatility has surged. oil plunged, the economic data has weakened, talking about zero to a half point on fourth quarter gdp. the jobs numbers, the weekly claims numbers have been softer. the fed will be wondering if the fourth quarter weakness is just a phase and if growth will accelerate in the first. so, here's how the fed could likely respond. it will note that weaker growth, but not really be off the charts in terms of the expected weakness. it will mention slower global growth, it will support the market view, i think, of at least no march rate hike. it may go no further. do not expect today a wholesale change in policy direction. only a time out. one phrase we'll be watching for

carefully, does the fed drop where it says it was "reasonably confident that inflation will rise towards the 2% goal." that could lay the groundwork for future rate hike delays down the road. >> we'll be parsing that language in a couple hours. thank you very much, steve st e liesman. boeing down sharply after that disappointing guidance. we'll get more on that. we're right at that 1889 level. its intelligent drive is msystems...ng. paradigm-shifting. its technology-filled cabin...jaw-dropping. its performance...breathtaking. its self-parking...and self-braking...show-stopping. the all-new glc. mercedes-benz resets the bar for the luxury suv.

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looking at a 1% decline on the dow, down almost 160 points. s&p 500 down 0.7%. the nasdaq is getting hit the hardest, down 1.3%. three big stories going around today. a few hours until the federal reserve meeting, oil under pressure again today ahead of that inventory data due out in seven minutes. and then apple weighing on the dow, down more than 4%. the only stock doing worse on the dow than apple is boeing after those results. >> boeing, 1.60, beat 1.28,

guidance for the year is no good, whether you look at revenue or earnings. there initially was confusion about whether this had to do with the 787 charge, but just saying weak things about commercial deliveries, things we're not hearing, cramer would say, from utx and ge. >> no, utx shares up almost 1.7% in stark contrast to boeing. you would expect those would trade together, not in opposition. not the case this morning. >> the best performer, freeport mcmo and they were out yesterday with results. >> which were well received. >> yeah. they said they would tackle debt problems. >> they have a lot of debt to tackle. >> some of the things, ak steel was saying about asp has led some to believe maybe we overshot a little bit on sentiment when it comes to

commodities. you hear some managers say that this year in their view would be the year that commodities finally bottom. >> not yet. energy is still the second worst performier in the s&p. we have that api number, showing preliminary builds, which reversed all of the gains from oil yesterday. waiting for that stockpile number out of the u.s. at 10:30 today. >> massive build. biggest since '96. >> 11 million. >> when we come back here on "squawk on the street," we'll talk more about this fed decision, some skittishness ahead of that important announcement and the statement. richard fisher will be here live with his take on the decision. he'll take us inside what happens those fed meetings. and what he thinks of the market action. .

secretary of state john kerry is meeting with xi in north korea. >> donald trump it making the rounds on the morning news show defending his position to boycott the fox news debate, he

said he would not participate because megyn kelly would be a moderator. bernie sanders will be at the white house this afternoon. there is no formal agenda planned. and tennis' governing body said they will commission an independent review of their anti-corruption unit to restore public confidence in the sport. this follows reports that suggested potential evidence of match fixing was not properly investigated. that's the news update, back down to the nyse. sue herera, thank you very much. one hour into the session. the dow transportation stocks trading higher. they're up a half percent. this is the second straight day we've seen strength. potentially a signal of the overall market. are we at a bottom? dow transports tend to lead, the

dow is down 166. much of that decline is apple and boeing, accounting for a lot of those points. apple doing damage to the nasdaq as well. just about 10:30 here, so we're keeping an eye out for oil inventories. let's go over to the nymex and jackie deangelis. >> waiting for those numbers, the api set us up for a huge build last night. department of energy saying there's an 8.4 million barrel build in crude, that's less than what we heard from the api, but still a really big number. the fundamentals are back in focus today. yesterday talking about opec, the russians more willing to cooperate here now fundamentals are in play. gasoline builds, 3.5 million barrels so we're adding to what we have in storage. gasoline built huge the last few weeks. whether it's gas or crude, it's going into storage and filling up space. the session low was 30.14. we were trading 30.66 before

this. prices are a bit higher now, but the pressure, it will continue. the range hugging the $30 level at this point. we could go up as high as 35, traders are telling me, but definitely touch back to the $25 level, too. that's something that's in the cards. energy investors will be focused on the fed. guys? >> as we all will be, thank you, jackie jackie deangelis. we are counting you down to the fed meeting today, no policy change expected. our next guess has said right here on this program, that much of the market turbulence does have to do with the fed. let's welcome back former dallas fed president and cnbc contributor, richard fisher. i believe the exact quote was that the fed front loaded a tremendous rally now it doesn't have any ammunition left. a ton of interest in those

comments. now that we have seen the turmoil continue, do you still believe this is largely due to the fed? >> look at all the attention you're paying to the federal reserve as we speak and other central banks. yes. this is why i was so opposed to qe3. one of the reasons was it was overkill, driving down all interest rates to historic lows, which changes the way you discount future earnings, and future cash flows. once you start to reverse that process, you have an impact. it's sort of a -- as was describe by a journal this morning, it's a loop they have gotten involved in. the fed will be guided by what happens in the real economy, in terms of job creation, and whatever is happening on the price inflation or deflation front. and they're not guided by whether or not we've had a correction in the marketplace.

i don't know anybody at the table that did not expect that to happen. in fact we talked openly about it while i was still at the fed, i was saying together with one or two other individuals, that we shouldn't go wobbly if we saw up to a 20% correction. this whole thing has been float ed by incredibly aggressive nonmonetary policy for a reason, but it changed valuations, and price is what you pay, value is what you get. the prices are very high relative to underlying values. >> the problem, as you know, richard, there's a big debate now about what is hoappening wih the underlying economy, with job growth, which looks good. but inflation has not been there. what is the rush to get off zero. the argument is there that they made a mistake for doing it in december. >> i do think, as you know, they should have done it, in september. that's when they should have moved. i'm not sure they made a mistake

in december. inflation numbers are interesting. people look at core goods, just to give you a data point. since 1993, core goods have deprecated or deflated 0.3%. the off-set to what's happening in commodities and oil, which is supply driven as these inventory numbers you just talked about show, is price inflation in the services sector, which is running at about 2.7%. so, if you look at the trim mean of the dallas fed, which probably is the best single indicator of the 12-month run rate, it is running at about 1.6 to 1.7%. if you look at the cpi, you look at the core cpi, particularly when you take rents and include them, even though they've come down, they're still fairly high. you can't say that we're having overall deflation. what you are seeing is commodity prices and core goods which have always through time come down in price, not gone up. but particularly commodities,

food, protein, greens, and of course oil and gas. you mentioned that earlier. they are deflating in prices. but the service sector is inflating in prices. that's where the balance is we're a service sector driven economy. and secondly very importantly this is a supply driven disinflation deflation on the commodity side, not a bad thing. and notcessarily dangerous and damming to the consumer. >> how would characterize the fed's move and policy actions relative to the way other central banks loaded up on debt, too the mistakes that the fed has made in your view have been amplified by the fact this was done all around the world. >> i think we don't know whether quantitative easing is successful or not. the last chapter has not been written. ben bernanke wrote a great book, but i don't think the story is oefrmt it's not over until janet yellen and her team, this

earnest group of great people, figures out a way to engineer the exit. only then will we know if quantitative easing was successful. qe, zert, nerp, we won't know if they worked out or not until we get back to a monetary policy. the story is not complete. the last chapter has not been written. this is chair yellen's burden, trying to close this off over time without creating enormous damage to the economy, even though there might be market volatility in the mix. >> that brings us to the immediate task at hand today, which is nobody is expecting them to change rates, but they are going to be parsing that statement. richard, take us inside. you're not in the room anymore, but you were there many, many times. how does this work? do they put the statement on a projector screen?

circle words? >> i was there for ten years. eight meetings a year. that's quite a bit. a paper is circulated well beforehand which gives you options to consider. the chair personally solicits every member, the 12 bank presidents, the board of governors, when you arrive at meetings, these options are changed a bit depending on what the feedback was. you have a discussion about the economy. usually led by the 12 bank presidents. the last go before the chair is the vice chair of the committee, which is bill dudley from the federal reserve bank of new york. everybody gives their view on the economy. that's usually the first day's discussion. they might tip their hand as to where they think policy should be, the second day's discussion. and usually it focuses on one of the three options that have been laid out or maybe there are a couple other sub options in the package of options. it's all done on paper. you sit at the table by yourself

with major staff from washington, d.c. who provide you plus the new york desk with a briefing on what's going on. you've already been briefed by your own staff. you sit at that table alone and provide your opinions. nobody else can speak to you, speak with you during that session. once you have the two go-arounds summarizing policy and the second day summarizing your policy preferences, after some discussion by the staff of what's happening in the markets and with financial stability, what's going on in the global economy, what's going on in the domestic economy, you then center around a policy option and then the chair takes a vote in the end as to who will support this option or not. even before that, because it's not just a formal vote, it's trying to get as much consensus at the table as possible. janet yellen is very good at this. she's good leader. very inclusive. >> yep. >> summarizes both sessions at the end of each session, but it's all done on a piece of paper, done sitting around that big mahogany table and done with

a lot of comity and friendship. if you disagree, it's a wonderful institution, nobody holds it against you. i remember the first meeting i had with alan greenspan, the first chair i served under, he said speak to the truth, richard. that's what everybody tries do, give their views, it's the chair's job to pull it altogether into a final decision. >> we're all fascinated by it. we'll look at that statement closely. >> here's the point very quickly, it's a matter of the best judgment of 17 well-intentioned people sitting at the table just trying to get it right for the u.s. economy and for the united states citizenry. >> we'll leave it there on that nice note. thank you. richard fisher, former president of the dallas fed. >> thank you. when we come back, the dean of valuation on why he's more worried about the markets this

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iphone sales grew at the slowest rate on record, now the company expects revenue to decline in the current quarter. are those catalysts priced into today's stock? joining us is aswath damodaran, professor of finance. good to see you back. >> nice to be back. >> let's do apple in a second. let's talk the broader market. you look at the equity risk premium. you said stocks were resilient last year but you're more wary this year. why? >> if you look at what's holding stocks up, it's the cash that companies have been able to return to stock holders. others buy back the didividends. last year they were returning more than they could afford to on the hope that earnings would bounce back. given what's happened in china to commodities, i think we're in for another bad year of earnings. i don't see how they can maintain those cash flows. >> so that can't come to the

rescue again? >> exactly. >> you're not a market timer you say. >> yes. >> for yourself, your best play is still to buy companies you think are undervalued? >> my history is when i feel uncomfortable, it does nothing for the market. the market does what it does. in this case, i have to go out and find good investments. >> apple as an example, is that a good investment? >> at app95, i think it is. it's not going to become a growth company. it's more like altria, a dividend paying solid cash cow. people are addicted to their iphones as they are to cigarettes. in a sense you have to do it for about right reasons. it's not a classic growth tech company. it's a very mature cash cow. >> can you compare it to another value technology company? i think you liked microsoft in the past which has worked out. we have earnings tomorrow. >> microsoft, it took a while

for investors to adjust to that reality. it took a few years before they said microsoft will not have a double digit growth quarter anymore. it's a different kind of company. so investors take a while to adjust. apple has been interesting. watching the stock over the last five years in terms of investors coming in and going out of the stock for the wrong reasons. >> you may think apple is no longer a growth company, but i'm not sure they think it is. they have 216 billion in cash, one would think if they believed that they would be returning more to their shareholders. >> i think part of the problem is 130 billion of that cash cannot be touched. you have to start off by taking 130 billion off. they returned an incredible amount of cash. this is like a cash machine that keeps on giving, but the cash keeps building up. more companies wish they had that problem. >> yeah, it's a high-class problem. that said, to your thesis that it is in some ways a dividend payer, one that -- a value stock that will deliver overtime

giving back to share holders, are they doing enough. >> the positive aspect of having 200 billion in cash, they can keep paying the dividends for the next 25 years and not feel the pain. if i'm a dividend collector, i think of it as a gimme on the dividend front. if they can do more, i'll take it. >> twitter a lot of news this week. how do you approach this one? this is a company in need of adult supervision. they have an incredible resource. user-based. i've never seen a company back so much part of public consciousness, but they have been unable to convert it into money. i have a feeling it starts at the top. i don't see how jack dorsey can run two companies at the same time. this company needs to essentially find a management team that can convert its most critical resource into money. >> finally, with the time we have left, facebook? >> facebook is the anti-twitter. if you look at a company able to convert user base into value,

facebook continues to impress me. the way they can take their users and make money off them. >> professor, good to have you back. we will cover more names next time. >> thank you. we have some news on boeing, which is one of the laggards on the dow. let's get to phil lebeau with that. >> we have production changes. production cut in the 777, it will drop from 8.3 per month down to 7 per month in 2017. boeing saying it does not expect production of the 777 as it transitions to the 777 x to drop below 7 per month. that's scheduled to happen in 2017. on the flip side, greater demand for the narrow bodied 737 is leading the company to increase production in the future. currently they build 42 per month. that goes to 47 per month in 2017. that was previous announced.

the new guidance is starting in 2019 it expects to build 57 737s per month. that's the new guidance from boeing on the narrow-bodied 737s. you have a production cut on the 777, and an increase scheduled for the future in the 737. we'll hop back on the call. >> phil lebeau, thank you very much. still ahead, the ceo of sprint will join "squawk alley" live. we'll be back with more "squawk on the street."

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new is tougher, stronger and lighter. 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. >> positive stocks are up. rick asntelli has the santelli exchange. >> good morning. i'd like to welcome my special guest from the fed. 2001 to 2006. thank you for taking the time this fed day. >> thank you for having me. enjoy being here. >> all right. you know what, i think we could bring something to the table. one of my favorite words has been normalization. probably 2nd best recalibration.

let's frame what the fed is looking at with regard to their process through the distinction between two terms. there's tightening and there's normalization. i think there's room for light in between. to me tightening is anything above 1.25 and 150 basis points. that to me would begin tightening. i think normalization is getting off to whatever that level that really is appropriate. the noncrisis economy which i would think fits the definition of where we're at. can you expand on that? disagree or agree? >> no, totally agree. that's a very critical distinction. if the fed does not get back to a more normalized balance sheet it will not have any ammunition for the next time we need the fed to be engaged in stimulating the economy. we have seen the term normalization in each of the last several statements. i expect to see it again but there's another element in that process, rick. you mentioned raising rates. the other thing that will get

thwart normalization is allowing for the normal run off of the instruments that have been toured and we are still seeing in the statement that we'll continue to reinvest those that mature. that to me is a key part of the normalization and that's when we'll see the fed making that commitment on normalization. >> okay now wait just to make sure that i understand you mark, you're saying that they should stop the purchases with the reinvested funds. >> exactly. what they should do as maturing bonds -- as bonds mature or instruments mature allow them to roll up because normalization means a reduction in that balance sheet. >> that's awesome. >> as opposed to. >> i agree. when i look at the flattening yield curve what jumps out at me is you can have a steepening yield curve if you let the

treasuries and balance sheets run off. they really don't want to do that. you're offering a 3rd door so to speak, correct? >> the reverse repos haven't figured out how they're going to work with that but just allowing the run off would be an important step toward normalization. >> excellent. the final comment is this is january. the market and many opinions if there's a tiethdenning that's in march, in the interim period if you were an investor would you pay attention to true data dependent? i have my question marks if that's as it appears on the face of it. what would you monitor to gauge whether that tightening is moving closer? >> i would be looking number one at inflation and there's almost no inflationary pressure now and so if that's the case, i think it will be tough to move. the other thing i would look at

is the underlying economy as opposed to the market reaction to it because the underlying economy and i think what we'll see in the fed statement today as a reassurance of that fact, the underlying economy is so hid but not strong. over 2 million jobs and with respect to the dollar, the dollar hasn't moved much against either of the other two real strong big currencies. the euro or the yen. we would see some of that reassurance but i would look at the under lying economy as opposed to market indices. >> it's always refreshing to hear some of your critique on the fed in the markets. i thank you and of course next time you're on we might have a little more clues regarding the fed. back to you. >> thank you, rick. happy fed day. we'll see you in a bit. let's send it over to john with a look at what's coming up next on squawk alley. apple shares down more than 5%.

>> that's right sarah. down near $95 a share. haven't seen those levels in a year and a half. we'll be digging into whether it's really as bad as the stock looks. also sprint ceo is going to join us in an exclusive and he'll talk about twitter. what he sees as the real problem with that product and service might not surprise you but then again, the solutions could be tricky. all that and more coming up on squawk alley. so i'm going to take this opportunity to go off script. so if i wanna go to jersey and check out shotsy tuccerelli's portfolio, what's it to you? or i'm a scottish mason whose assets are made of stone like me heart. papa! you're no son of mine! or perhaps it's time to seize the day. don't just see opportunity, seize it! (applause)

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>> apple headquaters and it's 11:00 a.m. on wall street and squawk alley is live. ♪ >> nice to be back with john and kayla at post 9.