2016, and "squawk box" begins right now. live from new york, where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" here on cnbc. i'm andrew ross sorkin along with joe kernen. becky quick is out today. take a look at u.s. futures. things look like they're going to open lower. nasdaq looks to open lower, about 30 points off. s&p looking to open off about tenpoints. take a look at the price of oil. wti now trading at 33.15. that is down marginally this morning but up on a relative basis to where it's been the past couple weeks. among this morning's top stories, bill gates now breaking ranks with silicon valley in that big fight between apple and the fbi over encryption.

microsoft co-founder telling "the financial times" that companies should be forced to cooperate with authorities in terrorism cases. gates takes issue with tim cook's characterization of the government's order, asking apple to open that san bernardino shooter's iphone as a demand for a back door. gates says, quote, this is a specific case where the government is asking for access to information, end quote. he says, quote, they are not asking for some general thing, they're asking for a particular case. gates says there are benefits to the government being able to stop crime and investigate terrorism, but there must be rules on when information can be accessed. melinda gates echoed her husband's views. >> i think that's a delicate balancing act, both between privacy of information but also what the government needs to keep us safe. i think that'll get worked out in the courts in the next few weeks, but i think it's an important debate that all societies need to have. >> but a separate apple story

indicating this may not be a one-time only request. u.s. department of justice pursuing court orders that would force apple to help extricate information from about a dozen iphones. the details of the case are not yet public and do not tend to involve any terrorism charges. that's really the big issue. even though james comey has said repeatedly this is a specific instance. the big problem is you then have people like bill bratton and others saying, we have 175 of these phones lying around we'd like to open. >> i've been watching you do back flips, trying to stay with your original opinion on this but slowly sort of realize maybe there are some nuances here. >> there are nuances. i'm trying to figure out how to come to the middle. as you know, i like to be in the middle. >> oh, yeah. as i read, i just thought of your position. then i look at "the huffington

post" and all your normal allies. you were so diametrically opposed to just about everybody you hold dear that i wondered how you were -- >> i'm trying. >> i know you were. the bill gates thing -- >> yeah? >> there's no love lost. >> microsoft has a number of cases they're involved in with the fbi and the government. >> would you ever look at bill gates, at what he was saying, and say, wow, he's just doing this -- it has nothing to do with microsoft or a horse in the game or a dog in the fight. i would never think he did anything based on anything other than self-interest, especially in this case. >> let me say this. there are a couple tech ceos who i can't name who are out there privately -- >> because you don't know their names? >> no, i know their names. >> privately saying apple should do it. >> at this point, they recognize that apple's back is against the wall and the public issue is so big that's sort of hard to deal with. also, the fbi screwed up because

they went first. >> you're going to have haydn on. nsa guy. he understand's apple's position. i love ted olson. i know he's hired by apple. if he says this could be an existential threat to the dominance of the iphone in the smartphone market, if you knew exactly how to hack into the iphone. you don't buy that. >> that part i don't buy. >> you think bill gates would be sad if the irkts phone -- >> i don't think that's what this is about. the flip side is i do think it means that the chinese from a policy perspective will go to apple and say, if you want to do business in this country, we're happy to have you -- >> but let us know how to get in the back door. >> you're going to have to do this for us when we have problems. by the way, if you don't, thank you for playing, we won't be selling your phone here. and that is a big business

issue. >> this is a privacy versus security issue. i do think to some extent that you almost can take the privacy, be a sort of fighter for privacy almost in any case and eventually it will be positive for security. there will be these individual instances where you don't get certain things, but you eventually -- i think you need to take a stand for things like this. maybe try to stop terrorism in other ways. sort of the point mcnaealy was making yesterday. must be a some border security. >> yes, there are other things you can do. the other thing is all of these phones going to become devices for terrorists? that's another problem. >> but that's -- with freedom comes risks. with privacy comes risks. things like that are going to happen. otherwise, you live in a society where they know everything.

>> but as we've said on this show, everybody is happen to for some reason give all their information away to each other. but the second it's the government -- >> people aren't happy about that. it's worth a lot, that information, to be able to tap into whatever. >> i'm just suggesting that the millennial generation, everyone is giving all their information away, and then the second the government says they want the information, we say, oh, you can't have it. >> the government can get plenty of information. i watched this year's homeland, really not liking the -- >> don't tell me what happened. >> there's an ex-pat over in germany. she's exposing everything. i watched her, annoyed, that she couldn't get on board to save people's lives. i don't know. privacy is important. >> look at you. >> with freedom comes risks. we need to do everything we can to stop terrorism. >> you and edward.

>> right. let's go on to home depot. it's a little easier to figure out. just out with quarterly results. earnings per share of $1.17, higher than $1.10 expected. revenue also beat expectations. they also announced a 17% dividend increase to 69 cents a share. u.s. comp store sales up 8.9% in the fourth quarter. united technologies confirms it held talks with honeywell. but utx said it didn't explore options further due to what would still be significant regulatory obstacles, customer concerns, and valuation issues. david faber first reported

details on the talks 16 years ago. but also yesterday was very weird. wasn't it? what were you doing? do you remember? you weren't in the business. >> i was in the womb. i was at my bar mitzvah party. >> you weren't in the womb. >> no, i wasn't. >> the wall street journal says the bid was worth $108 per utx share. 42 would be in cash. utx shareholders would have owned 40% of the combined companies, according to that report. who was going to be the ceo if it had happened?

did they make it that clear? >> oh, in this instance, i think part of the issue, beyond the regulatory issues, was i don't think that part was clear. it sounded like cody had approached once. they had approached. this had happened over the past year two or three times now. >> greg, what's his last name? >> the real question, does it suggest either one of those companies is somehow in play in some other way for another company? >> did you real the valeant stuff? >> yeah, we haven't gotten a chance to do that yet. >> is this new? >> it is new. if you're bill ackman, you have to be very unhappy. >> for a guy who's so anti, this is weird stuff to be doing. >> see, we actually agree on something. let's turn to the markets right

now. solid rally on wall street to kick off the trading week. the dow and s&p 500 out of correction territory and positive for the month. what are the risks in this market for investors? >> sitting between us. this is weird. >> this is a little weird. >> it's harder for us to hold hands. nice to see both of you. so do we miss it? if we weren't in before, was that the bottom? was this the dimon bottom? everyone talking about jamie dimon having picked the bottom. by the way, analyst day today. we'll hear more. is the bottom baked? >> is the bottom baked? i would say we still see some value here. i would say we still see some bargains. but we're also seeing some warning signs. there's a temptation to follow chicken little right into the bunker. so on the positive, you still

have an s&p that's yielding higher than the ten-year treasury. that's a sign of value. yesterday's activity is a sign of industrial value and opportunities there. you know, you've got something reminiscent of october here in terms of you're broken back up, you're out of correction, you don't have a lot of people participating in the rally so far. that's similar. >> dead cat bounce? is this a quickie? >> it could be. on the other side, the technicals, you're still not out of the woods, number one. high-yield spreads continue to really fall. in the past, those things have been precursors to rougher markets. so we get to sort of neutral on this. we see value, but there's some possible risks on the horizon as well. >> ed, you're our macro guy. tell us the link between wti at this point in the market. >> it's actually interesting. in 1972, none.

in '73, '74, it's critical. now that relationship is reversed temporarily. i still think it's temporary. i think in the longer run, the more important thing is what happens to the economy and especially corporate earnings. flat last year and look like they're going to be flat this year. we came into the year thinking we'd have a flattish market. prices have gone down. actually, the expected return in our view has gone up. so you're getting a little better value now. the fundamentals really haven't changed so far this year. we've actually been tilting more, rebalancing portfolios, selling the things that have done well. >> what about tech? tech has just been murdered. any opportunity there? >> well i think the issue with tech is you have a constituency that loves tech and is going to be very, very hesitant to sell it as a core position. we all know those names people love. if you get a market decline, you'll see those fall because

people have been reluctant to sell them as core positions. the innovation is all there. it's the heartbeat of american economy. so long term, we still like tech a lot. that would not be an overweight position for us currently. >> does anybody care? we talked about this yesterday on the show. this is the brexit. sterling tumbles as cameron takes on party rebels over brexit. if this were to happen, wouldn't this be greece all over again? >> no, i think it's clearly not a good thing for the global economy if the u.k. decides to get out of the eurozone. but it's still quite a bit down the road. there's still room for compromise and change. i don't think the markets are going to be tremendously -- at least the u.s. market isn't going to be tremendously concerned until it gets to the actual event. >> what about the buy backs? that continues at pace. should it? >> i think so. i think that capital allocation, whether it's on the dividend side, the buy backside, has been

helpful. if there's a downturn, it's going to be more helpful. companies have not held a lot of cap x. there hasn't been a lot of reinvestorment. on the same side f you get a slowing in the u.s. economy, you're going to have less overhead. i think that's a positive. >> i just saw a statistic that said ibm now officially bought back more stock over the past 10 or 15 years than the entire market cap of the company. >> right. >> is that -- is there a way to justify that? >> yeah, if you can't grow revenue, it's the only way to make earnings per share go up, right? >> but then -- >> no, there's no way -- >> wouldn't you just be happy to get a special dividend? >> a lot of things could have been done differently at ibm. it's sad. it's like watching xerox.

maybe they'll come back eventually. you can only reinvent it so many times. we'll see. time will tell. how is buffett doing? losing his shirt. >> we're going to talk to the gentleman himself here on the camera next mondays morning. becky will be out in omaha. thank you, ed, and michael. appreciate it. >> and what's coming up? we're going to dig through home depot's results with an analyst. then our guest host will be jimmy dunne. hung out with him at pebble a little bit. pro was 7 under the final day. that sort of helped. anyway, at 8 a.m. eastern, house speaker paul ryan will join us on the "squawk" set. he doesn't have that beard anymore. >> but beards are cool now. come on. >> but the beard is gone. macy's chairman and ceo terry lund green joins us for the

first interview after the company's quarterly results. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us. (vo) go national. go like a pro. something we'll show you.. through small things. big things. and spur of the moment things. sheraton.

♪ i provide for my family. i will use my education to help my community. i will inspire our next generation of leaders. i am a college student,

but i am only 1%. only 1% of college students are american indian. donate now, and help our numbers grow. ♪ welcome back to "squawk box." time for a couple stocks to watch this morning. we just talked about it a little before. valena it will restate its

financial results for 2014 and 2015. this has to do with accounting errors tied to sales of drugs to the distributor philidor. you got to think, bill ackman was already down. this is only making it worse. by the way, odd connection for you, joe. you know how aig has been suffering and carl icahn has been trying to break up that company? you know who owns a stake in bill ackman's company? >> no, who? >> aig. so as bill ackman goes down because of valeant, carl icahn does. >> did you read what squaring the circle actually was yesterday? >> i did not. was i supposed to? >> no, someone wrote in. it's an old term where if there were archers in a circle and the horses would sort of rush -- if you made is a square, they'd be less inclined or something. some warfare tactic. you square the circle to make sure you're unable to be attacked. just in case you were wondering.

>> i squared a little circle? >> little bit. >> okay. just want to put it all -- >> valeant, what its average cost? do you know? >> i do not know. >> because the high is 265 or so. it's trading at 75. i don't know where it's headed today. actually, that must be reflecting some of the weakness today because 75.95 is where i have it. that's rough, isn't it? >> so he bought at 87.41 -- >> bought more. >> that was on november 20th and november 23rd he had bought more. but he was out of the money at much higher prices earlier on. >> right. okay. all right. that's fine with me. home depot posting fourth quarter results just moments ago, beating the street on the top and the bottom lines. brian nagel joins us now,

covering retail hard lines and broad lines. ibm, 129 billion. home depot, 155. not related, brian, but we were talking about ibm and how the market cap, it was here 10, 15, 20 years ago worth over 100 billion. but how is home depot? how are the results? any surprises? anything that makes management really pleased, and any trouble spots? >> well, look, i think the easy assessment is these results were extraordinarily solid. the number people can latch on to here is the positive is the plus 8.9% domestic comp for home depot, which was well above what most people were thinking. i think really a reflection of the ongoing strength at home depot in the domestic home improvement market. >> yeah. we usually do a comparative chart between home depot and lowe's. is the macro environment where both these companies are doing well and you can't discriminate

one from the other? is one doing better than the other? >> the easy answer to that question, home depot has done better than lowe's for a while. tomorrow morning, so 24 hours from now, we'll hear what lowe's has to say. my suspicion is we'll see more of the same, where lowe's has another good number, just not as good as home depot. we'll see what they say on the conference call. i think home depot really benefits from favorable weather. you have warmer conditions well into the quarter, then this quick shift to very winter-like conditions. in those kind of environments, home depot tends to do better. they're great merchants. >> great merchants. so what does the actual execution look like? they got plenty of snow shovels ready or something? how would you take advantage of what you just said? >> well, look, the key with home depot is that they kept warm weather product in the stores longer. as the weather shifted, they got the snow shovels, ice melt,

generato generators, whatever else, in their store quickly. so they're able to take advantage of what was an odd weather environment. >> reading the farmer's almanac? how did they do it and lowe's didn't? >> i'm not saying lowe's didn't do it. what we've seen in the past is when you have these type of environments, home depot is particularly good at capitalizing upon it. >> okay. so from here on out, if you're looking for growth at home depot, it's going to come how? they've restructured some of their assets. i guess the previous guy did over the past five, six, seven years. how does the company keep, you know, adding -- it's a tough thing to do quarter after quarter, you know, to try to please everyone. what do they have to do? expansion? just clean up the stores? what's the most important thing to do? >> it's more of the same. so they're really not opening very many new stores. the growth really comes from continuing to drive sales at existing stores, which they've been doing for a while. i think about the growth

algorithm here. it's internal execution, but they're also very dependent upon the overall environment. we need to continue to see a solid demand environment for home improvement retail. >> okay. all right, brian nagel, thank you. >> thank you. >> stocks have been a great hold for people over the past five, ten years. appreciate it. all right. so voters in -- and i still hear it, man. >> what's that? >> i still hear people say nevada. i hear candidates say nevada. if i were in nevada, i would not vote. i would not caucus for someone who couldn't pronounce the name of my state. harwood's got it down. voters in nevada are heading to the polls today as the first in the west caucus kicks off. john harwood joins us now from washington with more. i think it's weird that on the same day the republicans have south carolina, the democrats have nevada, and then they switch it and do nevada and south carolina. that's weird, john, isn't it? who thought up that? >> reporter: well, it's a little

weird, but you've got a fairly open process. this gives a little distance between the two parties. don't have as much intermingling of the voters of the two, unlike new hampshire, where you've got some give and take between independent voters who can participate in either party's primary. just gives a little more separation. but look at the national landscape, joe, heading into this contest. we've got new numbers from the nbc survey monkey online poll nationally, which shows donald trump in command of the republican race, 36%. ted cruz in second with 19. marco rubio in third with 16. we saw when donald trump was campaigning in nevada yesterday, the race had -- the event he had, had a turn to the ugly, which we've seen a number of times in trump rallies, when the emotion is stoked and directed outward, either at the press or protesters. take a listen to donald trump's reaction to a protester at that

event. >> here's a guy throwing punches, nasty as hell, screaming at everything else when we're talking. the guards are very gentle with him. he's walking out big high fives, smiling, laughing. i'd like to purnch him in the face. >> reporter: that's the kind of thing that has republican leaders concerned. you saw a number of establishment figures yesterday rallying around marco rubio, believing he's the one who can stop donald trump. you have ted cruz and john kasich fighting away with different elements of support. ted cruz yesterday fired his spokesman over an untrue facebook post that he had retweeted. so you've got some turmoil in the rest of the field. donald trump appears to be consolidating his support. hillary clinton, of course, our poll shows maintains a lead over bernie sanders. she looks to be in decent shape heading into the south carolina

primary on saturday in the super tuesday states throughout the south, joe. >> the whole process, john, i guess in both parties, but in this case only two on the left, in the democratic party. it's a little simpler. but when you've got three candidates, or in this case four, five, six, whatever it is, you don't know what the ceiling is on some of these candidates. >> reporter: that's the key question in the race. >> you lead with 35, 36, what if you're stuck? what if that's the best you ever do and you have to add up all the other ones and that adds up to 65? i don't know. >> reporter: there are a lot of republicans, joe, who are hoping that exactly the dynamic you just described is what's going to control this race. that donald trump's at 33, 35, 36 in various places, but he can't go higher than that. >> he 35 plus 19. he might get cruz's guys. they don't all necessarily go to

rubio either. >> reporter: exactly right. and look, when you win and the headlines in the newspapers and on television say trump wins, you -- people then look at you as a winner. they become more resigned to the fact you might be the nominee. that ceiling grows. anything you say about donald trump's ceiling can also be said about the ceiling of these other candidates who have had a somewhat lower ceiling so far. >> time flies, john. i just can't believe we're going to know everything in a month, which is unbelievable. >> reporter: i believe you're right. there's been all this talk about brokered convention and everything like that. ic that is highly unlikely. i think as usual, this process tends to whittle. candidates drop out. the funnel gets narrow pretty quickly. i think it is likely that a month from now, we will know the identity of both party's nominees. >> which is pretty amazing.

it's something to look forward to. that's for sure. do you have anything, andrew, for our buddy? no? >> reporter: andrew is just thinking about that trump/clinton debate in the fall. >> he's thinking about bloomberg. that's all he thinks about. i don't know. >> i still wonder. i know you have counted him out. by the way, i'm not suggesting he could win. i just wonder whether he's going to jump in at all. >> if he has delusions of grandeur to have someone other than new yorkers to know or care anything about him, which they don't, other than the two coasts. >> reporter: andrew, why would he get in if hillary clinton is the nominee? >> ego? isn't he 74, 75 years old? >> 75 years old. this would be his last chance to do it. >> he's not going to do it. he just loves the idea of doing it. >> this would be his last chance to do it. by the way, he ran a great city. of all the people who are running, you could actually look at his record and say he ran something meaningful. there's value there. >> mayor of a city.

>> the biggest, perhaps most influential, important city in the country. >> we saw how rudy giuliani did. it's not going to happen for you. i'm sorry. >> okay. >> john, virginia lost, you saw. >> reporter: yes, sir. i watched the end of that game. that was a very nice win for miami. >> yeah, it was. so tomorrow are you going to watch? number five against number one. >> reporter: yes. i think that is amazing that those are both top five teams. yeah, that'll be a great game. we got a wide-open postseason in college basketball. >> they're the only two teams that are 24-3, aren't they. >> reporter: there's probably 15 teams that could win the national championship. >> i agree. i'm lost. that's why that bracketology guy, whatever his name is, that's rough. hard to figure that out. what's his name? j joe. that's also happening in march. that's why it's called march

madness. >> reporter: we have madness all over the place. >> unbelievable. i know. alrea all right, harwood. you know we have paul ryan on today. >> reporter: i know that. interesting to hear him weigh in. >> he needs to explain to me all the anger. >> reporter: are you going to try to draft him in the race? >> i love him. i do. i don't know. is the anger at the president, or is the anger at the republicans for going along with the president and letting him get his way? that's what i want to know. >> reporter: the anger is at the economy for not delivering rising living standards to too many americans. >> okay. all right, harwood. >> coming up when we return, taking flight this year. how airlines are attempting to make up for lost time after ticket prices hit five-year lows in 2015. and why it'll cost you. as we head to a break, a look at yesterday's s&p 500 winners and losers. on the floor! everybody down! nobody move! on the floor!

hey, do something! oh, i'm not a security guard. i'm a security monitor. i only notify people if there's a robbery. there's a robbery! why monitor a problem if you don't fix it? that's why lifelock does more than free credit monitoring

to protect you from identity theft. we not only use proprietary technology to detect and alert you to a range of identity threats, if you have a problem, we have a u.s. based team of specialists who'll work to fix it. we'll even spend up to a million dollars on lawyers and experts to set things right. considering how often you use public wi-fi, shop online, and give out your social security number, it's no wonder that one in four people have experienced identity theft. it's not too late to join. lifelock memberships start at $9.99 a month. join now and get lifelock risk-free for 60 days, using promo code "bank". protection begins immediately. call 1800 lifelock or visit lifelock.com serena williams. hi watson. you are a fierce competitor. i've heard that. i have analysed your biggest matches. oh really? when down a point, you serve an ace 5.8 times more than other top players. you sound like a coach. i am not. but i can customize training programs based on biomarker data. watson, that's pretty impressive. you might say i am the serena williams of cloud-based cognitive systems.

nah, i wouldn't go that far. just joe and i hanging out on a tuesday morning. welcome back to "squawk box." time now for the executive edge. airlines have hiked prices five times so far this year, as many times as the entirety of 2015. that's according to pricewatcher fair compare. airlines have boosted ticket prices in total by $22 this year. ticket prices did plunge toward

the end of 2015, down more than 6% from 2014. i won't even make the point you know i'm going to make, joseph. >> $22 when they plunged at the end of last year? >> wti crude plunged. >> nothing to do with -- what happens with crude has nothing to do with what you do with prices. just like if coffee goes down, it has nothing to do with what you charge at starbucks. you look at all the different things involved. you look at the competitive landscape and everything else. you try to maximize profits. >> historically, commodity prices have played a central role in the price of air. >> labor, pilots, unions, machinists, everything else. >> the environment, where there's less competition, you don't have to lower or raise the prices to the same degree. >> when oil prices go up, you and all your friends want to put a windfall profits tax on the oil companies. when profits come down, you want to tax them so we can, i don't know, put more money into wind and solar. it's crazy.

when the government gets involved, it's crazy. let the airlines earn a decent return after 20 years of having zero return. their margin is even at this point. if you want to argue margins, they're no higher than any other industry. they're 10% or 11%. we need a vibrant airline industry. i just had a buddy fly back from california. he flew into jfk for $200, round trip, l.a. -- >> there are still uncertain routes. >> it's no a prohibitively expensive -- >> but on many routes, there's no longer the same competition. >> but then you have the ceos that come in and talk about it and tell you they're full of crap. >> that's their job. >> it's their job to maximize profit. when they say there's plenty of competition, it doesn't mean they're just all liars. they're saying you don't know because you don't run an airline. they tell you exactly what's going on, fill you in on all the different competition and competitive landscape that you might not immediately see just from looking at, you know,

routes at laguardia or whatever. >> so many routes now -- >> that's what you say. plenty of competition. >> yes, if you want to hop around and do two stops and have layovers left and right. >> why would it be so hard to make money over 20 years if there was no competition? why did they make no money? why was it so hard to earn a profit for 20 years? >> because they had no discipline. >> there's a lot of reasons why. one of the reasons is not because there was no competition. coming up, utx -- >> too much competition. that's why. >> and now there's not enough. too hot, too cold. let them earn 10%, andrew, please. we don't need them constantly going in and out of bankruptcy. >> i'm not suggesting they do. >> good. you can't just say oil prices go down, cut your fares by 50%. >> no, no, no. if there was a true competitive market, you would think there would be one airline that would

try to buy market share and leverage -- >> because there isn't probably means it's not that simple. because someone would do that and undercut. utx confirming it's engage ed i talks with honeywell about a merger, but it's since abandoned those plans. as we head to break, a quick check of what's happening in the european markets right now. you're an at&t small business expert? sure am. my staff could use your help staying in touch with customers. at&t can help you stay connected. am i seeing double? no ma'am. our at&t 'buy one get one free' makes it easier for your staff to send appointment reminders to your customers... ...and share promotions on social media? you know it! now i'm seeing dollar signs. you should probably get your eyes checked. good one babe. optometry humor. right now get up to $650 in credits to help you switch to at&t.

i'm spending too muchs for time hiringnter. and not enough time in my kitchen. (announcer) need to hire fast? go to ziprecruiter.com and post your job to over 100 of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. you put up one post and the next day you have all these candidates. makes my job a lot easier. (announcer) over 400,000 businesses have already used ziprecruiter. and now you can use ziprecruiter for free. go to ziprecruiter.com/offer2

welcome back to "squawk box." it's time for the squawk planner. two things to watch today.

housing and the consumer. the home price index comes out at 9:00 a.m. eastern time. expected to show another healthy increase. that's followed by january existing home sales at 10:00. consumer confidence may have slipped due to market turmoil earlier this month. also, a trio of fed officials speaking today. minneapolis fed president neel kashkari, the dallas fed president, and vice chairman all speaking. we'll hear what they have to say. also, macy's reporting earnings around 8:00 a.m. eastern time. chairman and ceo terry lundgren is going to join us here on the set shortly after that report. we should also tell you that dreamworks and etsy are out after the close. joe? >> united technologies confirming it engaged in preliminary talks a about possible collaborative option with honeywell, but a deal would face major regulatory challenges and strong customer opposition. for more on what this means for the sector and future deals, we

have dean with us. he's now between us, separating us, andrew. >> it's a buffer. >> dean, whenever you look at anti-trust stuff, i always wonder who we're trying to help here and who would be hurt, who would be helped. if you were trying to compete globally in aerospace, there's probably a lot of rationalization you could do between these two companies. the company that you would create would be a potent competitor globally, which is appealing to some extent. who would get hurt? boeing and airbus because they wouldn't be able to play one of these off each other in building planes? >> yoe, you raise an interesting question. certainly shareholders would benefit because you have earnings accretion. >> most people think that would be a good thing, but not everybody. so shareholders would benefit. that's good. >> but the biggest stumbling block everyone is talking about and the issue you raise is the

anti-trust question. you can mark where there's overlap between these two companies, but it really does come down to that last point you made about the value, the set from the combined company signed to the likes of airbus and boeing, would make them too big a player. >> so there's nobody else that -- there would be no competition with certain parts of the aerospace industry if these two got together? no foreign companies that are involved in. >> i wouldn't say no competition, but you would have a stronger supplier to the relis of the airframe guys that would ma maybe tip the balance of competition. >> so what was appealing about the idea that these guys have had to deal with the strong dollar, had to deal with, i don't know, an economy that's not quite as strong as we'd like it. so this would help these guys compete better globally. >> yeah, this is pretty typical of where you see the end of an

economic expansion. these companies have wrong costs out, they've done all the low-cost manufacturing, but if you're in a slow growth environment, the playbook these companies typically run is to look for m&a as a way to drive earnings growth. >> so these companies, what would they have to do to satisfy anti-trust? they could merge, but they'd have to spin off honeywell. >> well, what would happen is they'd have to divest so much of it. you can do this surgically. so that's why these deals take a while to play out, because the anti-trust guys would say exactly, here's the business that we're uncomfortable with. they can get it down to the exact product line. then the remedy is you agree to divest that. >> can they do that beforehand? spin off something before hand to make it -- i mean, i don't know what climate control has to do with aerospace necessarily in the first place. >> yeah, there's not a lot of

overlap on the climate control side. it's in aerospace and fire security. >> i just want to know, is there a company you think could take out either one of these companies? now that both of these companies to some degree are willing to do a deal, it means they're up for grabs if somebody wants to come get them. is there anybody out there that you think would be a natural fit and would not raise the specter of an anti-trust problem? >> well, the last point is very difficult. you don't have to go too far back, 16 years we had this see fa -- scenario, where honeywell and utx were in merger discussions. then ge swooped in. >> would that make sense today? what would happen today? >> it really does not make sense for ge at this stage. they're going through a transformation themselves to divest ge capital. they've only earmarked 10 billion towards m&a. >> that's weird.

it would be the same thing that happened 16 years ago. that would be too weird. that could never happen. they get together, try to do it 16 years ago, ge comes in. try to do it 16 years later, ge comes in again. >> crazier things have happened. >> same market caps. it's very appealing in terms of cost savings and rationalization. i don't know. >> what i find really interesting -- >> it's the anti-trust guys. they get in the way too much. >> think about where we are in the cycle. you're in slow growth era, but all these companies have been on an urge to demerge path for the past several years. emerson selling their network power business. ge selling the ge capital piece. that urge to demerge kind of runs its course. now you're coming back into these classic mergers. >> your name is dean, right? >> yes. >> what's with the "e" at the

end? >> that's the old english way of spelling it. but i do have to tell you, joe, you were the first going back, i think, like more than ten years ago. you started calling me dr. dray. >> i did call you dr. dray. >> you were the first. >> that's cool. i'm not surprised. i forgot that. i would have thought it was very clever and new today. >> while you discuss that, we have to talk about what's coming up after this break. how many people watch "house of cards"? netflix doesn't release viewer numbers, but true optic is working to be the nielsen of streaming services. the company's ceo is going to join us next. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

♪jake reese, "day to feel alive"♪

welcome back to "squawk box". streams service netflix claiming to have the most watched shows outside of network tv but the company doesn't release viewer numbers. coming up now is the ceo and co-founder of true optic. his company is trying to be the nielsen of stream judging media. good morning. >> good morning. >> how does this work? you actually have the numbers that nobody else has >> that's correct. >> or netflix doesn't want us to have? >> that's correct. >> how are you getting that data. >> the fundamental problem people are having when they try to figure out what's going on in netflix, people have small

panels. impossible to have a panel based approach to understand what 70 million people are doing on netflix when you don't know the geobreak down of those people. sort of a nonstarter. what we do we look at the sharing economy. everything is driven by sharing. social sharing. people making on sharing their apartments. in terms of content, sharing is by far the largest market. we're measuring people sharing, streaming, downloading television shows all over the world. >> so, you're not monitoring twitter and saying if somebody tweets about a show that means they watched the show. >> absolutely not. >> what are you doing exactly >> we're looking at people downloading and share the content via streaming networks. >> illegal networks? >> you can call it that. >> you can call it that. that's what it is. >> absolutely. you're not monitoring whether "house of cards" is streaming off of netflix, you're

monitoring whether they are streaming. >> audience is larger than netflix subscriber ship. look at house of afterwards, orange is the new black, daredevil more people streaming that content off the netflix. >> doing it illegally. >> who then is the subscriber to your service. people that want to know this information are the production companies that actually do this, right? investors want to know. who sells buying this from you? >> agencies. >> agencies. >> so, really what we're looking at, the opportunity for netflix moving forward is much larger globally than it is domestic domestically. about three times more their subscriber acquisition is coming internationally. when you look at these markets whether it's brazil, india or australia their footprint is really tiny. how do they understand what the value of content is in those

markets? there's -- >> netflix knows. >> how do they know? >> they can track it better than can you. you're tracking off of illegal websites. >> absolutely not. one of the things that netflix does and they have been very open about this for years, when they look at international markets to try to understand what is the value of a particular show for fox or disney or something like that they have no understanding, the few hundred thousand people they have in the market -- netflix is one of the first people to tap into us. >> do they pay you money. >> i can't divulge who pays us money. >> we got a commercial there playing us out. thank you for being here. >> thank you. >> coming up our guest host for the morning, jimmy dunne. ideas! >>got it. we slow, we die. >>what about cashing out?

no! i'm trying to build something here. >>how about using fedex ground for shipping? >>i don't need some kid telling me how to run a business! i've been doing this for 4 long months. >>fedex ground can help us save money and deliver fast to our customers. not bad, kid. you remind me of a younger me. >>aiden! the dog is eating your retainer again. let's take a short 5-minute recess. fedex ground is faster to more locations than ups ground. they say that in life, we shouldn't sweat the small stuff. but when you're building a mercedes-benz, there really is no small stuff. every decision... every component... is an integral part of what makes the 2016 c-class one of our most sophisticated cars ever. because when you're setting a new benchmark for refinement, it is the small stuff... that makes the biggest impression. the 2016 c-class. lease the c300 for $399 a month at your local mercedes-benz dealer.

>> deal or no deal the talks between united tech and honeywell on hold. it's all about antitrust issues. we'll go into this potential tie up. microsoft founder bill gates breaking with silicon valley. saying apple should open up the iphone of the san bernardino shooter. and michael hiden says apple should stand its door. he's our special live guest this hour. radioshack looking to make come back. hiring "america's got talent" host nick cannon as its chief creative office per will the move help the company connect with millennials. we'll ask nick and the company's chief marketing officer as the second hour of "squawk" starts

now. ♪ >> announcer: live from the beating heart of business, new york city. this is "squawk box". welcome back. to "squawk box" on cnbc, first in business worldwide. i'm joe kernen along with andrew ross sorkin. becky quick is off. futures are indicated lower. we had a big close, way above fair value yesterday up 52 so only down 14 on the futures. yeah all up. you get to minus 65 for downward pressure at the open but a great week last week and a big gain yesterday and the markets definitely look a little bit more solid than they did two, three weeks ago and makes you wonder what the fed has up its sleeve at this point. as i said dew closed up 228 points yesterday and is out of correction territory. oil one of the reasons we pointed out yesterday it looks higher at 33.27 because it

rolled yesterday. big day yesterday. it was up and then it rolled so we're back to 33. try to be it was just under 30 not too long ago. got some do yw components. >> utx confirm it held talks with honeywell but in a statement after the close yesterday utx did not explore options few to regulatory obstacles. 16 years ago they first made a run. broken up by ge and then mario monti in the last hour broke up that transaction. anyway, coming back to sort move dern times the "wall street journal" says that bid was $108 per utx share with $42 in that offer for cash. utx shareholders would have owned 40% but the mining

company -- and he'll hear from an antitrust lawyer in a couple more minutes on this particular topic. the question is whether either of these companies is up for grabs and who would buy them if that was the case. >> something foreign. >> foreign and big. pretty big. >> 70 billion. 70, 80 billion. >> home depot is out with quarterly results. revenue was 21 billion. that beat expectations. company announced 17% dividend increase. now 69 cents a share. u.s. comp store sales were up 8.9% in the fourth quarter. our guest host this morning is one much wall street's top financial figures, wow. >> wow. >> you get to write your own -- did you send that to us? >> i did not. but it sounds good. >> jimmy dunne joining us for the hour. well-known be the best, best

golfer on wall street. you're just good. you've been playing your entire life and you are well-known to be a great player. just coming off fifth place -- are we allowed to talk about that. >> have at it, joe. we're a private company. we care. >> but it's only three days. >> three days. >> you played the fourth. >> lots of them. >> this is how he gets business. >> there's not just clients there. there's boss there's. there's ceos there. people keep a low profile but a beautiful place. >> the weather was spectacular. >> at&t puts on the best tournament. other than the four majors probably the best, one of the best. >> it's a joy to be there. the whole atmosphere is fantastic. the golf course is great. >> how much charity. >> lots.

lots. then they take some out of it and then you should give something to it in addition which i'm sure we aldo. >> i can think anything negative about it except i suck. >> you're improving. >> no. what's the lowest rating you could have. c minus? >> you're going to get better. >> so, have you ever seen an environment like this, where, you know, we got 4.9% unemployment and can't get above zero and in germany -- what's germany 20 basis points something on a ten year. this world is upside down. >> there's a lot to worry about. all you have to do is watch the debates and watch what's going on. >> political you're turning this to? >> it's leadership in general. i think we've had -- we've had ineffective leadership out of washington which is well-known. >> you're talking executive branch and legislative branch or

blaming snrch >> i would blame everyone. there's a host of co-conspiracico-conspiracy ors. we need to get to what can get done. one of your guests later, he's a good start. >> paul ryan. >> but when you look, there isn't -- the top presidential candidates, there's not somebody i can think boy they can understand the economy and do something about it. i really don't. >> what about bernie sanders? >> he would be the worst of all. he would be the worst of all. >> donald trump? >> he's entertaining, he should be the mayor of new york. he shouldn't be the president of united states. >> interesting. >> what else do you need to know? >> that's crazy. i would vote for trump over him to be president of the united states. >> we're not talking about -- >> de blasio. >> bloomberg. >> i would be totally in favor of that.

i think mayor bloomberg, i don't think he could carry a state, unfortunately, but -- see the problem is. you know, you have to be a good candidate to get elected and you have to be a good executive to become a great president. we've had -- on both sides of the aisle. i would argue reagan was a good candidate and a good executive. i would glargue the real clinto was a great candidate and good executive. >> be careful. >> i voted for reagan and didn't vote for clinton which was a mistake. >> so you went to politics. can you just get back to the general -- i guess globally now we're held hostage by where sovereigns are. would you have ever imagined we would be at zero for this long and we would have a 4.9% unemployment rate and be talking

about negative interest rates? what's difference? >> you need a different fed chairman. >> it's not the fed. >> rates need to go up. we need to -- >> would market rates push them higher or is the fed holding them lower or just lower because of the environment in the world? >> look, the fed -- we've been on an elevator ship going up. at this exact moment it wouldn't matter. we stayed too long -- >> that's your view. >> absolutely my view. >> you think yellen should be replaced i think you just said. >> yes. we would be better with someone -- you know, bernanke did a terrific job when he was there. we needed someone that took the foot off the gas. >> took the foot off the gas at this point then what happens? >> go ahead. let's figure out what will happen. we need to sort of face the reality where things are. the deficit. rates. >> how do you that in a world where we don't have one sort of

global fed chairman of the world, we're now playing against europe, right? which is doing the opposite of what we're doing. japan. china. >> andrew, with the crisis you took all the leverage and put them on the country's balance sheet. at some point we have to face that. i'm of the belief the longer we avoid that the big terrify hangover will be. >> in the context of all of these other fed governors you will of other countries doing, you know, going opposite way what happens to us then? >> i think we'll outperform everybody else. >> everybody all the multinationals, anybody that runs a company worries about the differential between what we're doing and -- >> we can do a lot of different things on tax policy.

i understand. this is what paul ryan has to work out. we have to do twhings the tax policy and the deficit. there's a host of things that need to be addressed now. and the problem you have when you look at the landscape, the first sort of four leading candidates, i don't see one of them really doing that. >> you know there's a whole body of people that think that there's a savings glut whether it's larry summers or all these guys on the left that think we need negative rates, we need more qe, there's a deflationary environment in the globe that there's no way we should be raising rates. you have a fundamentally different view. >> larry summers has probably got 200 point higher i.q. than mine. and i don't think he knows enough to come out of the rain. all right. i really don't. i read all that. i just couldn't disagree more.

>> there are those that are blaming the quarter point increase for the break that we saw in the markets. i think it was coincidental and should have been raised two years ago when we had a chance to raise. now we're in this box where, i liken almost to a heroin addict -- >> absolutely. >> you know about progressive diseases. >> i understand. >> up get a point the more you take you don't get the same high and all you're left with is withdrawal when you take it away. that's what we're left with monetary easing. >> the world is a very unsafe dangerous difficult place. always going to be a reason not to, you know, to keep your foot on the gas. >> now it's -- >> there's going to be a terrorist attack. china is going to slow all the way down 5.5%. that's the way it is. >> you just want rates to go up so banks can operate in a normal environment where there's a

yield curve? is that why they need go up or savers need to go up? >> that's a residual benefit. that would be good for banks to have that happen. that was not where i was coming from. >> what is it? >> i just don't think that the idea that on your show yesterday we were talking about a ten year being at 20 basis points, i just don't think that's -- maybe i'm too old. when i started in the business, and i was a very mediocre loan bond trader the 14s of 11, 30 year bond were trading at 92. 15 and three quarters was the 20 year bond. shows you how old and traded at discount. the notion that we'll have a 20 basis point or 80 basis point ten year i don't think that's real and sustainable. >> to put a final point on it. you suggested that janet yellen should be replaced. who would you replease her with? >> kevin worsch. >> he's your pick.

>> he would being a great. >> you think that's realist i can? -- realistic. >> for a republican. >> donald trump. marco rubio. cruz >> we can't have cruz. i don't know what donald trump would do. i've met him. but i don't know him. i always thought kasich-rubio would be the ultimate right combination. i think he said something about women in the kitchen yesterday that didn't sound too good. if trump said it, it would have been great. >> he ran in tea 70s a lot of women left the kitchen to campaign for him. >> i always thought the right thing for the country the most qualified person would be kasich. that's what i thought. so when i thought sort of a kasich rubio. there's very good chance you could see rubio-kasich ticket. i could see that happening. >> would you hope a lot of

things that have been done over the past 7 1/2 years would you hope they would be reverse sd - >> the irony of the last 7 1/2 years you have an executive branch that doesn't like the 1%, if you will or speaks ill of it. okay. all of their policies have, you know, been utterly effective for what they were trying to do. to try to then middle class, which by the way the 1% would be thrilled to then middle class. in doing that's he's inflated asset prices. okay. so now nothing has been better for the 1% than the last eight years. yet the 1%, they hate each other. i think that you have to start to really sit down and get, talk about economic growth, how to do it on a broad level. tax reform. you really got to start facing these issues in a nonpolitical way. the chances of that happening

doesn't look very high but i think if we don't do that, you know, it goes my sons and daughters. >> all right. we'll talk a lot more. got two hours. you may say something, i think. >> highly likely. >> we have a news alert to tell you about in the meantime. president obama planning to make a statement about guantanamo at 10:30 a.m. eastern time. we'll bring you those details as we get them this morning. >> oh, boy. i can only imagine. when we return dow component united technologies and honeywell holding talks. but a deal between two would face regulatory hurdles. then later it's the return of radioshack. the electronics retailer colliding with pop culture and hiring nick cannon as its chief creative officer hoping to give a chain a millennial pop. nick cannon and radioshack

michael tatelman will join us next. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

welcome back to "squawk box". futures right now having proved a little bit. down 46. actual future is up five fair value was up 52 or so. you do the math and you get down 47 points or so. great week last week and good

day yesterday. fitbit is beating expectations. weak guidance is sending shares tumbling. wearable device maker saying higher manufacturing costs and new products will negatively affect the first quarter. shares of fitbit down 45% so far this year amid concerns about increasing competition. and united technologies confirming it held talks with honeywell about a possible collaboration or merger, but obviously the deal would face regulatory challenges. tie up between companies would create a behemoth with over $90 billion in combined sales. here to talk about potential antitrust issues an antitrust expert. i say they can merge but then have to spin off honeywell.

that basically is what they have to do. >> perhaps. >> is there a surgical way this could be done and any likelihood they will try to do that? i'm surprised they would approach each other knowing they dome the conclusion that it's impossible do. >> impossible is a very strong word. clearly i think applies at least on the honeywell side believe there's a path forward. while that might involve significant divestitures the aerospace area is what jumps out immediately. other areas it could make sense. >> there's others where there's not much overlap but somewhere there's synergy and then aerospace give people what they need, boeing and airbus feel they can still negotiate lower prices.

>> possibly. aerospace is one of the highest, the most profitable areas of both companies. >> already. >> already. to spin off one or the other of the entire aerospace business might be too much of a chunk to tolerate for either party. so, you know it could undermine -- >> how would they work. who would they off terrify different parts to the get somebody else involved. foreign companies that would be interested in some of the piece? >> i don't think i've done any analysis to get down to that level of consideration of what you would need to do get it through. >> the companies think this is dead. do you think it's dead? do you think there's a way for it to come back? >> ut has come out with strong statements they don't like the deal for antitrust reasons. honeywell is going forward. they don't think it's dead. i think there's a path forward. >> the other question is anybody else who emerge, meaning now that both of these companies given that there's been talks on

both sides effectively could be up for grabs. is there any other company out there 16 years ago it was ge. >> it's not going to be ge this time around. >> for somebody to come forward? >> potentially. it's hard to think of who it could be. >> you have to look global. >> you have to global. not u.s. not ge. ge is very focused on restructuring, re-organizing itself. possibility of an alternative serious one that is just a little difficult to contemplate right now. >> you wouldn't -- what caused honeywell to decide to try this was more defensive than offensive. it's not a great operating environment in terms of growth in the next decade for either company, is it? >> i think that in, particularly in the core businesses, both companies are looking for synergy. they are trying to figure out where their profitability is

strongest. recently ut spun off. trying to get back to their core aerospace fwlis. equally there's a whole lot of other ancillary businesses where you got to go area by area and look at what overlaps there are. people were talking about climate control yesterday. i don't think that scenario was a significant issue. could be synergies there between the climate controlled businesses. in aerospace you'll see significant efficiencies from combining the operations which will lower costs and make the companies more competitive and that's one of the major reasons they would do this deal. >> thank you. quick programming note. united technologies ceo greg hayes will be on "squawk on the street" later this morning. >> more markets thoughts from jimmy dunne and michael hayden. we'll talk about this debate between apple and fbi. looks like the dow will open a

little lower. we're back in just a minute.

coming up on box general michael hayden director of the nsa snan arca and installed the

surveillance system. he'll be our special guest after the break and we'll talk about this debate. right back in a moment.

welcome back to "squawk box" this morning. let's take a check noornts. futures are looking down. things look like they would open lower. let's show you what's going on with oil. these things have been correlated. wti trading at 33.48. ten year note, our friend jimmy dun dunne, i know what you want to happen. ten year ♪ 1.783. stocks that we'll be watching this morning, valeant pharmaceuticals will restate its financial results for 2014 and 2015. stock has been hurt lot.

it has to do with accounting errors tied to sales of filador. fortune brands unveiling fwroonds repurchase up to $400 million of its stock over the next two years. better than expected quarterlies from motorola solutions. radio systems maker saw profits rise on lower costs. >> apple standoff with the feds drawing a heated debate about security and privacy. bill gates is break with silicon valley and backing the government. he said this is a one off case and fbi is not asking for a general unlocking tool. here though right now on the set general michael hayden former director of the nsa and the cia, currently a principal at the chertoff group. general hayden announce pd he's backing apple. has a new book out today playing to intelligent, american intelligence in the age of terror which chronicles his

tenure as they'd of national security. great to have you here. congratulations on the book. we'll talk about that in a moment. i was surprised to hear you were taking the position of apple instead of the government. why? >> i'm taking the position of apple on the broader question, prime question. remember the request at the beginning of all this, andrew, was universal back doors in all apple devices so that law enforcement and, again, under all the rules, court orders and so on could get into devices they needed to get into. i understand that from a law enforcement perspective. but my bottom line is even when you're just looking at this through a security lens, that's actually not the best resolution for american security. put another way. america is more secure, america is more safe with unbreakable end to end encryption. when you path back dore into everything, as a former director of nsa i'm going thank you lord,

because even though that back door is not intend for me and might be really well constructed and might take me a long time, good intelligence services have now been given one additional potential entryway into your data and mine. >> historically you have argued for a back door. >> i have argued for back doors in specific products. but, so what? that i may or may not have been precisely here. the world is changing. nsa has always had an offensive and defensive mission and always been challenged with balancing. it's in one place, andrew. because both missions pivot around the consettcept of vulnerablity. >> why should technology

companies be immune from a court order or a subpoena? >> well, put another way they should not be immune to the decision arrived at through the american political process. my argument is the american political process needs to make a smart decision. and the smart decision is not compelling these companies to have universal back doors. >> one of the things that tim cook has said, why don't we have a presidential commission or some kind of coming together of the minds from silicon valley and law enforcement, let's figure out rules of the road for this. >> that's great. >> right? >> right now you got this one off. >> what does that look like? >> you know, i think everyone is hoping that someone actually has the formula for the secret sauce, that someone comes in with the technological development that says if you use this everyone is pretty happy. i don't know that that exists. if it doesn't exist, i'm telling you, i'm back to the point

where -- i was at the national security agency. my point is american security, on balance is better served with unbreakable -- >> what you do that could described as a lodge situation. if i told you there was an ongoing investigation with real intelligence to suggest something terrible was going to happen tomorrow, for example, and i had a phone that i couldn't get into. now i don't believe apple would be able to recreate the ios in time to fix that. to the extent they could or to the extent you want an apple or microsoft or whom ever to do that would it change the dynamic in terms of how you think about it? >> again, all right. you got this one phone out there in california. and the government's view is this is one off. they are not asking them to decrypt it. they are asking them to suppress the ios. do you believe this is a one off.

>> every time the u.s. attorney here says i got a room full of these things he undercuts the argument that don't worry about this, this is -- >> how quickly the chinese get a hold of it. >> the more you use it, the more then that approach becomes vulnerable. >> if you think about a free society, which we have here, everybody is free. unfortunately, there's some s.o.b.s that are terrorists and take advantage of our freedoms. so the idea that none of us can be free because some, a couple of people are going to misuse it, just on principle it's a flawed argument. >> i can double down and simply maybe over simplify what you said. what are you going to do, you got a crisis. got a phone. i'm a foreign intelligence guy.

i operate with fewer rules than jim comey does. i know a lot of different things i can use to go after that. when i talk to apple about this, back last summer before any of this really blew up and they were surprised that folks like me and not just me some other members of the tribe feel this way too, that i got all done and said wow, got to love your position, hayden. one more thing, if i were still in government, after i'm done talking to you guys out there in california i'm picking up that red phone and i'm calling down to the white house and saying i need another $500 million because i'm going kick my way into the system. >> does the nsa or some other branch we don't know about have the technological ability to effectively do what the fbi is asking apple to do? >> i can't comment on the specifics because i don't know the specifics. in general, all right, it is honorable work for the national security agency to try to break

encryption even encryption created by an american based company like microsoft. by the way -- >> or apple. >> when i said that to the apple guys they said yeah, yeah, we understand that. that's okay. >> that's okay. >> by the way, there are other tools. before all the civil libertarians on the network think i'm a hero how do you work around not getting into content. easy. bulk collection and emergencia data everything that make civil libertarians go like that. >> you think you can collect all the information? >> always is a big word. intelligence agencies have additional tools that allow them to try to capture what is it they need even without the back door. >> there's an argument that has been made that actually the government has a lot of information targeted on this phone. there was a back up that was made available through the icloud. >> the back up was disabled by

the government not by the criminal. yeah. >> how do you think this will end? >> you know, i don't know. i really don't. if you ask me -- we get the one off. >> what about the public policy implication of the chinese or others saying look if you sell the devices in our country and we have a problem you have to build this for us too. >> that might be a compelling argument. again that argument has to be apple's. technologically -- >> no way to do this privately? that's the other thing. if this could have been done under seal -- >> andrew, you know, there's a part of me that's thinking the government thought this was a really good ground to have this issue disputed. now let me jump to the book for a moment. this is precisely -- this kind of thinking permeates the book. playing to the edge.

showing certain aggressiveness on my part. the backdrop of that statement is this is a perpetually gray area. no clear black and white. and even when you're in opposition, even here, this is not the forces of light and the forces of darkness. these are two virtues. privacy, security that now we're trying to balance as a free people and that happens every day in the espionage business. >> to the extent it's changed since you were in this role. >> although i don't address the encryption issue in the book there's a migration there. i probably take a surprisingly light hand not on how badly leaks have harmed us, but surprisingly light hand that i can't stand the collateral damage to the first amendment by too aggressively going after leakers. >> interesting.

>> one more? >> yeah. >> that having been in this part of the world for seven years private-sector is pretty good at what it does. the american government, the american security community needs pay more attention what the private sector and all of its elements has to offer. >> "playing to the edge." great to see you. general, thank you. coming up market risks and where investors should be putting money to work. we ask jimmy dunne for some fail safe money making. then later, "america's got talent"o and entrepreneur nick cannon joins us about his new gig with radioshack. the company turning to the stars as it looks to rebuild its brand. here are the futures.

get back to our guest host jimmy dunne. so what we did not talk about was just the current landscape in this country with the small banks versus large institutions, who can get loans, why the fed

has a $5 trillion balance sheet but still money that doesn't seem to leave and get to the places where it's needed. talk about dodd-frank. we got a lot of regulation. >> neel kashkari. that was very interesting. >> where did that come from? >> look, can i say something about that? >> the floor is yours. >> thank you. i watched your show and i watched him on and i always had a lot of respect for him. i think he did a good job, he's very articulate, smart guy. itches surprised with his comments very much. i hate to say it but i thought it was almost a little political. you know, i think bernie was really going high at that point and i think -- that's the only rationale i can make for it. hit to be -- the last little political -- >> he was a republican. he ran for governor of california. >> when we get a democrat president. you think that's the last job he wants?

>> so you think this was neel trying -- >> i don't know. that was a surprising comment. i think it was somewhat politically motivated. and i don't this he's right. i really don't think he's right. >> because? >> look, first of all, you know, it's very wonderful to say the banks are too big, got to break up banks. first of all from a value perspective just for your viewers, i don't if that would be the worst thing for the stocks because they are trading over the last 60 days they have been pounded so bad that i'm not sure if they broke it up the overall franchise value would be worth more. that's number one. number two, okay. when bear stearns was cratering was it nice that jpmorgan was able to absorb that? was that a good thing. >> will never happen again. >> you got that right. what was the real problem? nobody was there for lehman. who was behind jpmorgan if they

weren't there for bear stearns. >> the federal reserve. >> okay. by the way, everybody talks about the banks did this, the banks did that. what banks caused -- it wasn't bank of america, wasn't jpmorgan, citibank was worse than the other two but would have survived. it was mortgage bankers. it was investment banks. it was the shadow banking industry that really created most of the problems. it was not the banks themselves. >> guys in connecticut with aig with no collateral. >> an insurance company with an unbelievable amount of capital that they could leverage on forever nene one -- so the idea -- >> was individuals flipping and societal -- >> dental hygienist that owned seven homes. that's a problem. i understand that. i understand that. it is mortgage company just, no docs, negative loans. >> government wanted 80% home

ownership. >> i think the banks do a terrible job of defending themselves. i mean what banks were responsible for this. >> they paid the fines without admitting or denying and then bernie sanders says look -- >> break them up. >> they use the notion that -- they don't admit wrongdoing but to get the government off their back they pay it anyway almost like a shake down and then all the critics say because they paid it must have meant that they draw those conclusions. >> extortion. . >> what about small banks. >> if you look at the research, several hundred banks. in the last -- the earnings were good, not great. and we probably revised, i would say, 50 to 60% of the universe lower. okay. but the revisions is sort of anywhere from 1.5% to 5%, maybe

an out lieoutlier 10%. the market is heading in to a recession that credit will be a real problem. energy is not like housing. all right. it's not in any way the same. i think the energy, we're already fairly well reserved in the texas banks have been pounded. had the currency to be pounded. i think the banks themselves are a very good value at this point in time. now i still think as i said before we got a host of problems and things to worry about but, you know, i think the bank stocks are going a little further than they needed to. >> we'll continue talking about this. >> great. >> great jimmy dunne. >> oh, yeah.

>> i was on because becky wasn't going to be on. this is like being on seinfeld without elaine. >> i'll be cramer. >> high five. coming up. >> i've seen that trick before. >> coming up, radioshack looking to make a come back. nick cannon will be here, entrepreneur and producer on nbc's "america's got talent" teaming up with radioshack and try to remake itself under new ownership. he'll join us with the company's chief marketing officer. then we have house speaker paul ryan will be our special guest in an extended interview. we have a new picture of him without the beard. good. know your financial plan

won't keep you up at night. know you have insights from professional investment strategists to help set your mind at ease.

know that planning for retirement can be the least of your worries. with the guidance of a pnc investments financial advisor, know you can get help staying on track for the future you've always wanted. ♪ no, you're not ♪ yogonna watch it! ♪tch it! ♪ ♪ we can't let you download on the goooooo! ♪ ♪ you'll just have to miss it! ♪ yeah, you'll just have to miss it! ♪

♪ we can't let you download... uh, no thanks. i have x1 from xfinity so... don't fall for directv. xfinity lets you download your shows from anywhere. i used to like that song. . welcome back to "squawk box". less than a year after bankrupt retailer radioshack emerged under new ownership the neighborhood electronics store is launching a line of new products. nick cannon will be released at a harlem store. nick cannon is here. chief creative officer of radioshack. pretty cool title and michael tatelman is the chief marketing officer. good morning. we'll talk helped phones in a second. how did this happen? >> nick has had a life long relationship with radioshack. and when you have that level of authenticity he came and asked us if he could participate in

some way. >> what happened? >> i had already been in the consumer electronics business and i was really intrigued by the brand because i had an affinity for it because it was a pillar in my community. >> you used to go the radioshack? >> when i was 8 years old i got my first microphone, mixer, keyboard. and people in radioshack taught me how to, you know, hook things up from rca jacks to conductors. i have a real affinity for the brand. >> how do you make that brand to be cool zbhen >> to me it never stopped being cool. everything is about doers and makers. this is where it started. to continue that message. if you want to be anything in this field and area -- >> tell bus the head phones. you have a nick cannon tie on. whole get up on. >> all about branding. obviously today we're here to talk about the head phones which

are bluetooth head phone that's, you know, great value. it's cool. sleek. >> how much does this cost? how does this compare dare i say? >> better. >> tim cook watches our show. >> you're watching it today? >> absolutely. >> we try and create a product that's stylish, innovative and value. so i think you'll find them less costly. they are $129. >> noise cancelling. >> bluetooth. come with both wired and unwired capability. they come with a case. you may not know we have our own design and sourcing business as part of radioshack. so it's kind of natural to have an extension of the radio shsha line. >> when you get involved in this who do you talk to? >> i talk to anyone. more than anything i make sure it's stylish and has the value that, you know, like i said i've

been in electronics business for about five years now. so i've seen the ups and downs. >> is this the beginning of many? >> so many different things just in that field of entertainment and empowering young people p.m. you'll see things from devices to help your music career and film and television career that you can pick up at radioshack. >> your planning to find more nick cannons. >> no you can find another nick cannon. >> i'm trying to understand the philosophy. how important is try to find really talented people who are celebrities who have a voice and have an audience. >> start with yourself. as you should. >> god bless. there you go. >> chief creative officers that term is thrown out so many time. >> it's difficult. i've been lucky one other time in my career to find somebody attached to the brand.

nick comes to these design session and he's very meticulous and has a background in electronics. for example, just the incredible logo on top of the head phone was something that nick said hey we got to do this. >> you guys got to come back. love it. appreciate it. coming up house speaker paul ryan on the state of the economy, jobs and race for the white house plus macy's ceo terry lundgren on the company's latest quarter.

j.p. morning. jpmorgan jamie dimon said he's buying his shares. most powerful man on capitol hill comes to financial capital of the world, house speaker paul ryan will be our special guest right here on the "squawk" set. on the agenda the supreme court, tax reform and of course to race for the white house. >> plus the state of the consumer retail giant macy's posting its report. final hour of "squawk box" begins right now.

>> announcer: live from the most powerful city in the world, new york. this is "squawk box". welcome back. i'm joe kernen along with andrew ross sorkin, becky quick is out today and we're less than 90 minutes away from the opening bell. we were down 100, down 40 now down 65 points. up 228 yesterday. good week last week up 3%. out of correction territory. at least so far today. we'll check out the markets in europe as well which has been -- they were good yesterday, more mixed today, down but less than a point. oil is off slightly but the contract load yesterday and it's above $33 or last time we looked for wti. >> among today's top stories home depot beating wall street's expectations. global comp sales were up 7%. u.s. comps were up almost 9%.

the company announcing a 7% dividend hike. jpmorgan chase taking center stage today for its investor day in new york city. ceo jamie dimon and top executives will pull back their curtain on the business. a lot of people are focused on that. the bank expects to add 500 million exposure to oil and gas. a lot of people who don't own shares in jpmorgan look at that firm and what they say to know what's going on in the banking industry. bill great breaking ranks with silicon valley in the big fight with apple and fooib. microsoft co-founder telling the "financial times" tech companies should be forced to cooperate with authorities in terrorism cases. gates says this is a specific case where the government is asking for access to information. he says they are not asking for some general thing, they are

asking for particular case. he says there must be rules on whether information can be accessed but a separate story today indicates this may not be the only one time request. the u.s. justice department pursuing court odds that would force apple to help investigators extract data from iphones in a dozen of cases. many of those are sealed according to a world report in the "wall street journal" saying details of those cases not yet made public and do not tend to involve terrorism charges. but we've heard from others who said that they want more access to these phones. >> you're waffling. >> i'm trying to come back to the center. >> you're coming over to my side. if die you would change your view. >> i'm starting to wonder. seriously. in a world that's free, people are going to take advantage of that. that doesn't mean you screw everyone just to make sure, you know, that bad guys can't do

what they need to do. you need to think about this, andrew. >> macy's is out and i want to look at the stock because i'm a little worried about the number. terry will come on. it's up. that's interesting. i don't know whether this $1.73 is a clean number. that's below expectations. we were at $1.89. same store sales down 4.3%. however the actual revenue number was above expectations, it was 8.87 billion and 8.83 was the estimate. so maybe it was a margin issue that we're talking about the. gross margins was 37.4%. guidance for next year is 380 to 390 and wall street right now is right at 383. so maybe that, maybe that's helping because it brackets where the street is.

we'll talk to macy's chairman terry lunn gren wdgren who will in ten minutes. he comes on any time macy has a stumble. very forthcoming and take a look at the shares. it's been tough sledding. we'll see what mr. lundgren has to say. very busy time to be on capitol hill. budget battle. vacancy on the supreme court. and a contentious gop campaign with donald trump at the top of the polls. joining us on set this morning is house speaker paul ryan a friend of the show but i think this is the first time that you've been on since you shaved the beard. >> first time you've been on since being elevated to speaker. >> i came here to see becky. >> she's not here. >> you get to sit in her chair. it's already taking a toll pup got no voice. >> i have no voice. >> is that from yelling? >> yelling. >> in your own party.

>> done help i have 11, 12 and 13-year-old at home. i get three colds a year. nice addition. >> hopefully you can come back more. you may want to. maybe you want to hang out here. >> easier. >> it's obvious that something odd is going in in both parties. in the gop there's anger, that's how everyone is characterizing sort of the sentiment among voters right now and a lot of the anger has elevated people like ted cruz or donald trump, they are getting, accruing a lot of those votes. i'm wondering where you think the anger is directed. is it directed at the white house? because the republicans, a lot of republicans don't like the way the country is moving or is it directed at republicans that

were elected that didn't push back enough? >> it's directed all of the above, i guess i would say. >> donald trump is not seen necessarily as one of those freedom caucus tea party zmoosh he takes positions that are very different. >> you saw what happened to john boehner. >> i'm in this job because of that. >> that was a rebellion really from the right, really. >> yeah. >> it's those people are angry where would they be backing donald trump right now? >> look i think people are angry for lots of reasons but basically because the country is on the wrong path. 70% of americans believe america is headed in the wrong direction. you have conservatives like myself. i'm a conservative from the conservative wing of the conservative movement. you have conservative whose are very upset at the direction of the country and i find myself giving civics lessons all the time. we have congress. why didn't you roll this stuff back. it is because you chose not to do that? no it's because of the constitution. if you want to change laws you have to pass neuhaus to change

those house. the president has to sign them into law. have to get through the senate filibuster which is something we have a very hard time doing given the votes we have in congress and the president of the united states. that nuance to use your well used phrase, that nuance is lost in the shuffle. people are just very upset. we're on the wrong track and haven't reversed it. people in america panicked because they have economic anxiety. this is what i think because of progressive left, economic policies in place for seven years. we're skipping along the bottom with economic growth. wages are flat. labor force participation is at 40 years low. so people don't see a good economy. they don't see rising wages. we have terrorists coming to shoot us up in san bernardino, paris and we don't have foreign policy that's seen in any way of keeping us safe. you have economic anxiety, national security anxiety and broken washington not doing anything. either they went too far to threat and we're now seeing the result of that.

and when we got elected to congress in 2010 and 2014, they don't see us seeing things through well enough and it's because we need a new president. >> you characterize this on the conservative side of things. there are people that are further out than you that look at you and think you're not conservative enough. >> pretty funny. that's new for me. i was always kind of the bottom throwing from the right the guy with all hard core budgets. now i'm speaker of the house amazing that a guy from my background in congress to being in the speakership shows you we have shifted to the center, far to the right in a good way in my opinion in our conference. but here's the point. what can we do about it? what can congress do about it? one of the reasons i took this job is i took it on the condition we go on offense on ideas. we can't be comply sent a with being a reactionary opposition party. we have to show people how we would do things differently. so what are we doing? we're rolling out an jenagenda.

we're putting out an agenda to the country to give people of this nation a clear choice. 2016 is the telecommunication of all elections. congress is up for grabs. supreme court is up for the grabs. the presidency is up for the grabs. will we be a constitution republic or progressive socialist welfare state. we in congress have something to say about that. we'll lay out a five-point agenda. how do you grow this economy. what do you replace obamacare with? how do you fieks thex these entitlements. how do you deal with the fact we have these able bodied americans not working and getting training. what does a good foreign policy look like to keep us safe. how do you make sure the military is best. how do you reclaim the constitution. how do you reconnect to us the separation of powers so we truly are representative democracy a republic that we have government by isn't sent, self-governing

republic. we don't hatch these executive agencies making it up as they go. those are the things we're working on. we'll take to the country and say here's what we can do with the republican president in 2017. >> enter donald trump which is kind of, i don't know some people in the establishment republican space think that's a pretty big fly i want to bement maybe a dragonfly oil. last two mid terms to me it looked like the country was saying we're moving too far left. state houses, even the state legislatures, you look what happened in the house, look what happened in the senate. so you've got all this anger building up over the direction of the company over the past seven years. and here you are in the cat bird seat for electing a republican

and yet -- >> we're doing well. >> really? >> what if hillary clinton gets elected by the infighting between ted cruz, marco rubio and donald trump. >> that's out of our control. nothing we can do about what's going on in the presidential election. >> up can't control that. >> of course not. >> people are looking at it in horror. >> that's fine. but that's not something -- >> you're looking at it in horror? >> no. i'm looking at congress. i took this job under a couple of conditions. it's a job i didn't want to take. i'm very happy and honored to have this job. i see great potential. number one, we have to unify. >> is there any candidate on either side that you think is a unifier. >> sure. i won't get into this because i'm neutral. i'm not going to take the bait of this candidate or that candidate. i'm the chair of the convention. i learned a bunch of things after becoming -- >> if you ask him about

bloomberg -- >> i can say he's not my guy. >> let me finish the point real fast. what can we do about it? we can give people ideas. we can make this an ideas contest not a personality contest. we can show where we republicans in 2017. >> they are covering the personalities. >> we haven't even rolled it out yet. >> one of the things that you just mentioned that is up for grabs is going to be scalia's seat. one of the thing you have said is that the president should not nominate somebody. >> i didn't say that. >> no? >> i said the president has every right to nominate somebody but the senate has equally right not bring somebody through. >> the question on that if that's the way you're thinking about it is should you look at whoever gets nominated on the merits of who they are or simply on the politics of the moment?

>> we're in the politics of the moment. we're in the middle of a president ideal election. we already had south carolina, nam and iowa. there's a reason for having this tradition of not nominating somebody in the middle of a presidential election because it gets so political. i agree with that precedent. >> joe biden i think said it better than anyone. >> he did. >> he made the greatest case. if you need to see why you don't do it during an election year all you have to do is watch the veep. he nailed it. i'll show you that. >> there's a precedent. number two the point i keep making and the constitution is really clear two separate but equal branches of government. president has a right to nominate somebody but the senate has a right not to pass somebody through. and not doing it in the middle of a presidential campaign. the citizens of america will decide in november which way this goes. and this is a high consequence. >> whoever is the president -- whoever the president only the

first three years count? >> to when doesn't mean that at all. we're still doing things in congress. we're working on lots of legislation. this is a generational pick for the supreme court and there's a precedent for not putting somebody through middle of a presidential campaign. does that mean we don't do legislation? no. >> why nominate someone that would be so inclusive which the president would have to do. let's get a real progressive in when hillary is president. if i were a voter, if i were a progressive i would not want some, you know, average progressive that could pass muster right now. the president says -- i want a far left person in there. >> it becomes so political and the president has to make a political choice whether you're picking someone in is middle to force his hand to vote on the merits which nobody wants to do or then since he already said it's political then your

president obama, i have to choose, i'll choose the most progressive person i can. >> you're crazy. >> he's trying to run a country. >> you go the people, elect hillary and have a progressive. >> it doesn't matter. the question is the people get to choose when they passaic new president what kind of supreme court we'll have. will we be a constitutional republic or quasi constitution progressive welfare state. you don't agree with me on that but we'll get an equal voice, equal choice in november. >> which is probably -- i've never seen so much outrage from the left about following the constitution. it's been gratifying to me. i've never seen more constitutionalists. . >> we spontaneity lot of time this year talking about the constitution. >> i'm just glad suddenly that's important. >> congress is an equal branch

of government much separate and equal. >> separate constitutional question because we talked about it all morning. >> you're going to ask me about apple. >> what do you think? >> this is a serious issue that's not a one off event. i want will have big consequences. i want to get this right. i want to be smart about this. so we're going to have some hearings on this. we invited apple fbi to the commerce committee to testify. let's not think about this as one off event of san bernardino. with technology we're always going presentsed with these kind of challenges. >> does that mean james comey who said this would be a one off -- >> i don't see it that way. i think we have to think about this in a more comprehensive way. >> you're more in the apple camp? apple said this not a one off. >> have to remember the precedence we set and what it does to civil liberties. >> this screwy notion of yours,

andrew -- >> it's generational. >> look at your soul. >> i'm trying. >> you thought we would be in sync. >> we can knee jerk this. we have to think this through and write out a good policy. >> did you read my column today? >> the point is we shouldn't have to in america trade national security. >> there's an ideological middle between the two of us. >> no. >> thank you very much, sir. >> great to have you. >> don't be a stranger. >> come on back. >> easier that you're not way out there in new jersey. >> hanging out in new york city. >> i don't get here very often. >> new york values. that's good. good place. off camera we'll talk. lot of issues you're talking about are, i mean bizarre. just looking -- free trade is

that something republicans back or not? >> yeah. do i want to write the rules of the 21st century economy or not. by the way when we're 5% of the world's population, 95% of the world's population are in other countries we need to make sure we can make things and sell things overseas. >> a lot of the anger is pushing candidates on the gop side into untenable positions. >> we're in a no to slow growth situation. people are upset about it. so the question is can we offer go pro growth ideas that create opportunity, upper mobility. the answer is yes. we can do that. we'll be rolling out an agenda that shows that sign 2016 people go the polls knowing, knowing this is what republicans will be doing in 2017. >> the executive branch when push comes to shove can dictate what we do and it's nice to talk

about what you'll do and congress will do and all the air getting sucked out by the presidential race. >> in 1980 we wanted to win the cold war and have pro growth economics. we're look for a mandate of similar proportions but of today's issues. >> you're the chair of the convention. brokered convention they say. >> i doubt it. but who knows. >> thank you. >> thanks guys. >> great to have you. feel better. >> when we return retail giant macy's out with quarterly results. stock trading higher than 5%. we'll break down the numbers with terry lundgren right after this short break.

welcome back to "squawk box". macy's reporting earnings. revenue beat analysts expectations. same store sales were down. shares of the department store chain are soaring in pre-market trading jumping more than 7% immediately following that release. you're seeing it right there. looks like it would open up about $2.30 higher.

joining us to talk about it first on cnbc terry lunn gren, chairman and ceo of macy's. what happened here? >>ers of ale the business got better in january. it got colder. makes a big difference in the fashion apparel business. earnings improved. that's why the quarter got better than we anticipated. >> in terms of why the stock -- we've all been trying to understand why the stock has moved as much as it has. would you expect this to happen? >> we've been clear to the street because i've been with you guys and i said i'll be here when there's bad news, i'll be here when there's good news. so we've been very transparent what's going on. there's confidence in this organization that we've had a setback in 2015. we're setting it up for 2016. and the come back is in front much us in '17 and '18 and that's how we laid it out and communicating it.

>> how complete are with you some of these operational exchanges you're making? >> not complete. not so much risk, andrew, it's really how good are these tests going to be. i have enough initiatives some of them will get track on the. if everything is a home run you're not trying hard enough. we're testing a number of ideas and several of them will get traction. >> what do you see going on with the consumer? >> consumer, first of all, is spending. just didn't spend in our categories. i want wasn't just us. nordstrom store sales are down three two in their stores and saks came out with a negative number. they are not spending in our coordination. certainly buying la ining lawn d stuff from home depot. but we said that. last time i was here look they are buying home improvement.

buying automobiles. restaurants are performing well. not just in our categories. that too will change. how many cars do they need? how many washing machines do they need? there's a point in time when those expenditures are finished. >> what about the foreign buyer because that's been a big one for you especially down the street here. >> not just here. think about miami. think about orlando. think about las vegas. lots of places where we have our stores for macy's and bloomingdale that international tourist. >> you keep talking about your category, your category being fashion. >> fashion, apparel. accessories. >> look, you've had your own macy's specific issues. there's been issues across the board for everybody. >> yes. >> what is it that turns that?

>> we already got better in january as you saw because the weather was ridiculous. it was like the warmest holiday season in the history of mankind. so that definitely matters when you're in the fashion apparel business. what sold in january is our cold weather products. we sold coats and sweaters -- >> on sale. >> on sale. we sold it. that neutralizes. you have to bet on that neutralizing. the international tourism thing is a head wind. what happens is, look, jimmy knows this better than anybody. in 2001 everybody said no one will shop in department stores any more because everybody will change their values and not be interested in shopping. 2008, 2009 that's it. retail sales are over. i heard that. we came back with six best years we've ever had a in the history of our company after that. now people are saying the same thing. different circumstances. but they are saying no one is going to shop in department

stores any more. but i heard this a few times now. and we've always had a come back each time. so, i'm not saying this possible be pollyanna. >> two things, also your online business from what i can see is as sophisticated as anybody. i can remember being with you and speaking to your whole management team and there must have been 500 guys all together. >> and women. >> and women. but the whole group. there was so much enthusiasm. had such a great run, little mishap recently. how do they handle that? do they get better or crumble. >> the thing is too, jimmy, a lot of my online team the average age is 29. so a lot of them haven't been

through these set backs in the past. so i've communicated that to my broader organization. you're going to be okay. we're going get through this. those of you who have been around with me for a longer period of time have seen some version of this movie beforer and we'll get through this. in fact, we've actually led the department store industry out of the slumps in the past and i feel like that that's a responsibility of ours onour own company that we need to do that. we're not sitting back and waiting. we'll get through this with some of these initiatives i talked about. >> terry, one of the things in every spreadsheet that every person has a big question mark on real estate. this is a spot you said and you said in today's release your financial advisors had preliminary conversations about joint ventures, partnerships and other things on the real estate side for some of your big mall based and flagship properties. what does that mean >> i'll tell you, andrew. we're learning more -- i'm learning more about the real estate subject than i ever

thought i needed to know in the past. and this has actually been good. good for me. good for our company. there's infeed value. where i had stores in the past that i wasn't sure who might want them, i'm just learning turn that over to experts and they will figure that out. people who do this floifrg. they will figure out these alternative uses. so there's definite value here and there's also some financial ideas here that can help bring out the value and so i'm actually quite excited about the possibilities that we have to use our real estate to capture the value, but at the same time, you know, we're going to stay investment grade. we won't do anything crazy or short term here when we do this. but clearly i'm seeing plenty of new ideas come up and by the end of this story we're going to be in a position with our real estate that's far beyond other retailers. >> what's the timeline?

>> we're work right now. i got great information on my desk right now of things that we're working on. we're doing a lot -- as i said on this show the last time i was here, we're interviewing some top notch people. you guys helped me because i sort of announced we were going to send your resumes to me on your show and i got a lot of them. top notch people like major players in the real estate business want this job. so, the activity and action is happening now. it takes time. takes time execute these things. i can tell you there's a tremendous amount of activity going on in real estate right now. >> terry lundgren thanks for coming in. and wearing a beautiful ralph lauren tie. >> how about my ryan seacrest suit. >> you can only get exclusively at macy's. >> we sell pink at macy's and bloomingdale. >> wait until you bring back the

donald trump line. >> thanks guys. >> coming up, jpmorgan making headlines. company holding its investor day. now telling its plans for exposure to the energy sector. we'll be right back. welcome

box". futures are looking like they

will open lower again. dow off about 65 points. s&p 500 looking to open down ten points. nasdaq looking to open off about 30 points. also jpmorgan holding an investor day today providing details about the bank's businesses. kayla tausche joins us and has a lot more what to expect. >> reporter: jamie dimon is kick off the day with opening remarks as we speak right now. this is the day where the bank lays out in great detail what its strategy is for the coming year. specifically we're getting some new material information on its energy exposure. the bank has $19 billion in high yield energy exposure and half of that has already been drawn down or borrowed or spend sponsorship that's a number that the investment community is very interested in. they said because of the weakness in oil and gas and in commodities they are going to need to take another $600 million thereabouts in rereceives to cover bad loans in the first quarter of this year and that means they would have a

total of $1.6 billion for reserves for energy and commodities and need another $1.5 billion additional savings if oil stays at $25 a barrel for 18 months. zooming out to look at their total business the bank says it will cut $2.5 billion in total spend ps. some will come from businesses it's exiting. they will close another 150 branches. they will see some legal costs fall. but they are invests elsewhere. spending about $500 million in growth initiatives namely in technology. financial technology. they will be rolling out or testing some block change technology. the bank says it has a $9 billion tech budget. 40,000 technologists in house. they will be ruling out a new quick pay in partnership with six other banks that's coming in the middle of this year. so that's something that's interesting to watch with all of the competition in the payment space.

they have about $600 million specifically are aerearmarked f cyber security. why they are investing in tech is because millennials are becoming their core customer. they actually have seen millennial deposit gos go up by 32%. millennials open a chase mobile app 57 times a quarter and then they only go the branch three times a quarter. they are trying to cater to the professional and personal lives of those millennials and we'll hear more from the bank later on today. >> thank you for that. we look forward to what mr. dimon and others at jpmorgan have to say wp we have much more coming up from jimmy dunne and our big stock movers. we'll do that right after the break. no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart

plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade. i'm spending too muchs for time hiringnter. and not enough time in my kitchen. (announcer) need to hire fast? go to ziprecruiter.com and post your job to over 100 of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list.

you put up one post and the next day you have all these candidates. makes my job a lot easier. (announcer) over 400,000 businesses have already used ziprecruiter. and now you can use ziprecruiter for free. go to ziprecruiter.com/offer2

well tell you what's making headlines. joe has those headlines. >> here's the few headlines. fitbit. reporting earnings and revenue that beat analysts expectations but weak guidance sharing shares

tumbling. hire manufacturing costs will negatively affect the first quarter. valeant is expected to restate some of its previous financial results based on findings of an internal investigation after its business -- the stock is soaring on -- it was up more. it's come back down. only up .8%. potential revisions involve revenue tied to sales of the drugs to filador. is that a special purpose entity? what do we call filador. >> specialty drug. >> part owned. now they've severed their ties but still looking at some of the results, i guess they need to go back and look at those. valeant has until next week to report fourth quarter earnings or seek an extension. united technologies has confirmed it held talks with fellow aerospace giants honeywell. but in a statement after the

close yesterday utx said it didn't sploer further option ex. >> coming up we'll have much more with our special guest jimmy dunne. as we head to break take a look where oil is tratdin itrading. "squawk box" will be right back.

let's get back to our guest host jimmy dunne. we do hear a lot that small businesses still have trouble -- it's not as easy to get a loan, not as easy to get started as it was. is there at that reason for that? do you still see that with small banks? >> i think the loan numbers are actually pretty good. you know, people always say, you know, they are not making loans. the economy drives what the banks will do. the banks don't drive the economy. all right. so i think the loan numbers are actually decent if you look at loan growth. banks are dying to make loans. >> if there were some regulatory roll back to then economy in terms of the financial sect josh what would it be? dodd-frank? >> they should repeal dodd-frank. >> repeal dodd-frank. >> in its ensenator >> in its entirety. the reality is that the problem

they got they are into this whole too big to fail or after all the larger guys, all of that comes down and stifles the secondary banks. ethical be better off, this is going to sound radical, let a couple fail. what happens then? all right. if it's a private little bank, the family loses money. if it's public the shareholders lose money guys that tone bonds lose money. depositors won't lose money. so rather than stifling stifling regulatory world they would be better off letting the market -- i'm talking secondary, the nonsystemic stuff. >> what about the top ten. would you regulate them with dodd-frank. >> i don't like dodd-frank. they would repeal dodd-frank. if you look at the system now we have a third more capital in these banks than we have. we have a much heightened concern on lending. >> what about the living will aspect of it?

the idea that if a big bank like a bank of america, jpmorgan were in trouble the government and taxpayers wouldn't be in the hook. that's a component of dodd-frank. whether it works or not we don't know because we haven't tried it. >> the taxpayers and government made money on t.a.r.p. the other industries not so much. but i don't know why there's a hatred towards the financial institutions. they instituted t.a.r.p. which neel kashkari was involved with and they made money on the whole thing. i don't understand what the banks did that was so bad. now the shadow banging stuff, the under capitalized shares there you got a problem. i don't see what the banks themselves, not the thrifts, investment banks, mortgage banks, the banks that were so terrible. >> predatory lending, right? >> not so good. >> not so good. >> i agree with that. a lot of that was out of the mortgage banker. again that came more out of shadow banking than it did banks

themselves. >> even if you were to look and say the entire housing market was propped up -- even if you wanted to argue they created unreal expectations and then the entire economy unraveled as a result. a lot of people across the country lost their jobs and you really don't -- >> i do see tissue clearly. what i don't see is one point of blame for the entire issue. that's what i don't see. there s-you know, a jerry ford said something early on and he said there's a host ofco-c co-conspirators. once they said this is aaa some guy over in norway said i would buy it. >> why do you think that's -- >> exactly. >> are you surprised the credit

agencies have not been fixed. >> if i start a restaurant and people go to the arrest rant and eat and get sick it doesn't do so well. if they eat and die the restaurant should be closed. nothing has been done. >> why do you think that is? >> i don't care. i don't know why. i don't cover. i don't know. it's totally wrong. >> why didn't we just have hire capital requirements than dodd-frank. >> you should look at the leverage in the system. you're an 80-1 over a period of time you'll have a problem. you can run for crazy like 20 years. at some point in time something will go wrong. first thing they should rechoose the. what is the real leverage. what is really -- that's where we'll come apart. flying. >> and then do higher. >> higher capital. i'm not saying everything is perfect. there used to be 6% now required

8.5%. that's a third more. that's a lot. you know that's a lot. >> i mean you don't think that the bill is named after chris dodd and barney frank, biggest frank, the biggest enabler of fannie mae. >> i would be happy to argue the same argument he made. dodd-frank only solves problems around the margins and edges. the thing that changes wall street is the capital requirements. also changed the returns, compensation. >> there's a different way of saying that, which i think we're saying similar things. if you look pre-crisis, if you were talking to a bank or whatever and their returns were not in the mid 20s, you would say they're country bumpkins, they don't know what they're doing. what the financial crisis has done, it's made a 9% rate of

return seem decent. >> right. >> i think that's a positive thing. because financial institutions, you know, shouldn't be returning mid 20 rates of return. it's like guys saying look how much my stocks are down. yeah, it's like your invisible friend died. they were never earning 20%. now you have higher capital requirement, less leverage, 8%, 9%, 10% return sounds better than ten years ago. >> we're in agreement, if there. >> i'm still not in agreement with the narrative has in hindsight been shifted to wall street taking the lion's share of the blame for the financial crisis. i think government regulators -- >> absolutely. >> fannie and freddie -- the mortgage bankers. pick your poison. >> everybody who was flipping houses. right now, look, it has become so politicized you have two candidates on the left out-doing themselves to say wall street is built on fraud. >> candidates on the right doing the same thing. >> that's right. >> some of it, joe, is like when

i call the office and think don't pick up the phone on the first ring. i scream at the guy because we're in the service business what about the 312 other people that didn't answer the phone? wall street is the ones -- jpmorgan is the one to yell at, bank of america is the one to yell at. when we return, jim cramer will join us from the new york stock exchange. we have a lot to talk to him about. look where futures are now. things are looking down. better than before. dow opening off about 30 points.

welcome back. we're seeing some reports now crossing the wires that the london stock exchange group is in talks for a merger of equals with the deutsche. both stocks trading higher on that news. we'll try to keep tabs and bring you more on that in a minute. let's get down to the new york stock exchange, jim cramer joins us now. good morning. >> good morning. >> talk about whatever you're interested in. what did you think of terry l d

lundgren and macy's? >> i was surprised. they got better than expected numbers, guided down. but the forward look was very positive. just because you beat numbers that were guided down before doesn't mean they -- let's say that wasn't nearly as important as the fact they gave a very good forecast. i've been waiting for that. this is the first of the department stores that actually did well. nordstrom did not do well. walmart obviously more of a discounter didn't do well. this was a terrific quarter for terry. even though the comp store sales were down, it was a great quarter to see them actually beat. because, you know, a lot of people root for him. >> what do you have coming up? >> we've got, geez, we have greg hayes. united technology. david faber broke that story yesterday. probably the biggest scoop of 2016. we'll find out what the deal is. i think it was a deal toned all deals if they can make it work. sounds like united technologies doesn't feel like it's such a terrific thing. david will have the news, i'll have the analysis. >> we'll see you in a couple minutes.

coming up, some final thoughts from our guest host, jimmy dunn. through small things. big things. and spur of the moment things. sheraton. ♪

i'm in charge of it all. business expenses, so i've been snapping photos of my receipts and keeping track of them in quickbooks. now i'm on top of my expenses, and my bees. best 68,000 employees ever. that's how we own it. welcome back to "squawk on the street." our guest host is jimmy dunn.

>> a lot of fun. can't wait to see you again. >> all boys party. >> yeah. almost like a hazing. >> becky might be here next time. >> you guys need becky. >> you won't be back. no, we love her. it was fine today. >> join us tomorrow. "squawk on the street" is next. good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. moments from now a live and exclusive interview with united technologies ceo, gregory hayes. his company confirming the news that david broke yesterday that it held merger talks with honeywell. utx saying it decided not to pursue the transaction because of those antitrust concerns. what a crazy 18 hours it's been, david. >> yeah. it's interestg.