always great to be here. thanks for having me. >> we have to come back to st. louis. we loved being there, too. >> come on. >> maybe you should adopt kansas. they're right next door. >> merger. >> you're looking at kansas. >> all right. >> thank you very much. it's always great when you spend this much time with us. makes us feel important which we need, all the of us. make sure you join us tomorrow. "squawk on the street" is next. good thursday morning. i'm carl quintanilla with david faber and jim cramer at the new york stock exchange. a lot of retail earnings to look at, bullard on "squawk." europe with nice gains, shanghai, the worst session in about a month as the repo rates cause concern. bonds, durables, the biggest

claim in ten months. claims were good. oil is a laggard again. tim cook defends apple in its fight with the fbi calling the government's order, quote, bad for america and the software equivalent of cancer. sales force is out with a beat. the stock is up sharply. hear how ceo marc benioff described the quarter last night. best buy, kohl's and restoration hardware down 20% after yesterday's preliminary guidance. futures volatile, one day after stocks rebounded from a sell-off earlier in wednesday's session. data out this morning shows the durables up in january at the strongest pace in ten months. claims rose last week but that four-week moving average fell to the lowest level since mid-december. stocks have been shrugging off the sell-off in shanghai. >> it's almost as if what happened, people recognize that stock market has far less to do with the actual economy than people thought.

we're also getting decent consumer data, not so great industrial and commercial data. by the way, countries that sell into china like south korea, very much hurt. we forget we're not the big seller into china. it's nice to see a little bit of what i regard as being less of a linkage but of course if oil were down big we'd think that china was contributing. it's oil, it's oil and then it's oil. i wish it weren't that case because it's too simple. i was with some ceo of a restaurant company last night. she was saying that, you know, oil going down, our stock goes -- should go up. but it goes down. and how ridiculous it is because of how important gasoline is. you've got this counterintuitive market that's trading -- the financials are trading on oil and the oils are trading on oil. you have a big percentage of the s&p trading on oil. >> is it a fundamentally sound proposition that that should be the case? >> absolutely not.

>> absolutely not? even if, you and i talked about it a lot, we start to see significant restructurings in oil and oil-related companies or within the mlp sector. >> right. >> and we start to see damage done there, not that it hasn't been done already, jim. i wonder if we start to see more, thinking of etp and epe. which we've been following closely in the miss last night. >> horrible. >> is there an idea that it could spread -- there's still a worry that high yield could impact and go beyond where it is in high yield and beyond what the impact is right now. >> tremendous pushback from the big banks yesterday when you talk about the idea, when you have 4% of your loans, they get in trouble, don't worry about it. >> right. >> i worry about it. and could it tighten lending later in the year in the consumer is a clear beneficiary. only -- the only ceo i've had on "mad money" who said listen, the

consumer is hurting us from texas is wyndham, steven holmes. they've had a 35% decline in people staying in parts of texas with oil. >> 30% decline. >> it was going to what rh was saying, market volatility. >> they cited miami, texas and canada. that's the strong dollar, the stock market and oil. >> do you buy that? >> when they came on recently, gary freeman was not that bullish. he was saying you have to look at this long term and did cite those markets as weak. is the big tick fret texas that bad? i don't know. i do think that when you have that combination of people, people moving up here in order to be able to -- brazil is hurt. brazil hurts florida. canada is hurt by oil. we should talk more about that than we do. houston is oil. so i buy it from the sense that the stock was way too high, even though it had been cut in half. it was way too high because the stores are so cool looking.

that's not a reason to own. stores being cool looking doesn't make it work. stores being uncool looking, sears, doesn't make it work. stores that offer value, best buy, make it work. >> rh having been through pain would continue to go through, i think you called it a meat grirnd. >> that was my neve knew, cliff mason, my head writer. it's nepotism. >> total nepotism at "mad money." >> he said this couldn't be a worse story. i said there couldn't be nicer furniture. i bought into wayfair, too, by the way. that hasn't saved them. please don't get excited about us but people didn't listen. >> the stock was 100 bucks back in november. over 100. >> yeah. okay. >> hello. >> he was saying, listen, people got ahead of us. about how good it is. >> now it's 40. >> people -- it's probably going

to 30. people got head of how good it was because the markets were weak. a lot of people when they see the strong dollar, what does it mean, tiffany told you. it tends to be latin americans not being able to afford it here. russian is real estate, latin america is miami. russians are pulling back real estate. the $25 million properties are not going anymore. >> the high end may be impacted by them not being there. the chinese, we have to wonder about the crackdown and how much they can get out of the country. >> big marginal buyers. >> very high end. russia pumping all it can in terms of oil. >> the saudis are still spending here, saudis are still buying. the restoration hardware was the weakness wrapped up into one just nasty pile. and you could argue win did a very negative piece about william sonoma.

go over the tjx call, home goods is on fire. home goods is where i like to go. my wife is cheap as all get out. and it's amazing. why should we spend when we can go to home goods and buy stuff for the turkey, like the table and stuff. >> on all of this today, bullard was on "squawk." he spoke last night but talked this morning about the risk of recession. take a listen. >> no, i don't think the probabilities are particularly high right now. of course you always face risk and we are at a lower trend growth rate. so you could always argue that there might be a higher probability of recession because your trend growth rate is lower than it was historically in the u.s. >> on rates he said the forecast in his words makes it seem like the fed's on a freight train path when it shouldn't be. right? >> this is a guy was calling for rate increase last year.

then when he saw the slowdown, he changed his mind. that's like the john maynard kings that you really want. when the facts change, he changes, too. i thought he was eloquent about perhaps this is the wrong time. he dove tailed that with the citi call. you have a singlist fed president, the most data dependent fed. i don't know if you get the st. louis fed fee. it's unbelievable. >> i have it going in my brain at all times. right now it's being fed in. >> you know when they do the lending numbers and housing numbers that are extraordinary? >> yes. >> i used to manage the money of the head of the st. louis fed 30 years ago. >> you did okay by him? >> he only wanted to buy treasuries. he said anything else would be wrong. you can't make a lot of money when you buy people treasuries. the board was recognizing that things have gotten weaker. home depot was one and dominos are the two that had unbelievable januarys.

i put tjx in there. that's amazing. macy's was bad, dillards was bad. best buy they gave a special dividend. in retail, nordstrom, it's not been a standout. sears, what can i say? >> we'll get to a lot of those, best buy. it's a pizza and lumber country for sure. >> that's what people are doing, eating lumber and putting houses together with pizza. those numbers, 10% comp sales. >> sears had an improvement from the trend, only down 7.1% for same-store sales in the fourth quarter. mazel tov. cook said helping the fbi unlock the phone of one of sri jegarajah -- san bernardino shooters would be -- >> can the government compel april toll write software that

we believe would make hundreds of millions of customers vulnerable around the world including the u.s. and also trample civil liberties that are at the basic foundation of what this country was made on? >> he called that fight ironic because he says the government is there to protect civil liberties. apple's response to a judge's order to assist the fbi is due tomorrow. cook also addressed the possibility of taking his company's fight against the order to the supreme court. >> are you prepared to take this all the way to the supreme court? >> we would be prepared to take this issue all the way, yes. because i think it's that important for america. this should not be decided court by court by court. >> this is not the only fight they've got. they've got challenges on this front in europe and other parts of the world also. >> yes, it's got to be congressional. of course it will go to the supreme court. the supreme court will be divided, 4-4. whatever court underneath will

be enforceable. there's compelling arguments on both sides. it really is. the guys i know who do this kind of work, who are still surprised that instead of just changing -- the fbi trying to get the code and enabling the cloud function, that they didn't go to tim cook and say we have a clear and present danger here. they didn't go quietly. they went noisy. i asked marc benioff who do you side with. he wouldn't give me an answer. people in silicon valley may side with cook. you're not going to get a court to make this decision. this has to go to congress. >> the positive is, it has raised this issue to a point where everybody in the country, many people are debating it and thinking about it. that's a positive. >> right. >> simply. you know, it is a debate that is necessary. it's one we've been having for some time. it's only going to be exacerbated by the continued advances in security and/or the

need to know. >> but there is a sense, what did i learn at law school, one of the rare things you learn, there is no right to privacy. it's no the in the constitution. there's been a series of decisions that give you the illusion of privacy. you look at me as if -- >> you've said that on day one of this. >> think about it. the fbi listens to -- the nsa listens to everything. >> the right to privacy argument out of a number of other constitutional amendments. >> it's a -- >> there have been rulings by the supreme court that have affirmed the right to privacy. >> they've gone the other way, too. it's a split decision. you think the rico decision, the right to be able to wiretap people because you think they might be bad, what kind of right to privacy is that? that was a rico decision. thinking that was a good decision. we have to stop the mob.

rico, that was upheld. >> that's not feeding this arms race, reports today that apple is working on encryption that even they won't be able to get into later on. right? >> engineers versus the nsa. >> it's incredible, this plus the robot, the google robot. is silicon valley eliminating us? >> maybe we are as elon musk might tell you, all simulations. maybe you're a simulation of my mind. maybe you're a simulation. >> i don't think we're there yet but we will be. >> it will feel like it. >> the matrix is coming. we'll all be sitting in little amniotic pods. >> why wouldn't you have robots from google with encryption be our army? >> the machines will start to learn more than we know. then it's over. then it's over. >> later on today, ibm will talk about watching, being able to solve a lot of things that you

can't solve, including possibly a diabetes tie-up. >> we can turn off the aging of cells but the machines will be running everything. >> because you're a simulation of mine, i'll let you live forever. >> thank you. >> that's an easy way to shut someone down. you're a figment of my imagination. >> people are talking about it. >> why did you let elon musk get in your head like that? it's nonsense. you know that. >> like his numbers. when we come back, a congressman and former fbi official will weigh in on the apple encryption. comey will testify this morning on worldwide threats. more of this morning's movers, when benioff told jim last night. take another look at the premarket that come back yesterday, the biggest since november of '08. the dow is down 266. as you know, closed up 53. back in a minute. thanks.

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man 1: i came as fast as i man 2: this isn't public yet. man 1: what isn't? man 2: we've been attacked. man 1: the network? man 2: shhhh. man 1: when did this happen? man 2: over the last six months. man 1: how did we miss it? man 2: we caught it, just not in time. man 1: who? how? man 2: not sure, probably off-shore, foreign, pros. man 1: what did they get? man 2: what didn't they get. man 1: i need to call mike... man 2: don't use your phone. it's not just security, it's defense. bae systems.

sales force up sharply in the premarket, the company posted better than expected quarterly revenue and boosted guidance for the full year, citing stronger demand for their

software. marc benioff told jim last night on "mad money" -- >> this was a deal that we took down. including two of the largest deals in our company's history, which were massive nine-digit transactions. >> professional services up 28. these numbers were all good. >> the number that attracts it and marc referenced it again, operating cash flow, 38% growth. 460 million. operating cash flow is real. those that thought this company was a mirage, that's a lot of cash flow. >> operating cash flow is real. it's important you mention that. so many companies put up adjusted ebitda numbers. there's only one company that doesn't do that more or less in all of technology. microsoft. that's the only one. >> it's funny. they are close, microsoft although marc benioff did say they're basically crushing

microsoft, s.a.p. and oracle. marc worked at microsoft for 13 years. there's a long-standing rivalry between the two. we win when we're up against s.a.p. and oracle. this stock peaked at the what may be the apex of their sales, meaning that the quarter was doing great and then the stock got crushed by linkedin and tablo. people thought those were both cloud companies. they are kind of false cloud companies. the beginning of the week we got a call saying be careful of the margins, be careful of an acquisition. there was no mention of currency. it was a flat-out great quarter. two nine figure deals is extraordinary. it's one of the things, benioff goes to davos and he got big orders from davos. abb and snyder, european companies, were profiting for

them. this is the kind of company that an ibm has to come back from and really can't. oracle is very old technology according to marc. >> you called honeywell the industrial quarter of the year. is this the tech quarter of the year. >> yes. >> retail. >> with dominos it will be the restaurant quarter of the year. i like the plug at the end, i'm now going to be on "mad money." this was a quarter that basically said if you want to try to say that the cloud was slowed by linkedin and t a. blo, that's a mistake. the cloud is relentless. ceos don't want to be uberized. if you're not operating your business from your phone, then you will be uberized. that's what he's saying. he holds his phone up.

jeff immelt from ge, he will say, this is my sales force. >> this is a note from ibm. >> i got a picture during the rain yesterday, both dogs frightened to death. i said that's because they were long oil wells. >> that's serious weather yesterday along the east coast. >> i know. >> we'll get cramer's mad dash, the opening bell off a short break. don't go away. 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.

♪ if feels good ♪ it feels good ♪ it feels good

all right. we have about six minutes before the opening bell on a thursday. let's do a little "mad dash" and stay in retail land. >> best buy, immediately people looked at the down comps said wait a second, this is a bad story. upon further review, we have a special dividend, the company is buying back stock. when i hear second year being strong for a place that sells tablets, tvs and mobile phones, i think the read through here is the apple 7 they're banking on. they're not the only ones. verizon is banking on it, t-mobile is banking on it. if you have an apple 6 maybe you don't want to buy a 7. there will be an apple watch conference coming up in march. the read-through for best buy is not as bad as we thought. walmart is above where they reported their so-called bad quart quarter. >> the stock price is above where it was before they

reported the quarter with low expectations. >> kohl's did say positive things about the period between thanksgiving and christmas. you're getting a big dividend. 4.4%. that's the level where stocks have started going down. that's related to the 1.7% tenure. kohl's is doing small tenure. i think kohl's is another one of these companies that got oversold, kind of like macy's when it went to 35, 36. i expect lowe's to bounce. the home depot conference call was a thing of beauty. tjx, thing of beauty, kohl's will be okay. the standouts for retail are home depot and tjx. >> we'll be keeping an eye on retail. we'll be getting back to oil and gas, talking more about etp and ete by extension. i may even hit vallion. i don't know. >> really?

>> maybe. >> don't tease me like that. >> back with more "squawk on the street" after this.

you're watching cnbc "squawk on the street" live from the financial capital of the world, the opening bell set to ring in a minute or so. so many cross-currents today, the spectrum of retail results is varied. we have citi with this note saying the risk of global recession is risinging. bullard saying the likelihood of recession here, not particularly high. >> i think that's the right term, cross-currents. if you listen to what citi is saying or that gm downgrade by morgan stanley, you would see the recession has begun. you listen to home depot or salesforce, you're saying things are booming. it is case by case. if you're reading sears and you're looking at the gross margin, wow, but then again, does anyone shop at k-mart? >> no. >> no. >> hewlett-packard, they are talking about huge declines in personal computers. you look to lowe's and lowe's is

saying, you know what, don't forget, pain is the selling well. we're getting really good sales going on for roofing and lumber. it is case by case. that is why it's so confusing. >> as the opening bell and the s&p at the bottom of your screen at the big board today. columbia university's, students with an interest in the advancement of brazil. over at the nasdaq, janice exchange traded funs celebrating two new etfs. capex up 3.9. we have to go back a year and a half to get a number like that. >> go back to november 2008. that was a dire moment. there's this schizophrenia going. intraday going on. oil was down yesterday and everything was bad. then oil turned it up and everything was good, including stocks that do -- of companies that do poorly when oil goes up. i find that the traders must be being whip-sawed like never

before. kohl's, everything was shorting it going into quarter. it does great. best buy, a lot of people shorting it going into the quarter, you get zdividend buyig back stock. i-hop had an incredible quarter. every single one is so different. >> yes. >> apparel was bad, but then it was good for columbia sportswear. chico's reports a good number. when was the last time you were in a white house black market? >> when i was where? >> chico's. >> i've never been to chico's in my life. >> not that you have much reason to go. >> it's not really chico's. it's a company. >> what is it? >> it has white house black market. >> look at that. >> i know some people call you

maurice. you speak in the pompous of love. that's a store. >> can we talk a little etp/ete/rating agencies, what they may be poised to do in terms of downgrades. a couple things being shared from the call that's going on. etp, reported numbers that were not what had been hoped for. >> yes. >> and i guess the bigger question simply comes down to, is there enough cash flow at the company to support the debt at etp? will they actually be forgiven some debt at the ete level in order to enhance their own cash flow but can they do that at ete because they have their own leverage problems? the stock is down dramatically, over 17% right now. >> we sold a lot of this. >> they seem to be saying they

do not have a plan to sell any equity. they do also acknowledge having had extensive conversations with the rating agencies and are evaluating several alternatives around -- the 6 billion in funding they're talking about is the 6 billion needed to pay the $8 a share in cash that is part of the merger consideration, the consideration to buy williams, wmb. >> what a mess. >> don't confuse that as well with the 3 billion that may get accelerated if wpz, a williams property gets downgraded and the capex needs of the combined company. >> the ultimate, they paid too much for williams. this is a company that's -- we saw a lot of this thing when it was higher. it had a great yield. it attracted the yield. it's certainly case by case. the people have to recognize, we're over pipeline in this country. we have way too many oil pipelines.

if you find oil in oklahoma, three pipelines spin up. we done the have enough natural gas. etp -- >> wait a second. >> we don't have enough natural gas pipe from where the natural gas is. >> utica. >> and marcellus -- >> utica and marcellus are adjoined in pennsylvania and ohio. we have to get that to the gulf, they are now shipping natural gas over. we don't have enough natural gas piping from where there's natural gas. we have way too much oil pipe. we thought oil was going to go to 150. etp is caught in the middle. they have good natural gas pipe but anything with oil, forget about it. plus crude by rail. everybody thought this was going to last forever. you have something there? something for me? >> no. i think the rating agencies will once again become prominent part

of this story. >> explain that to devin. we don't it the need equity. what happened? >> devin had their earnings call, said we don't need equity and the rating agency says we differ with that assumption, because the way we're looking at you, we're going to downgrade you unless you raise equity. the next day, devin does what? >> raise equity. >> if you were on the deal you made money. >> you did. >> enbridge, they're raising money. i don't know if that will work. when you're on the conference call with jp morgan, these companies need to draw down their credit lines. >> comey is in front of a mike, answering a question about apple. let's take a quick listen. >> the judge, the federal judge has ordered the maker of the phone to do two things. that is disable the auto erase function on the phone so that if the fbi is trying to guess the pass code to the phone, it doesn't automatically delete the

contents, essentially after the tenth try and second, to disable the delay between tries function. so if we're going to try to guess the code, it doesn't take years and years and years but instead we're able to do it in minutes or hours and to do that through the remote pulsing of codes to the phone. that's what the order is with. i don't know whether this particular relief has been sought in another court proceeding. i don't think so, given the nature of this particular phone and its operating system. it's possible but i'm not aware of it. >> i'm sure you'll be getting more questions from this committee and i know that you're testifying also, i think, next week before the judiciary committee. >> yes, i am. >> this has been an ongoing debate. i want to switch over to director stewart. >> that was worth taking a quick listen to. obviously that discussion is going to continue but anytime comey makes comments about that live order, we're going to take a listen. >> i know comey from --

mr. comey when he was u.s. attorney, very reasonable man, well liked guy. i only point that out because people think he's a smart guy. he's above politics. that's always been the wrap on comey. don't know if he's republican or democrat. this is a painful discussion or everybody. i think it's painful for comey. comey is trying to pull it back, too. nobody wanted this to happen. nobody wanted this. the fbi director did not want this, believe me. >> we were just pointing out, "usa today" is the related story of sorts, dorsey and zuckerberg at facebook and twitter under fire, isis related factions. >> terrible. >> there's no hot seat like the modern tech chief executive right now. >> no. i mean, it is kind of mind boggling. you know, abc, this is the talk of the country. superseding the election for a few days. i think it's -- stocks are on a back burner a little bit versus

this discussion. they shouldn't be because we have a lot of good things happening in the market. people want to talk about recession. how that would impact. people want to talk about comey versus cook. no one ever thought it would come to this. everyone thought it would be behind the scenes, give us something on the phone. fbi tried to crack that code and they didn't and disabled it. i don't know if you back up your stuff on icloud or not, the big service revenue stream is coming from. >> right. >> if you back it up, it's one thing. if you don't back it up, it disappears. ever try to recover your pictures when they -- honestly, they disappear. there's nowhere. they're not in the cloud or anywhere. >> they're goon. >> they're gone. >> really quick, jim, crm is the top gainer. hp is one of the worst. so where -- what are we supposed to think about enterprise spending. >> the hp conference call, oh, geez, printers, when you see the weakened yen, what that means they've killed them in inprertz.

read about the down 12% year-over-year, minus 12 on currency, disappointing cash flow. they keep buying back stock, nobody really cares. 11% decline in pcs. >> it's the dollar crushing them. it emboldens their japanese competitors and enables them to take market share. >> i feel for these guys. >> it's a very difficult environment. >> right. >> for a new company, essentially. >> yes. people are negative on the conference call, really negative on the conference call. >> we hear from hpe, hp enterprise next week. we'll get earnings from them. as typical we'll be joined by meg whitman at that point. that business, a very different profile. >> yes. >> than this one. >> that's a business that at one point i thought would compete against salesforce and oracle. you align with salesforce or you don't.

>> let's get to dominic chu. >> this is an area we might see resistance, slowing down of momentum to the upside here as we approach some of these levels. carl, it was somebody interesting you said earlier on in the show, in this hour, there were numerous cross-currents in the mark the. let's take you through the checklist, what traders are watching out here. let's talk where the leadership has been for the stock market overall. look at the large cap side of things, it's been consumer discretionary. you talked about the retail theme. some of them have been beaten up, over the medium term, lowe's, home depot adding to the positive story. utilities and telecommunications stock, the big dividend payers, the yielders, the defensively oriented stocks. >> hey, dom, i'm going to bust in. comey back on the hill. here's fbi's comey. >> and so while the result may only affect this phone, the precedent will be there for many

others. and i guess what i'd like to ask you is, is there a limiting principle here? is there a way, through negotiation, that we can arrive at cases where it's appropriate to seek this relief and cases where it's not? do you acknowledge sort of the broader policy implications of a uniform application under the all writs act. i realize this may be moot by the next generation of operating system which may not allow this kind relief. nonetheless, if it is technologically feasible even with the next generation operating system for april toll help with the opening of a phone, it seems to me that the argument you're making in this case will apply to those new operating systems as well. so is there a limiting principle here and is there any way to resolve this through negotiation? because at least the initial positions of parties are, we

need access and we have legal warrant. and the other side is saying we can never provide access because if we do here, we'll have to do it everywhere. >> thank you, mr. schiff. i very much agree with the way you framed it in your opening statement. this case and all cases are very, very important but there's a broader policy question that is far larger than any individual case that we all have to grapple with. but to the case, first i think the answer would best come from a technical expert and good lawyer. i'm neither of those. but i will take a shot at it. i do think that it is potentially -- whatever the judge's decision is in california, i'm sure it will be appealed no matter how it ends up, will be instructive for other courts and there may well be other cases that involve the same kind of phone and the same operating system. what the experts have told me is the combination, here's where i'm going to get well out of my depth of a 5c and this particular operating system is unusual. it's unlikely to be a

trailblazer because of technology being the limiting principle. but, sure, a decision by a judge, a judge weighing a decision in brooklyn right now. all of those decisions will guide how other courts handle similar questions. the all writs act is a tool i've used for hundreds of years so courts can have orders given effect and how judges interpret that in any particular jurisdiction is not binding on others but will be important. that's fair to say. the larger question is not going to be answered in the courts and shouldn't be, because it's really about who do we want to be as a country and how do we want to govern ourselves. >> let me ask you about that broader policy question from the bureau's perspective and that is, can you live with the policy, can law enforcement live with the policy that says only in certain cases whether they're violent crimes or other very serious cases, terrorism related, that we would allow into this act and the congress

could specify to which purposes the all writs act or change would apply. is that something that the law enforcement community, intelligence community, you think, could negotiate with privacy, stakeholders and the technology sector? >> i think conversation and negotiation is the key to resolving this. this is the hardest question i've seen in government. and it's going to require negotiation and conversation. but i've been very keen to keep the bureau out of the policy making business. i think we have two roles in this context. one is in the cases. we must do a competent investigation following the murder of 14 people in san bernardino. we will and we'll use whatever lawful tools are available to us. in the larger conversation, our role is to make sure folks understand what are the costs associated with moving to a world of universal strong encryption. there's tons of benefit. i love privacy. when i hear corporations saying we're going to take you to a world where no one can look at your stuff, part of me thinks

that's great. i don't want anybody looking at my stuff. i step back, law enforcement, which i'm part of really does save people's lives, rescue kids, rescue neighborhoods from terrorists and we do that a whole lot through court orders that are search warrants and we do it a whole lot through search warrants of mobile devices. if we're going to move to a world where that is not possible anymore, the world will not end but it will be a different world than where we are today and where we were in 2014. we just have to make sure the bure bureau explains to folks what the costs are. this is too important to let us drift and so my goal is to have the bureau be a factual input so we have a really robust conversation that's well informed. >> thank you. i know my colleagues will have more questions. i'll defer to them. there's one other matter i wanted to raise, though, that's the subject of libya. i'm deeply concerned as the size

of the tumor in -- >> james comey of the fbi, wow, to watch this debate evolve -- >> extraordinary. he put it exactly like tim cook does. he favors the privacy but he feels there's this need. what an informed and -- a lot of times you listen to guys from the government. what an informed and honest and open discussion the guy's having with these people about how he understands entirely what tim cook wants to do. this was not some -- comey is impressive. anybody that's ever worked with him or knows him, he's just, he's as good as it gets, man. wow. >> it's not quite utx honeywell. never going to happen. >> no. >> david hasn't said a thing yet about honeywell and the acs possible, the commercial. >> we'll have christine varney join us. >> christine varney? >> yes, the antitrust attorney that honeywell is relying on as it presses its case. >> she's not just an antitrust

attorney. she's the top antitrust attorney. >> she's former head of the antitrust division at the doj from '09 to '11. she'll be joining us next hour. while we monitor the testimony, we want to get to a faber report this morning, another name we followed in the past, valeant. the stock suffered and then came back again after a restatement of earnings from '14 and '15. we'll be hearing from the company next week. i wanted to share insights on the health of former ceo, mike pierson who was gravely ill with pneumonia but has recovered a great deal. and is actually back to health where he feels he's almost ready to rejoin the company. the question is, according to people close to the company, whether in fact he will rejoin valeant as its ceo.

you may recall howard schiller who had been the cfo, left the company, came back and is the interim ceo of valeant. there may be division on the board of direct ares of valeant as to whether it is right for mr. pearson to come back to the company. this is something we'll be watching. his health has improved greatly. i'm told he's lost a great deal of weight. >> pearson is the company. >> he's on the mend. >> he has been the company. >> you're telling me now this is like a situation, the guy who's the company may not be invited back to the company? >> yes. >> it's like men's warehouse. you have to like the way you look. >> he's the man who developed the strategy, which ran them into a lot of issues as you know in terms of some opposition, perhaps, also from its peers in the broader pharmaceutical industry. to not focus on r & d, but to focus on later stage drugs and get volume and price increases in particular.

they did put a -- we asked valeant for a statement. they said we're pleased mike pearson's health is improving. howard schiller is serving as interim ceo. mike remains on a medical leave of absence. his health has improved and is about ready to rejoin the company. the question is whether they want them. >> that's amazing. >> there will be a meeting on monday, schiller, the cfo and others will be on a conference call. they're having meetings in new york. >> if you told me six months ago, pearson returns, i would say pearson built this company and the idea that pearson is not going to run it is shocking to me. >> we'll see. i didn't say -- >> right. >> i didn't say he's not going to. i'm simply saying it's not clear. >> that's kind of a reversal. >> we tried to reach out to mr. pearson many times by the way and have been unable to reach him. >> some of these companies are so closely identified with people that you find it's

unbelievable if you find they may not come back after an illness. i thought he was valuable. >> dealing with the health of ceos and disclosure and all of that. >> it's very important. brent saunders, for instance. that's how i relate to these guys. >> i know you do. >> valeant is also an ackman name. >> he owns a lot. >> it's down substantially. people are buzzing about if you own an ackman stock, maybe you have to be careful. >> he's had a hard, tough performance this year after a poor year last year. >> people can bounce back. >> he is. >> he takes his shots that guy. i give him that. he's not looking to mirror the performance of the s&p. >> no. when we come back, california congressman ted lieu wrote a letter to the fbi telling them to back off apple. the dow up 11 points. don't go away.

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james comey on the hill. this time a question from congressman hines of

connecticut. >> the thinking of the fbi and the first question is a follow-on to mr. schiff's. it's my understanding that the position of the fbi is a narrow one, that they of apple really pertains to this device and this instance. there's a legitimate worry, though, that a decision in favor of the fbi could be the narrow end of a very wide wedge. and mr. schiff asked about the legal domain of cases to which this might apply. i want to ask about the authority. if the fbi prevails, apple will be required to write some code at the behest of the government. my question is, where does this authority end? for example, is it the position of the fbi that it has the authority to compel the inclusion of code into a new device? can you paint a very bright line for us with respect to where you think that authority ends that might re-assure those people that say where does it end? >> thank you. i don't think i should by virtue

of expertise or should by virtue of my role, i think the lawyers representing the government in this case are best situated to do that. these are reasonable questions, judges on both coasts and lots of other places will have to determine the meaning of the all writs act and what is reasonable assistance. i'm not somebody qualified to offer you a good answer to that one. >> okay. so it's not, at this point in time, a belief of the fbi that the authority could go beyond what it has requested in this particular case? >> yes. i actually have not thought of it. here's the way i think of it. the fbi focuses on case and then case and then case. i've said this to folks and i've said it because it's true. the san bernardino litigation is not about us trying to send a message or establish a precedent. it really isn't. it's about trying to be competent in investigating something that is an active investigation and so i don't know how lawyers and judges will think about what is the limiting

principle on the legal side. i just don't know. >> okay. thank you. my second question really is about a different way to think about this. right now we're having this conversation primarily in terms of the tension between privacy and security. there's a different tension which is security versus security. if you prevail and if this code is written, presumably as mr. schiff pointed out, it will be the subject of other questions for law enforcement, this code will exist presumably on a server at apple. that creates a very substantial threat. it will, if this code exists on a server at apple, it will presumably become the target of sovereign adversaries, criminal enterprises and terrorists. you don't need to think too hard to spin ugly scenarios if that code gets out into the wild. now a terrorist knows my precise location, gets photos of my children. i wonder if you can give us a sense of, how did you think about the tradeoff between the

very compelling desire to get the information on this particular san bernardino case with the risks that would be posed by the existence of this code should it exist and ultimately, perhaps, get out into the wild? >> again, i think that's something that the court is going to sort out. and i'm trying to be cautious in answering because i'm not an expert. what the experts have told me, i'm sure this will be sorted out by the judge, the code the judge has directed apple to write works only on this one phone. and so the idea of it getting out in the wild and working on my phone or your phone, at least the experts tell me, is not a real thing. second thing is, the code will be at apple which i think has done a darn good job of protecting its code. before 2014 they were able to unlock any phone and i don't remember any code getting out that let that ability loose upon the land. again, i'm not an expert and do i think that's something the judge will have 0 to sort out. >> thank you, director. director clapper, in my limited

time i wanted to thank you for raising the issue of cyber security in your written testimony. i wonder -- >> obviously clear, jim, that comey isn't pretpding to be a magistrate by any stretch. >> he knows more than anybody there. he's such a humble man. honestly. i can defer to this, that, i would take comey's word. he's the foremost legal authority. he's a dynamite guy. i just like him very much. >> we'll monitor the hearing obviously to see if there's any more developments on that front. what's on "mad" tonight? >> we have dominos, the man of the hour. the stock is up ten. pizza is very hot in this country. hamburgers are hot. chicken is cold. it depends on the case by case. last night on "mad money," the ceo of popeye's louisiana kitchen said mcdonald's, the burger wars, wendy's, is hurting them. that's something jack in the box

said. pizza is a secular winner. he uses the internet a lot, too. >> let's switch from pizza to apple. >> see you tonight. "mad money," 6:00 p.m. peter king asking the questions back on the hill. >> just to knock down a media story, i've heard several people in the media say the fbi could do this if they wanted to but they are trying to establish a case here. just give you the opportunity. >> it's the product of people watching too many tv shows. i don't mind tv shows about fbi but sometimes we're not as attractive or as technologically talented as we appear on tv. >> okay. >> mr. quigley. >> thank you, mr. chairman. thank you, gentlemen. diving a little deeper into ukraine and russians, i don't know who wants to comment on this first. some sense of their strategic goals here, obviously the impact of sanctions are pretty

traumatic to their question. is this, i guess, a frozen conflict? and what else can we anticipate? >> well, what's had the greater impact on russia, russia's economy has been the drop of the price in the oil. crude is running around $37, $38, if that, a barrel. the planning factor that the russians have consistently used in their budgeting is $50 a barrel. sanctions have certainly contributed to that. the major impact has been with oil. i think the russians consider ukraine little russia. i think it's deeply steeped in their history and their culture. and so they are going to attempt to sustain influence, particularly in the two separatists republics.

obviously what the russians most fear and they're most concerned about is ukraine gravitating to the west more than it already has, meaning, becoming part of the european union or worse, nato. so russia will continue, i think, to via proxies, the separatists, sustain their influence in the ukraine in that manner. >> do you see the status continuing the way it is or, obviously, there's renewed conflict at different times. but no dramatic change recently. >> that's right. i think they will, for now, maintain more or less the status quo. that's creating issues and a lot of the incidents occurring along the line that has been drawn via

the agreement are occasioned by upstart separatists whom the russians don't completely control. >> there still are shortcomings. your characterization of a frozen conflict, there's still uncertainty about how the russians themselves are going to excrate themselves from this, but it has taken a toll because of sanctions. >> given the economy and the two conflicts they're most involved with, the sense that putin feels they have their hands full or do you have concerns about efforts to destabilize the baltic region? >> well, there are concerns about that, although right now that's more in the soft arena, if you will. >> you see the fbi giving testimony on capitol hill, importantly of course for many

in the market, it concerns exactly what apple will do with that iphone and others as, of course, they have 24 hours to come through with their legal defense against requests from the doj and the fbi that they write software to release the details of that iphone that was used by one of the san bernardino murders. joining us now, the former executive assistant director of the fbi, shawn henry. good morning to you. >> good morning. >> it was interesting to see comey speak just now. he seemed to cut to the chase. and the idea that in five year's time this discussion may well be over because the encryption will be so good and we hear apple is working on new phones that they would be unable to do what they're able to do in this instance. >> i think the encryption right now, if people are using certain applications, the encryption is not able to be overcome. there are actors, whether they be foreign nationals who are involved in espionage or terrorist organizations or

organized crime groups that are using that type of encryption separate and apart from mainstream encryption that really is not able to be circum vented. >> if the terrorists are using encryption that nobody can crack, why should the iphone be opened? >> so i think in this -- forgive me, sir, i believe we're getting more comments on apple. forgive me. let's go back to this hearing on capitol hill. >> not do anything else, is that correct? >> that's correct, as in thousands of other criminal investigations across the country, if we want to search. go to a federal judge, make a showing of probable cause to believe there is evidence relevant to the investigation on the device and get a search warrant from the court for the device. what happened here is, then, because the device was unable to be opened, the judge issued a separate order under this thing called the all writs act to give effect to the court's search warrant that told the manufacturer you must assist in disabling this auto erase function so they can try and

guess it and execute the search warn the. >> to me, just from a common man, i would think it's different if you've got two people that have killed 14 other folks in a terrorist attack and you're just trying to get through the security code to get into the device, versus some divorce lawyer trying to find out who a philandering husband may be talking to. i think there's a difference to that. i think the american people sense that. these are people who have committed a crime. the next thing i wanted to ask is, we've been going through a lot of the iran nuclear deal. and we have given them a large sum of money. >> we will come back as of course we get moran committees on apple. a reminder that shawn henry is

with us here. you were suggesting that terrorists are already using encryption that people can't crack. if that is the case, why should apple open this iphone? >> in this particular case, i think we have to be very, very clear, that apple and tim cook have valid points. nobody wants to see this back door that the government can access indiscriminately. we want to see privacy. we should all expect that. in this particular case, what the fbi has said, is that they are looking to access a particular phone that's owned by a county in california. they've given their authority to access that phone and they believe that there's information in there that could be related to terrorist acts, either prior acts or potentially future acts. so they're talking about this particular phone. they're not asking the fbi -- the fbi is not asking for a back door to get into all phones. they're asking apple to open that phone. >> i think importantly to counter that, the argument apple is making is once we create this software and we now know from

court filings, there are other requests around the country. once we create this software, the genie is, in a sense, out of bottle. >> they're asking for apple to open up. they're not asking it for the keys that they can open it and have indiscriminate access to all phones. they're asking apple to open this phone, open this phone. in their own facility. this issue is a broader issue for the legislature. it will be debated. the american public will have to decide the balance between privacy and security. that's an important issue. >> tim cook has acknowledged the fact that the fbi missed an opportunity to sync the icloud before we got to this point. we saw director comey say people have been watching too many tv shows. they think that the fbi is better looking and more technologically savvy than they actually are. is that self-deprivation or do

you think the fbi could have had better training? >> if i could tell you how many shows that i watched with the fbi and they're portraying what the capabilities are, absolutely, they done the have those type of capabilities in every situation. they're relying on the true experts who designed this capability, asking them to open a particular phone. i don't know that the fbi has the ability. if they did, they wouldn't be going to apple and their engineers. >> before touching the phone, why not go to the company and say we want to make sure we can unlock this and get to everything behind it. do you think that there is a way that they could have done this behind the scenes before it became such a public conversation? >> i don't know the totality of what occurred in advance of this particular issue. i think if the fbi could have done it, they would have, if they were engaged with apple. they certainly have been over the years engaged with different media organizations, talking to them about similar types of issues. >> this idea that they could do

it sort of in a private room at apple and then that would be the end of it, is that a fair assumption or do we think that whatever it was apple would need to develop would have to be stored somewhere and could conceivably -- a congressman was actually discussing this as well -- be stolen or compromised in some fashion? >> these companies maintain their technology all the time. they have their source code, proprietary data, their technology that is specifically related to their devices. they do that all the time. they protect those types of capabilities. i think to say that hundreds of millions of iphones might be susceptib susceptible, that implies understandably and rightfully, that the public doesn't want the government to have this capability. again, indiscriminately. i don't think that's the case here. >> isn't that fear precisely because the nsa overstepped its mark and used its ability indiscriminately? if you look at the survey, two-thirds of people under 40 do

not think the iphone should be open. these are people trading very intimate pictures of themselves. did the nsa drop the ball here? >> you're talking about an entirely different issue. >> not in the perception of people. we're talking about the democratic institution here. >> sure. i agree. encryption is something that is used, i use it myself. it's important and i recognize the vast issues here. and that nobody wants to see the government have indiscriminate access to all phones and the ability to read people's private e-mails about a philandering husband or something of that nature. in this particular case, what the fbi has asked for is the ability to access a phone of a person who killed 14 americans. that's what's being asked for here. if that opens up the genies out of the bottle, it is an issue that is absolutely going to be and should be debated in congress and there has to be some legislative response here. this is something that's not going away.

technology ask constantly going to change. there are still bad people among us, people that want to kill and harm us. the american public wants to and deserves to be safe. the government has a responsibility to protect its citizens. i think that's what they're trying to do in this case. this is a much broader issue. >> you talk about companies having proprietary data that they want to protect and insulate. that stuff gets hacked all the time. what's to say, apple does this, employees are aware of how it got done and somehow that information is in the open, not for government to abuse but evil elements to abuse. >> they're asking for the ability to guess the pass word to the phone. if the phone is tried to be accessed ten times and it fails, it will delete everything on the phone. they're not looking at encryption keys to intercept private communications and those sorts of things. somebody would have to have access to a particular phone. the concept of hundreds of millions of phones, that's a broad issue when we're talking about this particular case.

>> going back to the hearing here on capitol hill. >> -- where their cooperation in showing the world they might be able to accomplish what's requested makes their device less desirable and, therefore, use market share. >> i don't think that's a question that i can or should answer. i don't want to talk about our private conversations in the course of this investigation about apple. i know there's been a bunch of stuff in the press and they'll obviously have an opportunity to file in the court. i think today or tomorrow to explain why they don't believe the order is legally and factually appropriate. >> i appreciate that. we'll wait for the court filing to find out what their claims may be. mr. chair. >> mr. carson. >> thank you, mr. chair. director comey, without getting into classified territory, can you describe how the fbi makes a determination to determine which communities warrant pro-active

outreach and engagement to prevent radicalization and recruitment under the cde umbrella? >> as they tend to other subjects, let's return to former fbi deputy director shawn henry. when all is said and done, where do you think we'll be on this debate if five year's time if the new iphone is could encrypted that nobody can actually undo it. >> it may be a moot point. i think we've seen some of the capabilities employed currently where there's absolutely encryption technology that can't be broken by intelligence services, by the government. there's nobody who is complicit and would be able to assist the government in doing that. we've seen terrorist groups looking to develop encryption themselves where they are writing the code to do that. >> importantly comey said that it was now the role of the fbi to explain to the american people what the effect of this would be in the future. are you suggesting that actually the united states will be more at risk? >> i think they are going to have to rely on other

capabilities to try and disrupt terrorist activities, to try and disrupt major organized crime groups or espionage campaigns, those sorts of things. because we can't just rely on the technology. the capability for the adversaries to hide in plain sight, this going dark concept, the government's not going to be able, even within authorized warrant they're not going to be able to get access to that and read it in plain text. >> comey just said, if the fbi doesn't prevail, the world won't end but it will be a different world. as he said, he doesn't want the public coming back in five years and saying where were you guys? >> i tell you, why this is important to be a public debate, i use apple products. i concur with the encryption issue tim cook is talking about. the american public has to debate this. it will always be a balance between security and technology. after san bernardino i was on major media outlets and i was being asked -- after san

bernardino, i was on major media outlets and i was being asked why didn't fbi know about this? why couldn't they disrupt this? >> it doesn't change realtime observation, does it? >> in terms of disrupting terrorist activities it's about collecting intelligence. what the fbi said in this case is there nay be information that relates to who else might have conspired with those actors that killed 14 americans and who else might be out there who is looking to harm americans again. it's about collection of intelligence to protect the public. you're going to stick around, shawn. we'll continue to monitor the hearing in front of the house intelligence committee on capitol hill on worldwide

threats. when we come back, will the united and honeywell deal get done? christine varney joins us live to talk about the obstacles ahead. "squawk on the street" will be right back. the life behind it. ♪ those who have served our nation have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

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welcome back to "squawk on the street." fbi director james comey answering questions on capitol hill. some focused on apple, some focused on other threats presented to the united states of america. we are continuing to monitor

that hearing that is going on right now. we'll bring you any headlines. >> we'll be monitoring but for now, let's get to honeywell. honeywell wanted to buy united technologies that company's ceo says it's not going to happen. the key reason, concern the two companies would move antitrust regulators to block a deal. honeywell disagrees and believes antitrust concerns would not be a major issue, in its words. christine varney ran the department's antitrust division from 2009 to 2011. she has an antitrust practice at cravath, swaine & moore and is a key adviser to honeywell for the united technologies deal. good morning. >> good morning. >> yesterday, airbus ceo says i do not see such a combination would be in the interest of airbus. i'm under the impression that united technologies shares my assessment. boeing says healthy competition is vitally important to boeing

and our commercial and military customers and they say we would anticipate taking a very close look at the potential impact of a potential deal. it doesn't sound like the customers are in your corner. >> well, i think once we get started in talking through what the issues are and how easily they're resolved, everybody, including united technologies will see this is a very pro-competitive deal. you have to remember, honeywell is an $80 billion company with a wide portfolio. utc, great company. smaller, also wide portfolio. the overlaps we're talking about are so small and narrow in aerospace, there's no more than $5 billion of overlap which is easily dealt with through deves ves turs. >> a lot of people come back and say we don't see that at all.

they say there's no way the likely divestitures like that at all. he thinks the divestitures would be far, far higher. how do you get to your number? ram, air turbines, wheel sensors, biz jet helo engines, fuel pumps, he goes on and on. >> i think it's important to remember both companies have incredibly strong portfolios in addition to their aerospace portfolios. aerospace, honeywell, incredibly strong on the electronics side, utc very strong on the mechanical side. putting those two portfolios together and overlapping the divestitures will give us the synergy. they have crunched the numbers

and when we look at the overlaps, they are in small propulsion engines, auxiliary power units and environmental control. there's some overlap in the building controls side, de minimis. i don't think anybody thinks that's a problem. when you look at the small propulsion engines, in apus and small engines, there's about six players in that space right now. post divestiture there would still be six players in the space. ge, rolls, williams to name a few. that's an easy divestiture. it's identifiable. something both the customers and the antitrust authorities will be easy to digest. it's a very straightforward divestiture. >> this environment seems to be tougher than it might have been even when you were running the antitrust enforcement division at doj. i'm just thinking, i cover m & a, halliburton, baker hughes

has been a long slot. unclear where that's going to end up. ge was prevented from doing a deal with electrolux. are you properly adjusting your clean to the the current conditions when m & a seems to be something the antitrust enforcement divisions are saying no. >> i am 100% positive this deal is doable with the package of divestitures i talk about. >> how, why? >> when you look at the deals that don't get done, what principally happens is the parties don't understand they have to divest overlapping assets. they can't make arguments that others will come in and reposition, others will come in and enter. deals that get done are the deals that walk in the door where the ceos have put on the table here are the overlapping assets, they are going to be divested. they're going to be divested to a credible buyer. competition is going to be maintained. those deals get done. look, david, i've looked many ceos in the eyes and toll them

you can't do this deal. this is not one. >> halliburton baker hughes, as far as i know, i have no idea if you're involved. >> i'm not. >> they walked in with a divestiture package and they've been slow walked. >> some are more complicated than others. that's a potentially a combination where you have so many different pieces that aren't coherent, a lot of potential different buyers. it's a little bit more complex. i don't have any reason to believe that deal won't get done. i think it's a question of finding the right buyers for the assets and putting it all together. this deal, we have a much smaller group of assets. they're very synergistic. it's very conceivable that they could get one or maybe two buyers. that's not a complicated divestiture. >> what about the customers? mario monti is no longer the

competition commissioner. so what. >> customer concerns are important but i think once airbus and boeing and other customers see the synergies that will go directly to their bottom line, 3.5 billion in synergies will apply to them. >> that decision was overturned by the court in europe. it was held up on a technicality. the idea that you're simply too big has been discredited both in europe and the u.s. i don't see the deal failing for that reason. >> given your confidence, and yours is an important voice here, would you advise your client to be willing to do things that's willing to take on the risk of antitrust, to offer a large breakup fee or go hell or high water as we say? >> i would advise mayan clute to get in the room with utc and work out those details. this is a very doable deal.

the first step is sitting down with their antitrust advisers and unwinding why there's no antitrust issue, then let the ceos cut the deal. >> we'll see if it moves forward from here. we appreciate you joining us. >> thank you, david. >> christine varney from the law firm of cravath, swaine & moore. over to you. the public portion of that congressional hearing where fbi director james comey was testifying answering questions on apple has wrapped up. james clapper and john brennan also there as well. still with us is the former executive assistant director of the fbi shawn henry who has been helping us make sense of this hearing. comey has said apple has been cooperative and there have been plenty of negotiations behind the scenes. so do you still see this ending up as a very tense court battle down the line? >> i'd like to hope it's not contentious, that technology companies writ large understand the need for the public periodically to get access to

legitimately court authorized data, that might be related to a terrorist incident. i don't think anybody wants to see innocent people being killed. again, that issue being balanced with privacy and civil liberties, which is of utmost importance to all americans, that's got to be debated publicly because this is an issue with the advance of technology, we're going to see consistently advantages and technology issues here with law enforcement. this is something that's going to have to be debated in the public domain. >> hope you come back when the conversation continues. if donald trump becomes president, what would happen to his businesses? we'll have that coming up later on. dow is up 21 points. back after a break. >>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.

welcome back to "squawk on the street." i'm bertha coombs at the nymex. weekly inventory number is out for natural gas. it's a bearish number, down 117 billion cubic feet. the expectation had been for a withdrawal more in the range of about 140 billion cubic feet. bear in mind, the five-year average is much higher but it's been fairly warm, particularly out in the mountain region where

there was no withdrawal at all. inventories were fairly flat. we are seeing natural gas here move lower. one number to watch out for, 17-year low is 168 and change or so for gas. we are challenging that. we set that this morning. we'll see if we can hold these levels. back over to simon. >> thank you very much, bertha. the fbi director testifying in front of congress. and ted lieu sending a letter telling them to withdraw their request. we'll be right back. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late.

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i'm melissa lee. here's your cnbc news update at this hour. vice president joseph biden arriving in mexico city. the energy secretary and interior secretary all part of the delegation. biden's expected to meet with mexico's president. improved weather conditions allowing rescue teams to recover the bodies of those killed in wednesday's plane crash in central nepal. the bodies were plon flown to w the flight originated. 135 migrants remain stranded at the greece/macedonia border.

it's been allowing only a few hundred refugees in each day. severe storms tore across the eastern seaboard on wednesday, dumping buckets of rain and spawning possible tornadoes. among the hardest hit states, virginia where four people were killed. and that's your cnbc news update at this hour. back to you. >> thanks so much. the house select committee on intelligence just wrapping up a public hearing on worldwide threats. it included the directors of the nsa and the cia as well as questioning of fbi director james comey and here's what he said about the apple case. >> law enforcement, which i'm part of it, really does save people's lives, rescue kids, rescue neighborhoods from terrorists and we do that a whole lot through court orders that are search warrants and we do it a whole lot through search warrants of mobile devices. if we're going to move to a world where that is not possible anymore, the world will not end but it will be a different world than where we are today. >> meanwhile, apple's ceo tim

cook joining abc news yesterday in an interview to explain why the company is defying a court order to help unlock the encrypted iphone used by one of the san bernardino shooters. here's what he said. >> if a court can ask us to write this piece of software, think about what else they could ask us to write. maybe it's an operating system for surveillance, maybe it's the ability for the law enforcement to turn on the camera. i don't know where this stops. but i do know that this is not -- this is not what should be happening in this country. >> joining us now, california democratic congressman ted lieu who sent this letter to the fbi this week essentially asking it to back off apple. i request the fbi's demand of apple be withdrawn. let's all take a deep breath. congressman, this is a situation where public opinion is split. we heard director comey say this is the hardest question he has faced in a long career in government.

why are you coming down on this side in particular? what's informing you? >> thank you for that question. let me first say that having served on active duty in the u.s. military and still in the reserves, i believe when it comes to terrorists, we need to hunt them down and kill them. public safety is government's first priority. that's why i agree with apple in this case. there's not a shred of evidence that weakening encryption systems would have prevented any terrorist attack ever. these are difficult issues but they should be addressed by the american people and by congress, not through the courts. >> it is also a company that's based in the state of california where you are from. there is some concern that perhaps the increasing reach of government could push companies to either build even more s sophisticated encryption or worse yet, move operations abroad. is that something you considered? >> i have. let's keep in mind, the u.s. has

a national security interest in strong encryption that helps not just private individuals but companies as well. this affects consumers as well as companies both here and abroad. and if we allow a magistrate judge to apply a law passed in the 18th century to coerce apple into taking a series of extraordinary actions, who knows where this will end, not just in the u.s. but in other countries when they try to do that to our businesses. >> congressman, whatever sympathies you have, whatever side you're on, surely it's the job of the judicial system to find out what the law does actually say, even if it goes to the supreme court. why suggest it shouldn't go through the courts? that would seem a perfectly reasonable place for this to be decided at the moment until you get some overrule from congress. >> well, keep in mind, fbi director comey has opened letters that said this should be decided by the american people. and last year, the fbi tried to get this proposal through congress. they tried to get back doors to

weaken encryption systems. they could not do that. all of a sudden they're trying to use an interpretation of a law passed in the 18th century, never designed for this situation to a 21st century company. we should not have our national security and privacy and civil liberties being decided by a magistrate judge or the courts. >> i'm sorry, sir, surely, with if the law is obsolete, that's for the courts to decide. this is a respectable process to be pursued here, surely. >> i do not disagree with what the fbi is doing. they certainly have the right to pursue this through the courts. apple has the right to appeal it through the courts. this is an issue that should be decided by the american people and stakeholders and congress. that's why the fbi director is testifying in congress. it's why he wrote an open letter, keep in mind, when's the last time the fbi director wrote an open letter? he did not do that to the court. did he that to influence the american public. that's where the debate should happen.

>> i don't think anyone disagrees with you, congressman, that laws that long ago could not have anticipated the debates we're in now. there are senators, elected senators, mccall, warner, feinstein, working on laws on these very issues right now. why is that not the right direction for us to pursue this in? >> that is absolutely the right direction. i'm actual i a co-author of the legislation by chairman mccall and warner that will create a task force and commission of experts to look at these difficult issues of privacy, civil liberties, national security and safety. that's the path that should go instead of applying a law that was passed nearly 90 years before alexander bell invented the telephone. >> what is your perception of how the fbi might have changed its attitude? last night tim cook said they

learned of this challenge in the court by reading about it in the newspapers. he said, he felt that wasn't the way that the railroad was to be run. now we hear from the testimony we just got from comey that they're having active and productive negotiations. i wonder if the fbi came into this with a certain bravado and has been surprised by the public reaction. >> well, it's clear that what the fbi is saying is not true. they're saying this is just about one case. it doesn't set a press didn't and the news reporting has shown this is about multiple cases across america where they're trying to get apple to take extraordinary actions to unlock iphones and this applies to any case with any smartphone if this precedent is allowed to be set. let's be clear what we're talking about. we're not just talking about one specific case in san bernardino even though there was a horrific tragedy. we're talking about any case across america and potentially cases in other countries as well. >> congressman, we heard from tim cook in that interview

talking about the fact that it's hard to see where this stops. the government could turn on your camera. they could do a whole lot of things within your phone. we're also talking about the largest and most successful company in the world, it's highly sophisticated, more sophisticated than the government at what it does. at some point, could apple not say we have created this software for the government, it is up to us to make sure the next operating zsystem and the next devices we create are not compatible with this other code we have written. is that not an option? >> i think it's good to focus not so much on apple, because this applies to any company. it could apply to google. it could apply to amazon. the american library association, a nonprofit is opposing what the fbi is doing in this case. their concern, for example, where does this stop. could the fbi then force amazon to write software that notifies the government anytime people order books that might be

suspicious. there is no end to what the government can coerce private individuals and companies to do if this reading of this all writs act passed in 1789 is allowed to stand. >> we are certainly counting down the hours until we get that response from apple. in the meantime, congressman, our thanks for joining us. >> thank you. when we come back, the ceo of gogo discusses internet security and the threats posed by hackers. dow is up 35. always obvious. s aren't 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.

what's the best way to weather this market volatility? our traders are giving you their best ideas. find them at tradingnation.cnbc.com. more "squawk on the street" coming up.

welcome back to "squawk on the street." energy stocks weighing the most as the s&p 500 struggles to hold

gains, this as oil falls on concerns over oversupply in a slowing global economy. the sector in bear market territory, more than 30% off recent highs and is one of this year's worst performing sectors. dragging down energy today are shares of ensco, consol, the williams company and apache. let's get over to the cme group and the santelli exchange. >> good morning, carl and my guest this thursday morning, andy brenner. thanks for taking the time, andy. >> thanks for having me, rick. always a pleasure. >> i think negative rate should be our first topic. when it comes to negative rates, i look overseas, see the ten-year jgb flirting with negative six, european two-year on the dark side of 350 basis points negative. the ten-year in europe today, the bund, dipping back under 15

basis points. how can anybody justify in the central banking community negative rates? how can they subject us to an experiment with no historic ability to do any type of analysis as to the outcome? is it really gotten to the point where central banks have the ability to roll the dice in a consequence that, let's say, this works to the tune of potentially this could work in a 70% possibility. which i think is double the reality. that means, what, central bankers submit their economies to over 30% of a disastrous outcome? i can't believe this. your thoughts? >> rick, you know, negative interest rates do not work. have not worked and in my opinion, it's a total failure. if you look at -- since we've been in negative interest rates, if you look at the european equity markets, they're all down an average of 20%. if you look at the banks who is the transmission of how you get money out to people who want to

borrow, the banks are down. deutsche bank is down over 50%. even socgen is down 35%. even the swedish banks who have had a lot more opportunity or history, they're down 15% or 20%. and you know, what are you showing me, that there's an an uptick in gdp? all the european gdp numbers are awful. i think it's an absolute disaster and i think the more we talk about it, the worse it gets. i think draghi has to go to plan "b." >> when it comes to draghi, the big news yesterday, it really isn't big news. we've been looking at this ever since they started to go negative. there's a higher and higher percentage of securities that are going to be ineligible for quantitative easing purchases because their rates are below the negative 30 basis point deposit rate. and the last half minute, why does mario draghi think if the next meeting two weeks from today he lowers the deposit rate to 40 basis points negative with

will free up securities for how long? a day, two days, a week? and most likely more negative and the cycle keeps repeat, repeat, repeat. finish up with your assessment. >> rick, it makes no sense. >> rick it makes no sense. you got over a trillion worth of stuff that's below the negative 30. you have probably 2.5 trillion that's negative. this is the whole idea. it doesn't work. go to plan b. get all the nonperforming loans off the european banks balance sheet. that's what you've got to do. you have to be able to have banks make money. otherwise it makes no sense. >> you can't do that andy. it's too hard to do it the right way. let's take a shortcut so we don't see the negative consequences today. we'll see them when we're long gone. andy, thank you for taking the time to talk about this very dicey topic. simon hobbs, back to you. >> thank you.

as we hurdle toward super tuesday what will happen to the trump business ifs the donald becomes the next president of the united states? robert frank has the answer when squawk on the street comes right back. ♪ 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.

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if donald trump is elected president what happens to all of his businesses? robert frank has the answer to that question and i imagine it's more complicated. >> it is complicated but surprising at the same time. donald trump could remain ceo of the trump organization even if he's ceo of the country. there's no law that would prevent dru prevent trump from owning his running his company if he is president. but there's details criminal laws that prevent them from being in something that would benefit them or their families but the president and vice president are exempt. he would be able to remain on the board and promote his hotels, golf courses and condos all while in the white house. he might let his children run the business and he says his business is peanuts compared to the more important job of

running america but he hasn't promised to sell his ownership in those companies. he probably couldn't since he's so closely tied to the brand and licensing deals now. as you mention the blind trust would be futile since he knows what assets are in the company. trump would still be subject to gift and bribery rules but his businesses are complicated with over 500 different entities and he has projects in dubai, scotland, south korea, india, turkey, panama and the new luxury trump hotel on pennsylvania avenue just down the road from the white house. so he could have two houses there on pennsylvania avenue. guys back over to you. >> he is a true entrepreneur. robert, thank you. let's send it to seema for a quick market flash. >> i want to point your attention to shares of dominos pizza surging up nearly 9%. the pizza chain operator reported higher than expected fourth quarter profits and sales here in the united states.

the company also said it's same store sales grew more than 8%. the dominos ceo will join mad money tonight with jim cramer. you won't want to miss. >> thank you. coming up more on apple and the fbi. of course the former head of u.s. cyber investigations will join squawk alley live as the head of the fbi gives testimony on capitol hill. to help pay for her kids' ice time. before earning 1% cash back everywhere, every time. and 2% back at the grocery store. even before she got 3% back on gas, all with no hoops to jump through. katie used her bankamericard cash rewards credit card to stay warm and toasty during the heat of competition. that's the comfort of rewarding connections. apply online or at a bank of america near you.

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the complexity of this issue not lost on the fbi director. take a listen. >> conversation and negotiation is the key to resolving this. this is the hardest question i've seen in government and it's going to require negotiation and conversation. >> a big part of our coverage this morning. welcome to squawk alley for thursday. myself and kayla at post nine. mild market action means we have a little more room today to talk about the apple story which is taking shape overnight and this morning on capitol hill. let's get more on the fbi

director's testimony from aman in washington. >> good morning, a very careful fbi director that we saw on capitol hill today. he said this was not about the fbi trying to establish a broad precedent here. in fact he said the technology itself would be a limiting principle going forward because this case would only apply to one phone and one piece of technology. his very careful remarks throughout the morning. very much trying to be the reasonable man in this debate. >> when i hear corporations saying we're going to take you to a world where no one can look at your stuff part of me thinks that's great. i don't want anybody looking at my stuff but then i step back and i say law enforcement which i'm part of really does save people's lives, rescue kids, rescue neighborhoods from terrorists and we do that through court orders that are search warrants and through search warrants of mobile devices so we'll move to ald