♪ ♪ >> good morning, everybody welcome to "squawk box" on cnbc. we are live from the world economic forum in davos, switzerland. i'm becky quick along with joe kernen and andrew ross sorkin on our first day of coverage from the alps let's look at the u.s. equity futures. we know the major averages ended at all-time highs once again yesterday. dow futures now look like they're up 66 points s&p futures up by 3. nasdaq up by 24. look at what happened overnight in asia. you will see we are talking about gains also in the asian markets. hang seng closed up by 1.6%. and the shanghai was up by 1.3%. if you want to check out what's happening in early trading, green arrows there with the dax up by 0.8%

it's the biggest gainer of the major averages look at treasury yields, this is where the action has been. yesterday the two-year sitting at the highest level since 202000 the ten-year at the highest level since 2014 the yield on the ten-year is 2.632% >> couple big stories we're watching, the u.s. government is officially reopen for business after president trump signed a bill to end the shutdown hundreds of thousands of federal employees will return to work. the bill funds the government but only for 17 days it's the product of an agreement in the senate to reopen government and tackle immigration within three weeks we'll watch that it's a busy day for ponentse the opening bell johnson & johnson, procter & gamble, travelers and verizon. we will hear from capital instruments and united

netflix shares are popping the streaming company adding more global subscribers than expected in the latest quarter here's what reed hastings had to say about what is driving growth >> the real driver is to make the big titles bigger. so what happens is so many people are talking about "bright" or "stranger things," or "the crown," that pulls in people who have not yet joined, all their friends talking about the shows. that's the dominant accelerator. >> earnings and revenue were in line the company's upbeat guidance pushing netflix shares to an all-time high giving it a market cap of 1$100 billion for the first time this is the kind of day davos was made for >> yes yes. the snow stop. sun came out it's beautiful you hear the church bells ringing? >> it's not cold >> last year it was freezing >> this is our first of four days here. >> that's okay but this is pristine

not the slightest bit -- look at him. he looks like he's leaving this to go to a runway. walk up and down looking good without a jacket all right. i was going talk about something. ge reporting on a wednesday we need someone to find out the last time it was that they -- they always report on friday >> yeah. >> new company, new leadership >> reporting on a wednesday. we have a lot of important guests do we have to work in these earnings >> there's a lot of news >> duty calls. >> are there are no computers h. >> including this. as a proponent of renewables, you have to tell me whether you like this or not president trump is slapping tariffs on imported solar panels and large washing machines the u.s. will impose duties as much as 30% on solar equipment made abroad. currently about 80% of the parts in the industry are made overseas solar stocks this morning are up

a bit. renewable people here have been against tariffs, even though they are definitely being taken advantage of from dumping from abroad they think it will hurt the overall adoption -- >> if you look at the issues, just the jobs created in the united states, based on solar products, 15% of it comes from manufacturing. 25% comes from research and development. and from the sales jobs. 53% of it is installation. more expensive solar panels, it will mean fewer installations. >> so the green lobby is not -- >> the solar lobby is not on board because it means they'll have less adoption rates >> that's what i meant, the greenies i wondered how you felt about it it seems like we're getting dumped on. it's unfair. this is one area where you would look for if you would try to make things -- >> we'll see >> washing machines, i don't

know tariffs on large residential washing machines will range from 20% to 50% the u.s. international trade commission found both imported products are substantial causes of serious issue to domestic manufacturers. u.s. officials said more trade enforcement action will follow that's right there is a lot of news this morning. >> we do have news >> andrew's column >> it is some breaking news that just broke overnight elon musk is the subject of the column telling me he's agreed to stay on as ceo of tesla for the next decade. there was speculation that he would be stepping down he said once completion of the model 3 was up and running, that he might not stay at company at least as the ceo. but tesla announcing a radical new compensation plan. it could be the most radical compensation plan in history his compensation will be tied to the performance. the executive will receive no

guaranteed compensation of any kind at all. he only gets equity that vests over time but only if he reaches the hurdle rates which are, dare i say, crazy right now the company is worth 59 billion they run at $50 billion increments >> you're just talking market capitalization not based on revenue or production -- >> there's two metrics at each step so the first step is he has to get the company to 1$100 billion and reach these operational and adjusted ebita and revenue number if he doesn't get either, he gets nothing >> that's a weird way to break it down. >> if he gets to 150 and hits the operational number -- >> the market can be irrational. can't control that >> at each $50 billion number h collects 1% of the company if somehow magically he would get the company to 6$650 billion which is what the plan calls for, if you can believe this, he

would contact the equivalent of $55 billion in compensation. otherwise he gets nothing. >> what if you get it to 6$650 billion and it collapses to 500 billion? is it just hitting that market milestone that matters >> here's where it gets more interesting. the shares vest but then he has to hold the shares for five years. at each break point. >> you still get it, right market capitalization is the weirdest thing >> no. it's impossible to game, even if you were to get the company -- the market cap to 100 billion, you have to hit the operational numbers. >> on top of it. >> you have to get both. then you have to hold the shares for five years >> so if you're trying to do something temporary -- >> you can't, because five years later your shares would be worthless. >> would affect decisions on i buybacks, issuing stocks >> the last compensation plan they had in place started in

2012, it was similar to this it had a market cap component and all sorts of -- >> i never heard of another company doing this. >> he literally gets nothing if he gets to $99 billion he gets nothing if he gets to 1$149 billion, he gets nothing it is truly eat what you kill skin of the game >> operations, it would be that. yes, production if you can make sure you're producing enough models by a certain time it's not eat what you kill >> but you have to capture both. otherwise what do you do >> he is taking a chance >> huge chance >> who was it that said if you value the company x subsidies -- >> some think the company is worthless. >> people talk about what an

executive compensation plan should be, you want people to have skin in the game, this is about as much skin in the game as it comes. heads you win, tails you don't lose >> all right we'll talk more about this over the next several days. right now down to business with our first guest who has a big stake in all the final issues we've been talking about this past year. those include tax reform, the u.s. market rally and future of banks in the digital age joining us is bank of america chairman and ceo, brian moynihan bank of america the best performing bank stock in 2017. we appreciate you being here today. >> my pleasure to be here on a beautiful day. >> we got lucky today. you came out with earnings the numbers were better than expected but one slightly weak number was the trading number your trading revenue down 34% in fixed income for the current quarter we have not seen more volatility, but

what's happening with trading? >> there's seasonality to trading that goes on as you open a new year, people get back to work you see it so it's been a bit stronger. if you look at it the way we run the trading business, over the last six years revenues ranged from 12.9 to 13.6 billion in revenue. it's much more stable. it comes from our ability to issue clients andinvestor clients. so we're not running it to swing from the fences. >> we just talked about treasury rates, how they've been creeping up a bit the two-year, the five-year, the ten-year things picking up. what does that mean for bank of america? we've been waiting for higher rates for a long time. >> if the rate structure represents stronger growth in the economy, and next year the economy picks up a half percent to three quarters of a percent, that's a great thing

if the rates are rising in response to that if they're rising because there's inflation or other things, that's not so good but we all benefit technically if there's a rise in the curve from year end, 60% of it is the short end. we go by the general economy, and it's in pretty good shape in the united states, and we anticipate it to grow 2.7% the imf just raised their global growth forecast, 3.9% an increase of 0.2%, that was based on the u.s. tax law changes. we know what it means for bank of america, but what does it mean for the companies you do business with? >> i think the key for tax reform in the u.s. from a corporate perspective and a global perspective was a lower corporate tax rate and territorial system so you remove some incentives to try to move money to figure out where the natural watermark

would be for activities. so companies are going to benefit by that. they'll have more money to invest the second thing is they will be less about trying to figure out the knew wants in nuances in tax. we have a talent of work force, we have tremendous energy resources, we have a rule of law around working and employment flexibility and a regulatory environment swinging back in i don't think people have seen -- i've been pleased to see so far is not only u.s. reaction, which you might expect, but outside the u.s., the u.s. becomes a more attractive place to manufacture and drive to i think that will help the u.s. economy. when the u.s. economy goes because of size and the consumer side of it, that lifts boats >> what do you think about the small businesses you've seen it's early days, but have you seen increased demand for loans

or capital expenditure >> we've been doing sort of successive record quarters of origination, small mid size businesses it's been very strong. i think small businesses tend -- have looked the last several years on policy of being a bit working against them we decide that policy involved but implementation of affordable care act causes them to slow down and rethink the business models what has happened with the regulatory move and the tax reform is you have taken away uncertainty. they'll be more aggressive you have to be careful of overstating it if they tell you they'll do it, let's say it's 5%, 10% more aggressive in terms of investment, that's a big difference when you take across our 200,000 -- our 200,000 mid size business customers. think of each of them being slightly more aggressive and how that flywheel keeps turning. what do you make of the

companies that announcing after the tax reform plan to give one-time bonuses what do you think that's about >> we did it as part of a shared success with our teammates when we think about driving responsible growth at bank of america, we think of being sustainable. when the company receives a benefit like that, we thought it was important to show the teammates we had success with. it's part of what we've done in terms of healthcarebenefits an changed and lowered costs for lower paid people. we have done a lot of work around it. it was a good sign that, hey, we received a benefit, you should share in it. we'll continue to use the tax savings to invest in the company and continue to drive things >> but was it driven from an economic perspective >> it was driven by you received a benefit and i thought it was important to share the teammates. if you got the e-mails that i got from teammates who were excited to get it, it was a

tremendous thing >> let's talk more about the consumer i know the consumer was strong heard what you said about the holiday shopping season. the strength that was there. i read a report that suggested that consumer bad debt was up by 20% in the credi four major banks should we be worried about it? >> spending, if you think from '15 to '16 and '16 to '17, the spending on debit, credit cards, cash, everything was up 6% '16 to '17 think of that difference being across 2$2.6 trillion of spending so consumers are out spending. you hear about retail sales. there's a lot of spendingon experiences, eating, travel and stuff that's picked up so the spending is good. on the credit card pick up, we're at a low base.

we always have a bit of a pick up in the fourth quarter we went from 2.6 to 2.8. we used to underwrite 5.5% in good times of losses now we're experiencing half that so the conservatives in us and our colleagues in the industry will hold this in check. so i think the increase off a debt count balance level is expected we'll see that turn back down as we get through seasonality and as you continue to grow receivables, you'll see that in good shape consumer credit is in good shape. >> you have closed a lot of branches mine got closed. that's okay. >> a technology giant like you -- >> yes yes. i never use cash what do i use? >> bitcoin >> venmo >> yes >> through my paypal or

something. that's a change in strategy, isn't it bank of america, there should be one on every corner, like starbucks. >> as much as -- at the peak we had 6100 branchs we sold about 500, 700 to smaller banks to get the consolidation benefits we closed some it was all based on customer behavior and flows in that time, last year we rehabbed 300, 400 branches, built some new we'll go into cities like minneapolis and denver we have gone from 150th market position to 8th in those cities already. so we're bringing our as far ass and capabilities to seven or eight large cities automobile be building branches. with a change in behavior, if i were a retailer you would tell me what are you doing in terms of retail sales. it's incredibly important to do

everything for customers we have a million people kocomet branches every day >> all served by one teller? >> 60,000 teammates. >> still >> yeah. >> thank you, brian. >> it's great having you here. appreciate your time >> thank you enjoy your davos. when we come back, up next uber's ceo will join us on set to talk about the challenging and changing culture at the ridesharing company. we will talk to him. then blackstone chairman and ceo steve schwarzman is here ronoh really?g's going on at schwab. thank you clients? well jd power did just rank them highest in investor satisfaction with full service brokerage firms... again. and online equity trades are only $4.95... i mean you can't have low cost

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welcome back to "squawk box. we're live in davos. 2017 was a bump year for uber, but they came in with a new ceo, an investment from softbank and what could be the hottest ipo. dara khosrowshahi is here on set. we're thrilled to have him here. >> thank you for having me >> thank you let's talk about the softbank deal >> yes >> we've been talking about that on our air the past month. it's finally done. how does that change the company?

>> we are thrilled to have soft bank as an investor. they're one of the biggest capital players in the world and through their historical investments, they know the ridesharing industry they understand transportation in a way that few investors do we're thrilled to have them behind us, investing in uber, not our competitor it came with certain governance change, is that we needed to make, such as getting rid of high vote shares, getting rid of one share one vote for everybody at uber. so everyone has an equal voice we think those government reforms are incredibly important as we drive the company forward. >> what's the relationship like with travis? >> it's fine but strained.

there was a lot that happened in the past it wasn't right. the moral compass of the company wasn't where it needed to be, but at the end the eo of the company needs to take responsibility a lot of the press coverage is difficult for him. that's understandable. travis has been there for advice when i needed it as a board member it is a difficult time for him and as a company we have to look past that. my job is to move the company forward, move the culture of the company forward. >> how often do you talk to him on a weekly basis? >> not on a weekly basis it's on a monthly basis. we have our normal board calls and we touch base once in a while. right now my focus is getting a management team together we brought barney harfen from from orbitz.

tony west from pepsico and really getting a team together who i think can -- at uber, who i think can open up the next chapter of the company and take us where we need to go. >> the next place you may be going is an ipo. >> yes, we hope. >> do you think it's going to be easier or harder to make some of these changes that i know you want to make people talk about how they need to be a private company to do this >> i've been ceo of a public company for 13 years at expedia. i think that's an excuse sometimes it's harder as a public company to make the long-term bets that you want to make if you're clear about where you're going, you're clear that you won't be subject to short-term thinking, then there's a certain class of investor who won't be interested you need to be clear an then deliver. so the public markets hold ceos and teams accountable.

and i think with uber, this is a company that's absolutely been held accountable to some extent i think uber suffers from the negatives of a public company because the world is fascinated with everything we do we don't get the benefits of being public i think let's step up to the plate. this a big scale company it's an important brand. we are going to step up and we'll be a public company that our employees can be proud of. >> what is the latest with the regulators in london >> we're continuing to have dialogue i'm cautiously optimistic. i think the difference here is that we're being open and honest there were things in the past that we did that weren't right all of london's questions and issues, they make sense. we asked them to be patient with us in some area. they've been clear about what they need. i believe we can deliver

i think london with uber in it is a better city i know uber with london as a large market is a better company. >> dara, one issue for regulators and other people watching the company has been every time we think we're getting through and it looks like a clean slate another scandal comes up whether it's taking control of passwords, being able to change things, so if something came n headquarters could step in are there any other issues out there? >> i hope we're done i honestly can say i hope we're done the employees at our company are open and have taken responsibility for the past. some have left we are looking forward and we'll do the right thing if there has been behavior in the past, i believe it's been out there. we've done investigations.

we're looking through everything sometimes when we found things that were unpleasant, even though we knew it would hurt, we disclosed it so i believe that the mistakes of the past are out there. the only thing we can do is be transparent. tony west said sunlight is the best disinfectant. right now we have to bring these issues to light, be transparent, admit mistakes and then change that's why we brought in new cultural values, new norms one value that i get repeated to me over and over again not by me but by employees is do the right thing period if we do that we'll be fine. >> you came in when you were nine i think.

yo do you think it's time now with what you've seen over there? do you think there's something that has been lit and that this is not going to end quickly or there's still more >> i think that it's going to take time, but i think a fuse has been lit in iran and iran wants to be part of the world community. there's an incredible education system there women in iran are strong they're educated and the identity of iran as a country, i believe, is greater than the identity of iran as a nation >> it was a secular country. >> it was. >> how do you go back -- >> i think that that identity of iranians being proud of their heritage, of the persian culture and the empire, that and the education system the fact that women are so strong in that culture, it will live on. >> weren't there chants, bring

back the shah? >> i won't go there. before he was in place iran had a prime minister, but unfortunately the u.s. and great britain because they didn't like what he was doing removed him. i think there's a reason why iran historically is angry with the west we have to put that behind us. there is hope. >> final question for me driverless cars. you made some news the other day saying you thought it might take longer than we anticipated there was also an accident overnight, a tesla car on auto pilot. >> i didn't see that >> what is your sense? you hear from elon musk? you hear from google you're now in the hot seat what do you see? >> i think it's going to take a long time to get to full, full autonomy in software it's difficult to write software that solves every single problem out there

there are edge problems in software that create problems. the key with autonomous is that there will be a period where you will have certain routes that can be served autonomously, and certain route there's a only a person can serve i think we as uber having autonomous and the network under one roof to get from here to there, but the there will take fully autonomous, and that will take ten plus years. >> dara, thank you for coming in appreciate it. love having you. maybe you can do something with my uber rating >> you should tip more >> tip more? >> are you tipping >> i'm an aggressive tipper. >> really? >> hold on >> i think the highest tip -- >> i do, too >> my rating is getting better >> do they rate you after the tip? >> i don't know. i think they can rate you before or after somehow my rating is getting better i don't know why >> everybody, tip aggressively >> thank you

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futures. we saw the major averages closing at record highs yesterday. this morning things have turned around the dow futures were up by 66 last time we checked they have turned down 25 points. so you're talking about a swing of close to triple digits in the last half hour s&p futures are under pressure the nasdaq is up by 9 points now. >> government shutdown is over and joining us now is steve schwarzman, chairman and ceo of co-founder of blackstone you must be watching events globally but also in the united states, steve, just in wonderment and i guess a degree of satisfaction. you were an early supporter of president trump. do you tie some of the gdp, the confidence we're seeing in business leaders, the stock market, any of that get traced back to trump and his policy >> i think it does

you started seeing this right after the election and the markets started going up on anticipation of sort of tax reform, tack cuts. changes in regulation. we talked before it last time i was here, those things happened or are happening so i think they'll have a substantial impact on the econom economy. >> being an individual that will do better with noncore layingret equity markets, is it bitter sweet to see etfs doing better than what you can do in private equity >> it's actually fascinating like most cyclical things, it's probably relatively limited.

it's nice to see it's good for pension funds, good for all of our portfolio companies. they become worth more all the time so it's not like we don't benefit from this. but it's good for the basic investor >> geopolitical risk was the one thing that you said could be the problem down the road. i think you're -- i don't know how many times you were quoted you won't buy many office buildings in seoul they have a joint olympics team now. do you feel better about real estate in south korea? >> you might in terms of skating rinks. >> right >> but things have -- the geopolitical risk is less than three months ago >> feels less than three months ago but that doesn't stop the development of nuclear technology, ballistic missiles, and things that we stopped

thinking about on a short-term basis. i look at some of the geopolitical risks rather than the economic ricks economically the world is expanding almost every place things look good and will continue to stay good absent sort of any of these unpredictable black swans. >> the president will be here on friday there's been lots of speculation about what he will say what do you think he should say to this group in particular? can he pursue an america first agenda here? does he have to pivot and go in another direction? modi was speaking this morning >> that's a good question. i've been told it's a good speech that's been worked on a long time. so whatever is said is considered i would suspect, and i don't know it all, that it would be

some kind of mix of, you know, pursuing national interests is not a bad thing because look what's happening to countries that do that there will be some other stuff that won't be quite as harsh as some of the other rhetoric that gets reported on almost a daily basis. we did talk about the trade actions that took place this week the administration raising tariffs on solar panels and washing machines is that a precursor of things to come >> it's hard to know there's friction and frustration given that the chinese trade surplus went up again. i think the administration is looking around things to do. ultimately that has to be addressed by both countries if a

comprehensive way. individual things are, you know, indicative, but won't change the overall balance. >> do you have 90, 100 billion lying around now is it hard to deploy because of the market maybe people need you now to find your value, that way the price is not fully reflected >> that's the basic thing. >> you have some ideas >> it's nice to have that around you never know when you might need it. prices are high for sure growth is up you have to be careful but we always try and only buy things where we can make them better >> didn't tax reform open up a whole new mix of companies that might not fully recognize the possibilities now that -- >> tax reform where it has the

ability to have 100% write-offs of capital equipment, they make those types of companies much, much more attractive >> i am low on time. talk about mega funds. were one of the early mega funs. masa son talks about wanting to create 1$100 billion funds regularly. does that make sense to you? is size a friend or an enemy of the investor >> masa is an unusual guy. i know him quite well. he supported our scholars program in a generous way. i've been with him in saudi arabia i spent a lot of time with masa. he has a peculiar kind of niche at the moment. because tech is where there's enormous expansion if you're going to finance the

expansion of an industry that often doesn't earn anything, you will need large amounts of money to the extent you're a believer that those types of investments will turn out to be involved with companies that make money it's tech at a time where only certain tech companies really make money to expand them, need a lot of money. to keep them alive, need a lot of money so i understand how he's in a particular place >> steve, thank you. we'll run into each other again. >> we'll see you here. >> yes >> i still haven't talked to him about boitcoin coming up, chuck robbins wi tk llalto us about taxes. we're live from davos in a moment

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johnson & johnson is the first of four dow components to report earnings this morning the company earned 1.74 for the

latest quarter 2 cents above estimates. revenue was about forecast the results were boosted by strong performance in the pharmaceutical business. later this morning we'll get the numbers from travelers, verizon and procter & gamble the internet runs on cisco hardware, but the company is reaching for the skies with cloud computing and networking joining us is cisco ceo chuck robbins. good to have you on set. >> good to be here >> seen some price upgrades, the move to more of an -- not an annuity business but sk subscription business is in full swing. it's been going on for a while but finally bearing fruit. is that accurate >> when i became ceo 2 1/2 years ago, seems like yesterday, we embarked on a transition in business primarily because our customers were asking us to change the way we deliver

technology customers wanted to consume more technology as a service which leads to more subscription and more occurring revenue which is positive for a longer term business model so we've been working on that. the strategy is working. the results have begun to show that we're making a great deal of progress. >> certainly as we can see from that chart after a long period, trying to get back to those glory days of 1999, it was between 25 and 30 it seemed like for years and years, now here we are breaking out. i think 60 is the high 42 is a far cry from where it was stuck. you still are a hardware company, right there's nothing wrong with that. if the guts of the internet -- >> the internet won't run without it 80% of our engineers are software engineers, they always have been. the notion that we're becoming a software company is not the truth. the reality is that we're taking

some software assets and we're adding new software assets and giving customers the ability to consume those assets however they like. at the heart we build high performance hardware because without it the internet wouldn't run. >> i think anybody that provides jobs and creates wealth and, you know, satisfies their customers, i think they're socigood shape you're involved with bigger issues when you can move beyond hardware, you can do security, you can do internet for everyone, where it isn't right now. there's some initiatives you've embarked on. >> if you think about it, look back three, four years ago in davos, it's funny because we were talking about the internet of things, the internet of everything, the fourth industrial revolution, now we're talking about all the positive and now the potential risks associated with the transitions

we're going through. technology will be at the heart of it. the network is at the heart of it as is security, which are key areas we play in we'll continue to bring technology and to deliver solutions. with security as an example, we see 20 billion threats every day. while we're trying to provide security, we live in a world where traffic is increasingly encrypted. so there's got to be innovation at the center of that, where we brought us some technology recently that can determine when there's threats inside encrypted traffic without decrypting it. there's a lot of work going on when you move to the other issue, we have a great deal of responsibility and we have responsibility around helping ensure this technology creates opportunity for everybody. that includes access for everyone it is also at the heart of that lots of partnerships, deep

partnersh partnerships public/private partnerships. we need people to gain the skills they need to participate in the economy later this afternoon you will hear over the last two years we've been working on a skills initiative here at the world economic forum where we're going to try to he heducate several million students the reality is we see several competitive companies coming together rising above the competition in order to actually try to solve some of these problems on a global basis >> are you seeding soft of the cloud business to amazon because they've got it you can do other things or are you still going to compete >> actually, when you look at the cloud providers, when our customers today think about the world they're trying to operate in, they have public cloud offers from amazon, microsoft, google, alibaba, tencent, all of those. they have private data centers they haven't gone away the infrastructure market for

private data centers hasn't gone away they have sas offers what the network is going to do is provide policy and security across that entire architecture. >> real quick, repatriation. >> yes. >> what's it going to do what are you going to do with the money? >> we talked about it. it's in line with what we talked about before, continue our previous capital investments, look at some new investments obviously we've always been very keen on m&a. >> we can see a big headline big headline i mean, are you thinking of -- >> we said our m&a strategy over the past few years hasn't been impacted by the cash being over seas we continue to look for assets that line up with our strategy. >> fair enough >> thanks, guys. when we come back, a big lineup continuing this morning including hilton ceo christopher narcetta and a lot more names. stay tuned you are tcwahing "squawk box" on

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welcome back, everybody. one quick stock to watch this

morning, the u.k.'s antitrust regulator says twenty first century fox's deal to buy sky is not in the public interest it could complicate disney's separate deal to buy most of fox's assets, including sky. still to come, hilton ceo will join us here in davos along with carlisle group david reu n reubenstein. "squawk box" will be back in davos. what did you have in mind? i don't know. $4.95 per trade? uhhh and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

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squawking in davos business and political leaders gathering at the world economic

forum's annual meeting to talk politics, economics and social issues and "squawk box" is there. in this hour, canyon partners joshua freedman. hilton worldwide ceo christopher nocetta. carlisle group's david reubenstein and bill browder joe, becky, and andrew talk politics, tax reform, the government shutdown and the issues facing the world economy with some of the brightest investors and business leaders in the world as the second hour of "squawk box" live from davos begins right now ♪ ♪ good morning, everybody. welcome back to "squawk box" here on cnbc i'm becky quick along with joe kernen and andrew ross sorkin. we are live from the world

economic forum taking place in davos, switzerland beautiful morning. lots of sun, lots of snow, lots of security. we're keeping track of what's been happening with the markets, too. let's take a look at the u.s. equity markets we were looking at the dow futures up by 66 points. it gave back all of that and half an hour ago we were down by 22 and they're up 30 this is all happening a day after the dow and other averages set new highs once again this morning it looks like the stau s&p 500 is down. premium revenue exceeding forecasts and setting a record for the full year. stock right now is unchanged but we'll keep track of it as we get closer to the opening. also, johnson & johnson out with earnings in the last half hour it, too, beating expectations earning $1.72 compared to

forecasts of -- or $1.74 on an adjusted bases compared to expectations of $1.72. johnson & johnson helped by the pharmaceutical business among other factors. and a major deal in the spirits industry this morning. ba card did i is buying patron spirits for $5.1 billion that deal will make ba card did i the second biggest spirits company in the united states market >> wonder how much our friend is going to make on that. patron is gone. >> yeah, john paul remember that? >> 5.1 billion do you know how much he owned? i don't remember. >> i don't. >> he's already done so well on the hair products. >> i know. i know it. >> all right that covers about everything, doesn't it tequila and hair products. for me. >> all the most important things. >> yeah, exactly netflix shares, add this in, netflix shares moving higher this morning

the streaming company adding more global subscribers than expected in the latest quarter here's what ceo reed hastings had to say about what's driving netflix growth. >> the real driver is to make the big titles bigger. so what happens is so many people are talking about bright or stranger things two or the crown that that's what pulls in people who haven't yet joined, is all their friends are talking about the shows. that's the dominant accelerator. >> it's all about subscriber growth really. because earnings and revenue were in line the company's up beat guidance pushed netflix shares to an all time high. up almost 21 points. almost 10% and the company now with a market cap of more than $100 billion, first time i think it's done that. a little bit of news this morning. topic of a column that i wrote, but elon musk telling me that he has now officially agreed to stay on as the ceo of tesla. he's going to do that for the

next decade. there's been a lot of speculation that he might step down, take on a chairman role or something else as part of tesla announcing a new compensation plan that could be considered the most radical in corporate history, musk compensation will be tied with the company performance. he will receive no guaranteed compensation, no salary, no cash bonuses or equity that vests based only on time instead, he's going to be based on tesla reaching certain operational milestones and market caps. he effectively collects 1% of the company for every $50 billion of market cap he creates. if he doesn't create that new market cap and at the same time reach the operational adjusted ebida numbers, he gets nothing if he gets 99 billion, 149 billion, you get nothing at each increment. in each case he has to hold the stock after it would vest for another five years so it makes it very difficult to game it in terms of trying to profit. >> claw backs, too

if he gets a 151, back down to 85, does he keep the -- >> no, no, no, no, no. let's say -- do that let's say he gets -- he hits -- let's say he gets the company to $100 billion it's at 60 today let's say he hilgts the operational numbers. >> right >> let's say that is some kind of illusion. it would vest at 100 but then he has to hold the stock for five years. >> 1% of the company whatever it's worth. >> but then you're saying it's an illusion. let's then assume the stock falls precipitously and gets to zero -- >> if it falls to 50 billion he has 1% of 50 billion it's a bizarre thing especially when you look at what the markets have been doing, market capitalization the companies that have performed well have out performed their peers. stocks were up by 40%, 42% since the election for the dow it's a weird -- that's why people don't gauge their compensation based off the market. >> first of all, he gets nothing. then he has to go up -- it

literally has to go up 100% for -- at each instance just on the market, forget the operational numbers. >> market capitalization is not a reflection of what the executive does. >> cisco in 99 got 1% when it was at $500 billion. it hasn't been above 200 billion for the last 18 years, whatever it is. got to 500 billion. >> you're still paying 1% of $200 billion. >> 1% of 500, so you get 1% of the 500 billion. then you go down and it's -- >> it's hard to believe you can get the stock to that number -- >> revenue numbers >> you have to do both. >> not necessarily ge was trading at 50 times earnings back in 1999. all of a in this market. >> come up to shareholder vote if you were a shareholder, you would vote down. bad deal for you >> too radical. >> i understand tied to

operations i would think tesla shareholders would like to see production numbers hit. >> subsidies from all the states and government, too. that will never happen. >> no, no. you have to pretend you're a shareholder of the company -- >> i would not like toplace anybody on market cap. >> flip it around. the alternative is he might say, then i'm not going to do this. i'm not interested it's not interesting to me he has $13 billion of stock then you have to say how much of the company's value today is actually elon musk. >> if that's the case, he's not going to be there for forever. if the key man issue is something, you want to make sure that it's a company worth more -- >> might be a question of whether you're the key man during this remarkable growth. >> he's a complete visionary i'm not trying to take anything away i think there's a reason no other ceo compensation is based on market capitalization it's irrational number you can get rewarded for things you didn't do.

you can get punished for things you didn't do, too it's a bizarre way of tying it. >> if you tied both together, if they're paired together. it's not like if you hit the market -- if you hit the market cap and not the operation numbers, you -- >> i know. ebida but then also production numbers i would think would be a valid thing. they've had trouble hitting the production numbers. >> what's the multiple to ebida right now? >> infinitinfinity. >> exactly so it's easy to hit your ebida numbers when you're getting a multiple number like that. >> yes, i never thought the market cap makes sense. >> right >> i'm not contending it makes sense. >> you can say that about anything. >> by the way, this was a company in 2012 when they set the first compensation plan in practice, the company was worth $3.2 billion and nobody would have -- if i told you it was going to go up 17 times you would have laughed at me. >> right >> so, okay. separately, champion of risk -- maybe you have a view on

this i'd be curious our next guest is no stranger to disruption or its benefits josh freedman, co-founder and co-ceo of canyon partners. great to see you we're in davos or what were we calling it, davos in the desert? >> yes >> by the way, so you're a shareholder in lots of things. ceo comes to you and says this is how you're going to pay me, i'm only going to get paid this way. >> there is a reason why private equity people are paid on realized not market to market as a shareholder do you really care about ebida or do you care about the stock price? market cap might not capture either one because if a whole lot of additional shares are given in merger shares, it might not have to do with share price. these are imperfect. >> fair enough when we did see you at davos in

the desert, we talked about what could happen if there was tax reform i think you said that you expected there would be some form of tax reform i don't necessarily think you thought it would happen this quickly nor at this rate how does this change the dynamic for you now? >> well, it's pretty clear that deregulation together with a lower tax regime for corporations together with accelerating depreciation has a very positive effect on not just the profitability of companies but also on psychology you're seeing consumer confidence at levels that it probably hasn't hit in 17 years, 18 years corporate confidence is high spending is high and earnings are anticipated to be high and, of course, the stock market has absolutely rocketed. >> therefore, you were doing what >> we tend not to be people who are trying to seek beta and be long stock market risks particularly i would say that the stock market has certainly outrun our expectations in the short run. the concern i say we have at

this point is that you could be a little bit set up for maybe a 1994 type scenario where corporate earnings are up 20% plus but the stock markets maybe already had its run and therefore is uneventful or flat. especially if you consider interest rates as well, which are starting to creep up those two have an effect on multiples. >> do you think the market is fairly priced at this point? is it richly priced? is it under priced and i ask this because we've had guys like sam zell who have told us there's irrational exuberance >> done that for a while. >> what do you think >> i'm not trying to avoid your question, but we don't really get paid to make that judgment we're really trying to find things that are out of the general flow of mutual funds, out of the general flow of etfs, things that are event driven than market driven. >> is it tough to find things that you think are reasonable deals? because the amount of liquidity has boosted prices across the board? >> it's been tough for a while

now, but actually the increase in the stock market has helped in some respects andrew mentioned risk arbitrage, for example. because of the slow pace of antitrust approvals together with a lot of fixed priced deals that have been announced but not approved yet, when the stock market moves up so much the floor value of those stocks if a deal doesn't happen goes up quite a lot, therefore, your risk is actually quite a bit lower. in fact, maybe you're better off without the deal onthe table. >> what's your biggest deal you're playing right now >> at&t/time warner. it's a jump ball whether or not it gets antitrust deal. >> it's a jump ball? >> in our mind it's a jump ball. >> which way are you betting >> neither way you may have some initial underwinding but we think if you look at the disney price that they paid for fox, the fox price, rather, disney is paying, you would translate that into a significant premium to the price that's being paid for time warner so maybe in the long run we're a

lot better off if it doesn't get approved but i think either way is a good outcome. >> you were cautious on retail last i saw you, but we had this sort of remarkable sort of retail season. did that change your view at all? >> look, retail is something people like to do, but it's still a hard call. and a lot of uncontrollable factors. you've seen what's happening in the world of malls sometimes very good retailer is a casualty because an anchor drops out in a mall in which it has a presence, so we're still cautious about retail, and you've had record number of bankruptcies last year in retail it's an area that continues to warrant lots of caution. >> thanks for coming in. >> thank you very much. >> thanks, josh. earnings, meanwhile, coming, crossing the dow components, procter & gamble and verizon procter & gamble earned $1.19 a share in the fiscal second quarter beating estimates by 5 cents.

it's on track, in its words, to achieve its fiscal year goals. it did say that growth profit margin fell by 60 basis points during the quarter and verizon earned 86 cents a share for the fourth quarter falling two cents short of estimates. revenue did beat street forecasts. verizon also saw the new tax law, set the new tax law will improve its cash flow 3.5 to $4 billion. they got that little kid that didn't have teeth in the first season. >> oh, yeah, from "stranger things." >> he does the phi owfios stuff >> he's a gamer. >> i thought you were going to talk about the hbo silicon valley guy who does their commercials. >> i don't like those at all i don't like the guy yeah bring back the other guy the other guy got another job for sprint. >> he's like mr. phone salesman or something. >> great deal. >> good gig if you get it, right? >> all right

when we come back to davos, he runs the second largest hotel chain in the world christopher nassetta is our guest after this break then later david reubenstein will join us and wliilam browder will join us to talk about russia and investing stay tuned you are watching "squawk box" right here on cnbc when you look at the mercedes-benz glc... with its high-tech cameras and radar, contemporary cockpit, 360 degree network of driver-assist technologies and sporty performance what's most impressive about the glc? all depends on your point of view. lease the glc300 for $449 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. your but as you get older,hing. it naturally begins to change,

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time to focus on the travel industry joining us is ceo christopher nassetta you're opening a hotel every four seconds >> we're opening more than one a day. >> one a day. >> 400 last year >> not quite every four seconds. >> if i do my job, it will be. >> still sounds like very rapid. >> yeah. we had a great year last year. not only did we open a hotel a day plus, we signed more deals than we ever have in our history. we signed, you know, a thousand hotels last year in our pipeline we now have more rooms under construction than any other hotel company in the world we launched some terrific innovations with a new brand tapestry by hilton game-changing technology with our connected room and probably the thing i'm most proud of,

which gives us a lot of momentum coming into this year particularly here in davos, we were voted for the second year in a row top ten great places to work in the world which is a great reflection of our taking care of our people so our people take care of our guests. >> you do get free wi-fi if you're a member? >> you do, indeed. >> if you're a member. >> you do, indeed. >> do you have your hilton honors card? >> i do. >> i think i have one. >> andrew, if you don't -- >> 71 million people, right? >> christopher, what i like to read, you know what, uconn vinced me. you really don't compete with airbnb -- you do but it's different. >> we talk about it all the time, airbnb all the time. i fundamentally believe we're in different businesses the simplest way to talk about it is we're in the business of hospitali hospitality, taking products, wrapping it into authentic heart felt service, connecting it with technology and delivering aho lis stick approach for an experience for customer

airbnb is much more about the business of lodging which is a good business. our average market share for 1400 brands is 115%. we're the premium player because we consistently give high quality product, high quality service, amenities, technology, the things that people need. it's not that they don't do t they're offering a different service. >> the competition from them because they were able to get so big so quickly without owning any real estate is part of the reason why you operate the way you do. >> we are a very capital light business it affords us the opportunity to open a hotel a day or more around the world because we're using third party capital and all of these things. >> when you open a new hotel, how much is acquiring old hotels and rebranding. >> 1/3 of it, given the strength of our system. about 1/3 plus or minus every year is taking either independent hotels or hotels that are part of weaker brands and converting them into the hilton system.

>> what's going on with the price of these rooms they've gone up a lot. >> prices are going up. >> big time. >> i wouldn't say big time i would say what's interesting is our growth is circa 10% same store growth was in the 2s. the bulk of that was in rates. when you say big time rate growth, rates probably grew 2% sort of in line. >> do you see an industry shift in terms of cancellation policies >> i definitely see -- >> that's a huge thing. >> we're trying to lead it, and not in a way that is taking choice away from customers, in a way that's giving more choice to customers. >> the issue -- >> explain to people what's going on. >> i'll explain real simply. in a world of all new technologies that everybody can use in all of the new apps, all of the other intermediaries selling our products, you've seen an escalation in cancellation rates what that means is we don't know on any given night who's really going to show up so effectively it has to get built into our pricing. effectively it costs consumers

more to tie up inventory cancellation rates have gone up to 50%. >> what was the standard >> maybe 10 to 15% so it's going up at an astro no, ma'am mick rate. >> used to be free to cancel. >> now it is free to cancel within 48 hours. what we're doing is we're going to launch in march or april various new ways of pricing products that will give complete choice and control to the customers. if you want still to have total freedom to cancel up to that 48 hours -- >> become like a refundable fare on an airline? >> in a similar way. give us five days notice on cancellation, we'll sell it and we'll give you a discount. by the way, when you test it with consumers, almost every consumer that we talked to actually knows within five days when they want to cancel or not. >> never had to do it. >> think about it. right. in a typical world we didn't care much, but in a world where you have 50% of your inventory being tied up and canceled, it's very challenging to be able to

sort of manage inventory and make sure you have inventory. >> are you going to give people credits the way the airlines do? >> we will effectively sell -- if you're willing to give us a little bit more notice, you're going to buy at a lower rate you are going to get a discount so you will get credit. >> around the globe the economy has been strong. very quickly, what's happened in terms of travelers in the united states down by 1.7 million. >> travelers in the u.s., that was down 4 or 5% probably cost the u.s. economy about $2.7 billion 20 or 30,000 jobs. so, you know, there's a host of issues contributing to that. some of that with the travel bands are a component. the overall strength over the last three or four years, the dollar has not been helpful. one of the things we're working on is to work with the administration to make sure that people that want to come to the united states, the vast majority of them don't want to do any harm feel like they're welcome in the united states and that is something i think from a marketing point of view we can do a better job.

we're losing market share and there's no reason to there's thousands of jobs available. >> we've got to go safe to say -- i mean, tax reform helps hilton but it also helps the businesses that send their employees on whatever they're doing and they stay at hilton. >> it helps everybody. i think that's why you see -- in part you see the economy sort of buoyed a bit i was here last year, i know we're out of time, i sat at this very desk. i was told by the interviewer that i was amongst the very few that were optimistic that the economy would be a little bit better it was a little bit better last year, and i would say i have that same kind of optimism not that we're going to have a roirg economy in 2018, but so many things are going to boost economic growth. >> coming up when we return, a lot more live from davos trust in the valley being tested by mark banteof. sales rce foceo sounding off his comments coming up next. (siren wailing)

(barry murrey) when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. evaluating patients remotely is where i think we have a potential to make a difference. (barry murrey) we would save a lot of lives if we could bring the doctor to the patient. verizon is racing to build the first and most powerful 5g network that will enable things like precision robotic surgery from thousands of miles away. as we get faster wireless connections,

it'll be possible to be able to operate on a patient in a way that was just not possible before. when i move my hand, the robot on the other side will mimic the movement, with almost no delay. who knew a scalpel could work thousands of miles away? ♪ coming up, david reubenstein of the carlisle group. u.s. equity futures. it did gain after the deal was announced maybe not surprisingly after someone said one side

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good morning welcome back to "squawk box" right here on cnbc among the stories front and center this morning, want to

check out the stocks of four dow components that have reported. johnson & johnson, travelers and procter & gamble to beat earnings estimates verizon, slightly short. david favor will have an exclusive interview with lowell mcadam so-called initial coin offerings don't appear to be the safest investments. that's from ernst and young. i think i probably could have told you that. more than 10% of funds raised that way are lost and stolen from hacker attacks. they've lost roughly 400 million. j.p. morgan chase saying it will increase wages, hire more workers and open more branches 22,000 employees will get wage hikes of an average of 10% ceo jamie dimon will join us on "squawk" right here in davos tomorrow morning at 7:30 a.m. eastern time also want to tell you about a panel that i hosted this morning. sales force founder mark benioff

slamming the leadership styles of silicon valley bosses he said trust must come before growth as a company priority >> what is the most important thing to you and your company? is it trust or is it growth? if growth, i think it was you that said the very powerful thing. you said convenience trumps trust, which doesn't have anything to do with our speaker on friday. it was this thing, but this idea of anything trumps trust, we're in trouble >> sales force boss cited the example of uber as a company he claimed under ceo travis cali knack forgot to value trust. david reubenstein warned of black swan events disrupting the market and threatening global growth david joins us now he is the co-founder and co

executive chairman of the carlisle group >> my pleasure to be here. >> this is the first time we're talking to you since you stepped away from co-ceo you're co-chairman what does that mean? it doesn't seem like you're slowing down. >> i don't have to do the earnings call. the other co-ceo and i were 68 years old. we thought before there was a 7 attached to step back and let the younger people be the co-ceos. bill conway and i are the largest investors in the firm. we're going to do what we can to help the firm but we have two good co-ceos now >> you're still involved in the business >> not day to day as much. >> i'm pretty involved if you owned as much of the firm as i own, you would want to be involved i do this because i love it. it's not work. i love what i'm doing. when you create a firm from whole cloth 30 years ago and

it's grown to be a large firm, you have pride in it you want to see it succeed >> wanted to talk to you about the tax reform package and what that means to the world of private equity one issue has been the carried interest issue. >> we've never talked about that before. >> but there's another issue in terms of how debt is being treated. >> yes. >> and i want to know sort of how you think that's going to change your business maybe you should explain to the viewer. >> historically you could deduct the interest that you borrow, interest you pay on debt that you borrow now in the new law you can deduct up to 100 -- you can deduct up to 30% of ebida for the first four years and after 30 years 30% of ebit if you have good companies, it probably shouldn't be that big of a problem we think it's not something we would have been in favor of but we don't think it will ruin the private equity industry.

>> will it make it less likely that they'll take on turn around projects >> well, it will make it more complicated to do some of that but, remember, most private equity deals today don't have the kind of debt they had 30 years ago when you had 90% debt. now you have 45, 50% debt compared to the 90% of the '70s and '80s it's not a problem i wouldn't have recommended this to congress. congress didn't ask me. >> in terms of what it would mean for how long you hold companies, the average holding time is seven years. if you only get the initial benefits for the first four years it will mean companies try to turn it around more quickly >> they tend to hold on for four to six years, something like that the law could change in four years. it will change whether the congress concludes that they should keep the standard of 30% of ebita we need to find good deals at prices that are affordable prices are high. >> in the intro we talked about how you talked about a black swan event would be something

that would impact prices that's because you think prices are at the right level in terms of what we see with the economy, different tax changes that come through? >> prices are high relative to what we prefer investors are willing to accept lower rates of return. the average ebita was 9.7 times. today it's 10.5 to 11% it's higher. they wanted a net internal rates return of 20%. today they're happy with 15% net. you can pay a little bit more and still please your investors. >> that's because investors are doing next to nothing in the treasury markets. >> that's correct. >> we are seeing prices start to pick back up we're looking at the two year now trading at the highest level since 2008. >> yes. >> the ten year since 2014 does that change >> when you look at investor surveys, consistently they think private equity will out perform every asset class over the next five years the rate of return might be slightly lower than it was 20

years ago or 10 years ago, there's a big gap between that and public equities. >> david, let's talk about infrastructure carlyle was one of the first funds to go into infrastructure. we know there are big plans coming from this administration. we've seen the plan leaked out a little bit today it's going to be a bit of a heavy lift to get both sides of the aisle to pass something. >> couple points everyone loves infrastructure. it used to be called pork barrel people love infrastructure it's a wonderful world the truth is infrastructure is terrible when you go to new york city you see the great new skyscrapers, billionaire apartments, but the roads to them are crumbling. you drive to these places and bump up and down why we haven't fixed the infrastructure, i don't really know you should know that 90% of infrastructure is really state and local. the federal government if it does something will be helpful but state and local governments and authorities are going to

have more impact they are doing things to make it easier to have public/private partnerships. >> wanted to ask you about your side inthustle as an interviewer >> i did. >> you are yo' co're coming to . he said he didn't know it was a globalist affair was he being serious both your question and the answer. >> when you interview people sometimes you want to get a rise out of them and sometimes you ask a question which is tongue in cheek maybe you guys don't do that, but i do that from time to time. i obviously was saying that this was a global elite kind of place, though i don't really think it is. i didn't think that the trump administration would come en masse here, but obviously they are. i think they're coming here because they have a message that they want to give, which is they're not as bad from the point of view of global elites as people think they might be. >> that's too bad. >> if president trump came here i suspect the message will be reasonably well received you can't expect everybody here to love everything he says i think he has a message that

will be reasonably well received. >> what is your forecast for gdp growth over the next three or four years average >> i think on average -- >> in the united states. >> i think we'd be lucky and happy to get close to 3% somewhere between 2.5 and 2.7 would be very good i know the administration has 3% projections. most economists don't think -- >> i don't know whether that means anything. >> what other -- >> no, what most economists think. >> most economists are not always right. >> why bring them up >> well, i thought it might be nice for your audience -- >> i think they know that. they know that only too well atlanta fed's at 3.4 for this quarter. that would be three straight >> i think it's unlikely we're going to have 3% growth in an economy of our size for a two, three, four year period of time. if so, it would be hard for me to believe that. you don't have that many people in the work force. you have an aging population to think that an economy of $20 trillion can grow at 3% is hard

to believe. >> we'll remember. >> go ahead. >> no, i'm done. >> i hope i'm wrong. i hope we do grow at a higher rate, but i don't think we will. >> one of the things you do in an interview is to try to get a rise out of people that gives me license. >> i didn't hear that. >> about carried interest if you didn't hear. carried interest, look, it stayed in. a lot of people thought it should have gone out you do this because you love it, not because of the money what would happen if they would get rid of the carried interest? >> i don't think the world would fall apart as we know it western civilization wouldn't be destroyed, but i think the private equity industry, which benefits from it for sure, and the venture capital industry which benefits has done very well for the united states it would keep some people from being in the industry, perhaps, you don't know most of the carried interest is paid for by the real estate industry private equity and venture capital are really small they changed the law you have to hold onto the assets for three years. >> right

like you said at the beginning, you hold them for four to six on average. >> some are held less and some are held more. yes, carried interest doesn't raise that much money. >> i know. >> it doesn't raise a lot of money. >> because we do well and because we don't raise a lot of money we should ignore it, right? >> there are issues that i would deal with. if i were writing the tax code, i would change many things carried interest isn't a big issue. >> would you change it though? >> well, if i were -- >> in your grand scheme. >> i wouldn't change it because i think we dominate the world in private equity, we dominate the world in venture capital and why take a chance that we might not dominate the world. >> do you think it's fair? >> i actually do think it's fair because i think people are taking risks why did they decide to do this because you are taking a risk. there's no guarantee you'll benefit. you're taking risks when you do this. >> elon musk is taking risk in

this new crazy compensation plan that's the way it goes that's because we decided you're in one -- >> when he sells his shares in tesla he will be set taking capital gain. >> on the ones he got initially, invested in. no, no, not on the ones that have been compensated on any share that he's been given as compensation -- >> yes. >> restricted shares. >> yes restricted shares. those shares when they vest -- >> the shares that he bought when he initially started the company will pay capital gains. >> yes. >> he took a risk just like private equity people, we're taking a risk. >> thank you. >> i don't think i'm convincing this audience of three. >> you've got one. you've got one. >> when i hear things aren't fair, it's like, okay, now you're paying 50% taxes and kormss are paying 21%. does that sound fair to you? it's not about fairness. nothing to do with fairness. do you think the whole progressive -- >> i think the tax code -- >> progressive tax system.

>> okay. we've got to go. >> eye of the beholder. >> thank you, david. great to see you. >> top 10% pay 80% of the taxes? >> no, but if you're talking about a progressive system, it ld remain progressive across the board. >> i don't know. it's definitely, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. that more accurately assess a business' chances of success. this is a good investment. she's a good investment. get ready, because we're helping leading companies see it- and see it through-with digital.

welcome back to "squawk box. futures have turned negative not a lot at this point, but after a pretty solid session positive up about 2.5 points the nasdaq has gone up over 20 points few stocks on the move this morning to tell you about. adobe systems raising its profit forecast for the current quarter thanks to substantial decline in tax rate software company announcing that chief financial officer mark garrett will retire as soon as a replacement is found shares of t.d. ameritrade, discount brokerage reporting quarterly profits 2 cents above estimates. when we come back, hermitage capital founder and ceo and author of red notice bill browder will join us we'll get his thoughts on u.s./russia relations.

"squawk box" will be right back.

despite trends and global growth, russia seems to be falling under the kremlin. bill browder is the ceo of hermitage capital management he's the author of "red notice." thank you for being here. >> great to be here. >> we talk to you a lot. a lot of times in between. we know about your issues with

russia that go back to 2009 and beyond give us an update. >> it's been a very dramatic year it was discovered that the famous russian lawyer working for putin approached donald trump jr., paul manafort and jared kushner asking for the mag nin ski act which is what i had been fighting for to post sanctions on russian officials she wanted that repealed that set off a whole political firestorm like i've never seen before since that happened in terms of my own campaign we have gotten now five countries to impose magnisky sanctions on russia that includes united states, canada, lit through wayne na, estonia. >> putin is pretty mad at me. >> he probably was before. gains from this. president trump was one who backed this up i think back in april. he gave some additional support to your rulings on these things.

so where do you think we stand just in terms of u.s./russia relations at this point? >> it's a bit schizophrenic. if you read trump's twitter feed, he says nice things about putin, however, if you look at the trump administration in terms of their actual policy implementation, they are as tough or tougher than obama and russia they've been implementing magnisky sanctions and other sanctions. things are moving forward. i watch it like a hawk so far if anything, things have gotten worse, not better for putin. >> do you have a take though, given your own experience, do you have a take on the whole mueller investigation, the whole investigation and what happened? >> i'm not going to be an armchair law enforcement officer. mueller has got some 20 of the best u.s. attorneys working for him. he probably has 200 fbi agents underneath him he'll come to his investigation, either there will be collusion,

there won't be collusion i don't know more than the guys that can do wire taps, surveillance, subpoenas, other things he knows a thousand times more than i'll ever know. >> you don't like investing in russia, that goes without saying you don't like bitcoin either. what are your concerns about bitcoin? >> i have an interesting perspective on bitcoin i've effectively devoted myself to imposing sanctions on russian crooks and crooks from around the world through this magnitsky sanctions program. bitcoin and other cryptocurrencies are a way for bad dictators or criminals to bypass sanctions and so from my perspective, and i think from the perspective of politicians around the world, they're not going to allow that to happen. they will eventually regulate all cryptocurrencies you can't take more than $10,000 out of a bank without reporting it to the u.s. government, they're not going to allow people to take $1 million of bitcoin and move it from russia to switzerland

that's just not going to happen. eventually it will be regulated. as it gets regulated one of the prime aspects of bitcoin will disappear, libertarian freedom. >> we've seen south korea step in and look at potentially regulating why do you think other governments have been so slow? >> just because governments tend to be slow at doing everything what we've seen over the last ten years is technologies get ahead of regulation. true with facebook, twitter with information, true with bitcoin in terms of money laundering they will get to it. when they get to it it will be extremely tough and devastating and hurt the share price. >> what's the rationale for it if the libertarian freedom part is taken out what good is it? >> people are talking about ease of transaction, lowering transaction expenses, stuff like that. >> i'd be worried if that's -- that's the selling point. >> it doesn't become -- it becomes a temporary currency you go into something, then out of something, but use it sort of as part -- >> can you still only get other -- you know, other

cryptocurrency you can't really exchange it for dollars? >> you could >> no, you would be able to. it's hard with fees and everything else. it's still early we'll see. >> my view is that there's no long-term value for these cryptocurrencies because of government regulation. >> bill -- >> that's different than worth a million dollars in bitcoin. >> it is, indeed. >> worth zero or a million. >> it's binary >> if you don't like russia, you don't like bitcoin, what are some of the areas where you do think there is a good place for investment >> as an investor over a 0-yea career running the hermitage fund i invested exclusively in emerging markets and now i exclusively invest in developed markets, namely the united states and the western europe. i think the markets are pretty frothy a lot of good news is priced in. i wouldn't be sort of going crazy adding on to positions right now, but i like countries

with a rule of law, with property rights and good economic fundamentals. that's where we are with western europe, the united states. >> do you feel like you got burned going into the emerging markets thinking it was a good place to be and all of a sudden rule of law is the thing that matters most >> property rights and rule of law are absolutely essential if you don't have that, they can take everything away which is what we've seen happen over and over and over again in russia and other countries. >> bill, we want to thank you very much. always good to see you. >> good to see you >> yeah, millennials are listening. 45% would rather live in a socialist system i don't -- andrew, we've got to work on that we've got to get the word out. will you help me >> that i can help you. >> they listen to you. >> i don't know about that. >> they do >> thanks, bill. coming up, another big hour from the world economic forum in davos. ray daleo will be here paypal ceo dan schulman. ebay devin wenne and vtb bank,

andre costin futures up this hour, please there they are down 3, 3.5 on the dow actually, 9.5 on the dow glare on that. up 18 on the nasdaq. down fractionally on the s&p "squawk box" returns after a break. you always pay

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snoitsds ♪ ♪ ♪ good morning welcome back to "squawk box" here on cnbc live from the world -- we are here, the world economic forum in davos i forgot for a second. look at that shot. it is beautiful. it's a beautiful day it's arm i'm joe kernen, becky quick and andrew ross sorkin i have a vest that has a battery in it that i'm afraid that i'm going to get electrocuted. i don't have it on. >> i have long underwear on and i'm regretting it. >> anything going on with you, sorkin >> good. good. >> you're layered up >> i'm layered up. it's good. >> i do like it.

>> you are a davos man you come here and the energy you have like you're up early, bouncing around. >> i like it here. >> you're in your element, dude. >> it's all good. >> it is. >> right now let's check out the futures. take a quick look. they were mixed with the dow just barely positive negative down about 10 but the nasdaq is up netflix having a big, big day. now $100 million market cap for -- >> 100 billion. >> 100 billion yeah, yeah, yeah why have billions when you can have millions? >> right >> treasury yields, 262 on the ten year check out the two year though, weird dynamics global play here with germany still down half a percent for ten years? >> uh-huh. >> there are some tough corporate stories, becky. >> there are let's tell you a few of them this morning big news is earnings from ford johnson & johnson posting better than expected profits and

revenue. the company benefitting from strong demand in its pharmaceutical business. check that out, it looks like the dow component is up close to 1% this morning. procter & gamble beating the street on the top and bottom lines. profits down from a year earlier primarily because of the sale of the company's beauty brands and a one-time charge that was related to tax reform. you can see that stock is down by 1.25% then there's travelers latest numbers topping forecasts as well the insurance company's performance comes despite the widespread wildfires in california travelers up 2%. mixed quarter for verizon. earnings falling 2 cents short revenue beat the street forecast verizon said it would see positive cash flow from tax reform of 3.5 to $4 billion. stock is up by close to 1% joe mentioned netflix. take a look at shares of netflix this morning the company posting strong subscriber numbers and upbeat guidance as he mentioned, that stock over

$100 billion for the first time ever that's a gain, wow, of 23.5 points i realized why there's all of these earnings usually we're here a week earlier. davos a week later earnings while we're here. >> j.p. morgan chase says it will increase wages, hire more workers and open new branches. this is part of a $20 billion investment resulting in an overhaul 22,000 employees will get wage hikes of an average of 10% ceo jamie dimon is going to join us right here on "squawk box" tomorrow morning that's going to happen at 7:30 eastern time >> i think that's good, andrew. >> yeah. >> joining us -- >> no. they're getting a raise. >> don't gloss over that. >> i just -- >> okay. all right. >> told the audience the news. >> i know. i know i want you to be a little bit more upbeat. little more happy. that's what you wanted income and equality. >> i'm ecstatic. >> that's a strong -- okay in other corporate news, don't you want to read this? >> i could, but you could read

it, too. >> your thing. elon musk has agreed to stay on as ceo at tesla. his compensation will be tied to the company's performance. will receive no guaranteed compensation of any kind instead, he's going to be paid on tesla reaching certain operational milestones and market capitalization which brings up all kinds of discussions that we've been having all morning long. the issue stock, the market cap goes up. you buy it back. the market cap goes down all kinds of -- and market cap is a -- it's in the eye of the behold beholder companies can trade 100 times earnings like coke or ge in 1999 and then they trade ten times -- >> but i will say it again he has to -- in $50 billion increments. >> i know. >> he gets nothing if he gets $49 billion in market cap. >> i know. >> plus he has to hit the operational -- >> we talk about how markets can be irrational. you cannot get rewarded for good performance -- >> no claw backs >> you have to own it for five

years. >> doesn't matter. you still get 1% even if it loses half of its value you still own 1% of the company at that point. this is not a claw back. >> you have to think about how would you -- if you're the compensation percent of tesla, how do you compensate him? >> you're never going to be able to pay -- >> this is part of the game. >> you're convinced that he is the steve jobs of the auto industry obviously because have you ever heard the term the future performance -- past performance is no guarantee -- he gets ten years because he's elon musk. what if he sucks five years now? >> ten years getting paid nothing. >> i understand. >> fire him tomorrow. >> it's a ten-year employment contract. >> they can fire him tomorrow. >> if he doesn't hit his numbers. >> he's agreed to that. >> you think this is skin in the game >> this is the ultimate skin -- i don't think there's -- i think this is the best deal that shareholders could ever have i've never heard of an executive compensation plan like this. most of the time we're sitting

here talking about how people are getting paid when the stock is going down and they're getting this and getting that. this guy gets zero this guy can create $99 billion and get nothing. >> i love when commodity closed down when they lose money because they don't get the 10%, whatever it is anymore can he leave in two years? >> he can leave. >> he can leave? >> sure. >> then you're not even locking him in >> but you can't lock anybody -- >> how else would you lock him in >> i don't know. it seems gimmicky. >> joe and i are reacting to this knee jerk you had more time to think about it i heard it on air. >> we have ray dahlia here i don't think -- he may not know about this i'm actually curious we want to talk about stocks and the markets with you do you have a view about this? this guy is going to get nothing but he only gets money -- he only gets paid if he raises the company's market value by $50 billion increments and at the same time has revenue and

adjusted ebita numbers if he doesn't hit either, he gets nada. >> so i don't know the particulars of the deal, but if it's just as you're telling me, i think it's fabulous. also, the man is -- the man is tesla. i mean, it's his dream he's built the dream so when we start to think about who's going to be the other person -- >> is it a dream is there anything illusory about the dream? because there are people that say without all the subsidies it's worth zero. the market -- it's at infinity times ebita. >> if the company is worth zero then he gets zero. >> i understand that there are so many companies that are like that. the request he is what the future holds. >> no. >> i don't know. >> we don't know what the future holds. it's your choice you don't have to invest in it >> right. >> short it, do whatever you want to do the question is, what is his incentives so all the critiquing about that, you know, don't do it. >> we don't do either. >> okay. but i'm just saying i think it ties them together

it's his -- it's the dream, you either buy into the dream and you have the right -- >> ray, the idea of sayings that your compensation is tied to market capitalization, that's out of your control. they can be entirely -- >> that's his risk as much as anybody else isn't it partners with the -- >> i would think hitting your operating numbers and if you want to tie it to stock performance is different than tying it to market capitalization. >> that is market capitalization. >> no, it isn't. >> everything can't be precise you can tie it to earnings, market capitalization makes a big difference they're partners if you're a shareholder, you're a market cap person. that ties it to that whether you do that. >> is it. >> i think it's a secondary decision. >> would it incentive advise you to do things for short term rather than long term? >> i don't think that's him. i mean, the character. you have to decide -- >> that's been the case with this company all along it's all about elon musk. >> shareholders get to vote. i would also say, as i said

before, even once the share's the best, he then has to hold the shares for five years and then have it go to zero later. >> buy into it or don't buy into it. >> it's not necessarily a binary question of 100 billion or zbleer we should properly introduce him. >> yes. >> ray dalio is the founder of bridgewater, chairman, chief investment officer we're always happy to see you, always get your ideas about where you think the market is and how the machine, we've always talked about the machine and your principles work right now. so where are you >> so i think we, let's particularly talk about the u.s., but i think it's generally true of the world, we are in this goldilocks period right now in which we have had a beautiful leveraging the inflation isn't a problem. growth is good everything is pretty good with a

big jolt of stimulation coming from changes in tax laws and such that is going to at the part of the cycle where the -- at the later part of the cycle if you look at the operating rates, you look at the gdp gap and measures, we're going to have a jolt of stimulation into that and there a's a lot of carbosh h sidelines. banks have a lot of cash corporations have a lot of cash. i think we're going to be inundated with cash. i think that's going to produce a lot of stimulation and i think perhaps a market blowoff in other words, we're in a situation where if you're homing ca -- holding cash, you're going to feel pretty stupid. with that, everybody is going to become more deployed classically, this is late cycle behavior as you get that movement, then the interesting question is how does the federal reserve react i think it's difficult to get

monetary policy precise. that's why we have recessions. you can never get it right i think it's particularly difficult to get it right now because of the fact that with interest rates so low, all assets trade at the present value of the future cash interest rates affect all assets because the duration of bonds and debt has lengthened, it just takes a little change in interest rates to have a bear market so the things that we look at are in terms of tightening and monetary policy, will it be tighter than is discounted in the curve, right we have a very small amount of tightening, which is built into the curve. if it is greater and interest rates rise greater, that can affect all asset prices. >> but you're not necessarily talking about four moves instead of three, you're talking about something a little greater than a quarter percentage point off, right? >> it's all a matter of degree, right? >> right >> we are entering that part of the cycle, right that last part of the cycle.

that last part of the cycle i think can last a year, but i would say when we come back here next year probably when we're dealing with t the issue of the preciseness and monetary policy, the delicacy is going to be a particular issue so i think that -- i think you're going to get a reaction i think that the fed should think about how much of it is this jolt to stimulation and they should let it go. that the notion of inflation worry, what is the problem with inflation? they're struggling to get it to 2% all the central banks are struggling to get it to 2% we're not going to probably even hit a core inflation rate of 2%. there are other things happening in the economy so let it go. enjoy it but probably we're entering the last segment. >> this is the last -- if this is the last leg, not only does the fed have to get it right,

you as the investor have to know when to be in and then clearly when to be out. >> that's my game. right. right. i've got to know we've all got to know. >> ray, we need to recalibrate what is a high interest rate and what is a low interest rate? because even historically i'm conditioned to think that, i don't know, i'm used to 6 and 7% this time 5% could be high and that could be enough to dislocate -- >> i think to calibrate it you have to ask what does it mean for asset prices first and then what does it mean for economic activity if you look at asset prices, if they're all calculated as present value of future cash flows, so if the bond market goes down, put that in perspective. if there's 140 basis point rise in bond yields -- >> right. >> -- you will have the greatest bear market in bonds ever. the biggest bear market and when you do -- >> even though we're still at a

relatively low level historically >> right right. you can't have a significant rise in interest rates without knocking over the whole asset markets. all markets, private equity, real estate, everything in terms of market is trading at cap rates or yields that are very low. if all of a sudden you raise the discount rate on that, they're all going to go down, right? so you have a sensitivity from asset prices the average increase in the tightening cycle has been about 500 basis points i don't think you can have 100 or 125 basis points from here without knocking it over. >> just to put a fine point on it joe mentioned 5% you're talking 4% potentially? >> yeah. i don't think you can get -- yeah so for asset prices, and then if you look at the nature of there has been a leveraging up on many parts of the company corporations, the return on equity was high relative to the return on cash so the typical

company's leveraged 2 to 2.5 times what they did before did they get that right? that's the key thing you're going to have a sensitivity to that. you still have a fair amount of debt so there's a lot of sensitivity, much more sensitivity to interest rate changes than there has ever been. >> so the fed really does need to tread lightly is the fed in control? is the market going to decide where interest rates are >> the fed -- >> because that's -- >> the fed is going to determine what the level of real interest rates are. >> they can. >> right the only thing that -- the only thing that can matter -- look, there's been 15 trillion of pushing -- of buying central banks by we do have an issue that we're now entering the reverse of that cycle, right >> right. >> so as we're looking at that, there is a supply and demand issue because as they let the balance sheets run off and we have a larger deficit, then we have to sell more bonds, okay? that selling of bonds is a

factor and that has -- then, of course, it has its effects on the markets, it has its effects on the economy. so the markets do play a role, but the fed could decide how much they're going to accommodate that or how much they're going to let it go that will be the fed's balancing act. by the second half of this year i think -- when we meet again we're going to be talking about that you know, did they get it exactly right and how difficult it will be to get it exactly right. >> let me ask you about what you called two different economies or two different markets that we're living in in terms of the united states, which as you've talked about sort of inequality in the country are you surprised by -- and we're talking about the jamie dimon news this morning, jpmorgan, you know, offering 10 -- increasing salaries by 10%. you have all these bonuses that came out right after the tax reform plan. are you -- and do you think that's going to seep meaningfully into the real economy? >> i don't think it's going to -- i don't think it's going to move the needle, okay

what i did is broke the economy up into two parts. i think when we look at averages they're misleading the top 1/10 is equal to the bottom 90% if you look at income -- you can't look at averages and be represented. i broke it into two parts, the upper 40% and the bottom 60% i picked the bottom 60% because that's the majority of the people if you look at that, that's majority it has no -- it's had no income growth it's been -- the group that has suffered the most in terms of income change has been the middle class so less income growth it has the only rising death rates in the world and it has open eig opiates, suicides. i go through the calculations and see what companies say they are going to do. there probably will be a one time, maybe 10% pass through of that -- of that benefit in terms of trickling down to workers so i think that there should be metrics.

in other words, they really take the economics of the income because what i'm worried about is what would the next downturn be like? i'm not worried about an immediate downturn, but i would say if we were to look two years forward, probably before the next presidential election there is a good turn you will have a down turn. if you have a down turn for that segment i wonder how we will be with each other in that element of cohesiveness. basically the formula for having social and political problems is having a lot of difference between rich and poor people who are -- their budgets are tied together so they have to decide on those things and you have an economic downturn because there will be a lot of arguing are you concerned about what that will be like if you have a down turn? >> i think we may. >> so i think -- >> getting along so well now >> so i don't think when we look at -- when you look at -- if you

look at how it passes through, let's say revenue growth, we boosted tax -- after tax earnings because of the changes. it's great for shareholders, and then if you look at the percentage of profit, revenue that goes to profit and the percentage of revenue that goes to the worker, there's been -- it was typically property has been about 7% of revenue and it's gone to about 14% of revenue and the amount that's going to the worker has gone less that's capitalism and, okay, because we invent better technologies and do such things which are wonderful for productivity in its various ways, but there is a question of how that's working for the majority of people that is -- that's our -- so i don't worry about debt service payments i don't worry about inflation. i think we're in good shape. you know, just let that -- let's just let it go a little bit, but i do worry about a downturn with that set of conditions. >> the age old question is does

it make more sense to try to divide a stagnant pie more evenly or hope that the bigger pie divides itself more? >> i think you and i would agree that that group -- you can't give away money. if you just give away money, that's not good for -- >> right >> it's not going to make people productive and that's not good for their state of mind and not good for the productivity but to find ways to make those people productive -- >> right. >> i think there should be a national initiative, a commission that basically uses metrics of that particular group and say how do we do that probably in private/public partnerships, so shareholders say i can buy into that particular program -- >> right. >> -- that's going to be able to have an effect. >> skills. >> you have to have usefulness for that population. >> it all comes down to work and the dignity of work and the skill set you need to be productive in the dignity of work >> right. >> it all comes down to that. >> that's why we're in davos.

>> we have to run. you did mention the idea of a recession before the next election do you think that's going to change the course? >> i think it would make greater polarity i think the left will be more left and the right will be more right and i think this isn't just an american phenomenon. if macron doesn't do well in france we'll have a choice between two extremes. >> the left can't get anymore left there's no room left of left where they are right now it's impossible. >> and i have to ask you before you go last time we saw you you said you thought bitcoin was a bubble it hadn't gotten to 19,000 it has come off. new view >> well, it was a bubble it's a bubble. >> still a bubble? >> you know what bubbles are they have their own dynamic. a perfectly good market can be in a bubble. dotcom bubble. they had a bubble and then they had a bust i don't trade dot. i don't know how to value it i believe in the blockchain technology, i think it's great that notion of how to trade it

and value it is not my expertise, so i'll keep my mouth shut that was a bubble. it looked like a bubble. >> thank you >> good to see you. still to come this hour, paypal ceo dan schulman and devin wenig. live from the economic world foruinavm dos nobody's putting their money into equities. they're not investing in commodities or fixed income. what people are really putting their money into is what they hope to get out of life. but helping them get there requires a real refusal to settle for average. because when you approach investing with a tireless desire to beat the status quo, something wonderful can happen. those people might just get what they wanted out of life. or maybe even more.

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call, visit, or go to xfinitymobile.com coming up live from davos, campbell soup stock down nearly 20 percent the company's ceo talks about diversifying the company's naands to include more scks and fresh foods. stay tuned you're watching "squawk box" right here on cnbc ♪ ♪ ♪

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coming up, this morning's top corporate stories plus the ceos of paypal and ebay. as we head to break take a look, please, if you will at u.s. equity futures they've been all over the map this morning they're mixed. the dow's down, thnaaqs upe sd i well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better.

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good morning welcome back to "squawk box" on cnbc we're live from davos, switzerland. got a lot of stories to tell you about. among those front and center, kimberly-clark cutting 5,000 jobs about 13% of its global work force. kimberly-clark trying to deal with sluggish sales and heavy price competition in the country. separately they reported $1.57 per share. upbeat forecast. the stock is up close to 2% in the pre-market the company behind the dating site bumble said to be up for sale they're telling cnbc that badu which owns bumble is seeking a

sale that could value it at $1.5 billion. badu is said to hire jpmorgan to advise it. women have the power to initiate conversations with potential matches. i don't know anything about it. puerto rico is going to privatize a utility company. the utility has yet to fully recover from the devastation resulting from hurricane maria late in september. here in davos this morning i had the chance to sit down with campbell's soup ceo denise morrison i asked her about the company's stock performance over the last year down close to 25% >> i think about it for the long term and, you know, i've been ceo since 2011 the stock was $31. it's 47, 48 right now, but i'm really focused on what are the drivers of shareholder value that will ultimately improve the stock performance from being a company that was the majority of sales and earnings from soup,

we're now much more diversified. with this latest announcement, about half of our company will be from snacking and soup will still be very important, and we have over $1 billion in fresh food. so i have my eye not only on satisfying existing baby boomer consumers but also with a lens towards a focus on the next generation of consumers and we've got to do both today. >> what's the impact of the tax reform bill, do you think, going to be on campbell's? >> we are going to have a positive benefit from tax reform obviously being predominantly a united states company, we bear a high rate today, and we expect that that rate will be much more favorable going forward. and, you know, we have most of our -- most of our cash in the united states so it's mostly going to be the tax rate that benefits us. and we intend to invest in our business and pay down our debt. >> do you ever think you need to be really big and not independent? >> we'll be a $10 billion

company, but most important is to bring, again, the entrepreneurial spirit of a small company in the categories that we compete in but enough scale that you're meaningful to retailers. >> okay. you can see a lot more of that interview on cnbc.com. you don't want to miss the face-to-face conversation between denise morrison and k kimbell musk that will be available on the cnbc facebook page our next guest is a leader of the cashless payment revolution joining us right now is paypal ceo dan schulman dan, thank you for being here today. great to see you. >> thanks for having me, becky. >> i know you're in a quiet period you can't give us specific numbers in transactions over the holiday period can you tell us broadly how you think the consumer is doing based on the numbers you're seeing at paypal >> i think the holiday period was a strong period in general across the world, and i think what was really interesting in the holiday period was the advent of mobile payments.

you saw for the first time mobile payments actually more than half of all of ecommerce payments. >> wow >> for the first time ever ecommerce was over 50% of the sales in the holiday period. so last year you saw that just on black friday weekend. this time you saw it over the whole holiday period. >> it's not 50% of all retail sales numbers. >> of retail sales. >> not including cars and other things, talking about retail sales. >> at stores. >> at stores >> exactly that's a massive move towards online sales we're obviously a beneficiary of that tail wind that goes on. >> there are a lot of competitors who are kind of springing up, too. you've branched out and are doing things like venmo. they have zell, they and other banks are behind their transactions are oaring, too. i think they were up 91% in the fourth quarter where do you think the future is headed how do you deal with all these new competitors that are later to the game than you were? >> i think there are two trends

that are going on right now. one is the digitization of money. we're all seeing that happen as people are moving more and more towards online, less checks are being cashed, that kind of thing. and the explosion of mobile. those two tail winds are fueling digital payments, whether they be online or mobile. and when you think about things like p to p, p to p is -- >> person to person. >> peer to peer. >> like a venmo. >> or zell as you were mentioning before. that's a $35 billion industry right now. in the next three to five years that's supposed to go to almost $300 million. >> 35 billion that's in revenue? >> in revenue. >> to the business >> yes. >> how are you collecting money on venmo right now >> venmo is peer to peer. >> no money? >> just starting to monetize it now by allowing venmo users to start to basically click on any button where paypal is accepted

and then make a purchase that way. so just like paypal started off as peer to peer, that's exact same metaphor for venmo. we started monetizing paypal through merchants. we're doing exactly the same thing about venmo. >> we asked every guest about cryptocurrency and bitcoin you may have more authority than others do you own some bit cohn >> i do. >> did you get it early? >> pretty early on. >> but you don't like bitcoin. even though you think the digitalization and fin tech is going to mean that people have been banked, so to speak -- >> yeah. >> -- you don't think bitcoin is the way it's going to happen >> i think what's happening with cryptocurrencies and blockchain is a grand experiment that's happening right now. if it's successful, it could be one of the greatest shifts in how you think about the transfer of value and distributed trust, and that's what blockchain is about. but the cryptocurrencies on top

of that right now, whether it be a bitcoin, aethereum, ripple, any of those, right now they're quite volatile they go up and down, sometimes 10% in a day if you're a retailer and your margin is 2 to 5% and you accept bitcoin and it goes down 10% that day, you've lost money on every transaction that you've made and so for something to be a legitimate currency, it needs stability on it. really today bitcoin and these others are more like commodities. it's more like trading in gold but the underlying blockchain protocol actually has the chance to fundamentally change the way we think about trust type of applications, contracts, payments, that kind of thing and i think that could be one of the biggest breakthroughs that we've seen but, again, it's an experiment i give that maybe a 50% shot of happening, maybe a 20% shot that the whole thing collapses. but if it does succeed, it could

bring massive change. >> dan, i want to thank you very much for being with us and make sure you stop by next time you're in new york, right. >> thank you so much, becky. appreciate it. coming up when we return, ebay ceo, devin wengin is going to join us among the special guests, jpmorgan and goldman sachs ceos all up on "squawk" tomorrow. back in just a moment.

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welcome back to "squawk box. our next guest is devin wenigen. i read a lot of stuff about ebay trying to prepare because i'm kind of illiterate in terms of these type of things becky or andrew is going to take over i had no idea that pop culture can make your area. >> it's always been a marketplace of everything in the world. things break out, sell, they end up on ebay it's a minority but still is the case. >> if it's a quiet quarter in terms of pop culture, you may be explaining that to shareholders versus if something happens? >> we're pretty big and diversified. big example is we own stubhub

and the super bowl match-up matters. we were kind of rooting for the vikings because it would have been a home game for them but it is what it is. we'll get through it. >> this is better, isn't it, overall? >> exciting. >> i think it's good -- in taking ebay though from where it is now to where you'd like to be, what's most important? what are your key initiatives right now? >> i think there are a couple of dichblg tall and omni channel marketplaces that make up the future of retail, and we're going to be one of them. so you heard dan said that over 50% this holiday was e. commerce that's going to grow to probably 60 or 70%. the market's globalizing it's going mobile. e.r. approaching 100 billion now of sales with 180 million customers. for me, it's about a sharp relevant customer experience and a brand that stands for more than unique items because that is what we sell but still many people think that we're limited

to, say, collectibles, pop culture. >> how about speed of delivery because clearly the major distinction in this whole game, at least that amazon has created, is that they can get you the product, in some cases an hour, at least overnight. they clearly have built a pretty remarkable marketplace some of your own customers and clients are on their marketplace as well. >> sure. i think speed matters, but it's not the only thing that matters. we do a lot to facilitate the speed of delivery. in the u.s. average package is delivered in two days for ebay people also care about costs and value and more often than not you'll find a better deal on ebay than any other marketplace. it's a combination of cost, speed, convenience and it's those -- it's that mix that we think gives us a great competitive advantage. >> within the context of the world of search, people find a lot of products on ebay through search you are beholden, to some degree, to google. how do you think about that in the context of regulating google

and regulating amazon and just the larger conversation that's been taking place? at least you hear in washington silicon valley. >> first of all, less and less is dependent on third parties. more an overwhelming majority come directly to ebay not through channels like google the answer isn't strong regulation through things like search i think that would be a mistake. building a better product is always the answer for companies in silicon valley and, sure, we have a complicated relationship with google, but i'd rather build a great product and have customers fight to get to ebay than have the government intervene and solve that problem for me. >> the government intervention may be coming whether you want it or not. certainly washington has turned its sights towards silicon valley you may not be the primary target of this, but that is had a in any way changed the feel in silicon valley, the mood >> sure it has, and i spend a lot of my time on government and regulatory issues, probably more than i ever thought i would when

i took over as ceo there are things around the world, not just in the u.s., that are going to impact tech disproportionately trade, taxes, privacy. all of them matter there's certainly increased scrutiny i don't think all regulation is bad. i think these companies are really important in the economy and it's time that they grow up and they play a responsible role in society. >> are you going to bring your money back >> yeah. >> what are you going to do with it >> well, we'll talk about that in a week when we have earnings. >> how much you got over there >> not -- over 9 billion. >> how much of that is yours specifically, devin? >> most of it. >> before we let you go, we like to say election. how do you think about voice controlled assistants and the fact that people are shopping this way and where do you fit into that ecosystem given that clearly alexa gets you to amazon, google home is not yet

tied in with everybody else yet. are you going to break off and start partnering with someone in this game? >> which we already have you can shop ebay on google. i do think the way humans interface with technology is moving fast. moving from text to images to voice. that will be in messaging platforms, it will be all over your digital life. we're spending a lot of time and effort on that, and i don't think the world will be in an alexa or google home that will be one way people shop there will be many others. >> devin, thank you. >> thank you. >> great to see you. >> you come on, the sun comes back out. >> always. >> unbelievable. >> stay here don't leave. when we come back this morning, one of russia's most influential bankers will join us live on the set. stay tuned, you're watching "squawk box" live from the world economic forum in davos, switzerland.

>> that's what happens. >> so afterwards >> i couldn't stop fletcher cox and send four, you can drop back. i don't know if that works against the pats because they know how to read these kinds of things okay, now i see near tendency and they're done it took a lot of people by surprise they did not have the horses at all. jes jesus, not at all. >> you must be washingtonilkingd like that during the game. >> the revf loves the patriots a couple of times i just thought god, that sure helps how about some results today >> verizon is much better than

exacted and kimberley clark with the re-instruction much better than expected. all i can tell you, joe, the people that don't like this market don't like to look at the market if they did, they'll be saying maybe i have this wrong. if verizon now is a based straight point >> jim, weigh in on the elon musk conversation plan, we had a debate going the last couple of hours. >> i didn't like it, i loved it. if he makes that much money for people, i would double what he gets i wish that everyone could take that i thought that was a great piece. holy cow, what it presents you was here is a man of conviction and i have been neutral on the stocks, who knows. that was a fabulous vehicle, it told me a blueprint of what to

do with ceos, it is a must-play. >> andrew. >> he keeps ongoing like this, jim. >> i was looking while you were talking. >> just gloating a little because he got you on the side >> the discussion is brilliant >> okay. >> it is not nice to gloat >> you are >> in the meantime, our last news maker of the morning that we had so many joining us this morning. the president and chairman of vt bank we are thrilled to have you here i want to talk a little russia politics the last time we saw you, you said i am sick and tired how u.s. views russia. i am curious if you think that has changed at all >> this morning, i talked to one of the well-known journalists asked him, what's a result of

this the discussion of mr. trump could fire the fbi boss. okay, but it had nothing to do with russia and there were other things like money laundering business, again, it had nothing to do with russia. i cannot understand what is it about russia again, it is some battle in america and the russia card was used yes, i am psyched and tired. this year did not help very much >> how is the u.s. viewed in russia >> well, we don't understand what's happening we thought that you elected the president and started to fight against him, it is ridiculous. we found it is a little bit dangerous because as more arms are coming to europe and what's going to happen? it is dangerous. i am not talking about the

nuclear war. when is too much military or weapons when close to each other. i think it leads to less safe of a world. >> do you think there is any tu opportunity to improve the relationship >> i don't see how, america is putting on a new sanctions and what should report of a new sanction, more corporations, i doubt. >> last time we talked to you about prioritizing the bank. where are you on that process? >> american investors and european investors can buy our stocks >> where do you think? >> we don't have much sanctions. next week we promise there will be some news and we can make a judgment at the moment >> the olympics that's coming up

that's another sore subject, i guess, right >> i don't know. it is another very serious story. we have what we have russians are a big fan of winter olympics and particularly we have what we have. >> overall, it must be welcome to russia and the financial sector >> the situation that we have, probably if mr. kim jong-un behaves better than mr. putin. >> that's sarcastic, i like this guy. >> what happened do you have an answer? what the hell did happen >> there is a large part of the country that liked him >> he comes here and maybe he will say something and you will like >> what would you like him to say? >> i don't know. last year everybody was frighten

because mr. trump was seen as an anti-global and he's a guy against free trade, i don't know what he's going to say here. i was in vietnam when he was speaking one day after he visited china and i saw nice things in the chinese and in vietnam, he spoke of a different tone of china. i don't know >> we are all waiting for that time now to slip in a quick eak and an early look of tomorrow of an early line up of davos when we return, back in a davos when we return, back in a moment it is... the new ibm cloud private. the cloud that's designed for your data. ai ready.

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looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online. since 1980, the government have shuts down on two occasions. welcome back, twitter says that the cfo is leaving the company to accept the ceo position at another company. cfo noto could take the top position at another company. >> make sure you will join us tomorrow we have a huge show on tap we have jaime diamond. big news >> 22,000 employees are getting

a 10% raise. >> michael corbeck from city group is kicking off things for us >> and secretary wilbur ross >> make sure you join us tomorrow right here in the snow of davos "squawk on the street" begins right now. ♪ good tuesday morning, welcome to "squawk on the street." the government shut down end, we watched davos and trade. europe is green. our road map, earnings from netflix and verizon and procter & gamble