very quickly, let's take a final check on the markets this morning. you'll see the dow futures indicated down by 285 points after a down week last week for all three of the major averages. s&p futures down by 43 nasdaq down by 240 points. treasury yields have picked up rapidly. the ten year now at 1.823% that does it for us today. we'll see you right back here tomorrow right now, it's time for "squawk on the street. ♪ >> good morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber earning pick up speed this week. we've got some blockbuster m and a to get to this morning goldman with a miss. >> and we've got microsoft's

mega gaming deal it is buying activision blizzard the price tag, all cash, 95 bucks, close to $70 billion. bobby kotick and phil spencer are going to join us this hour airline ceos issuing a warning about 5g calling it an impending catastrophic aviation crisis. >> start out with the deal of the morning. microsoft buying activision blizzard, jim. biggest deal for microsoft ever. >> it's incredible it's a wakeup call for everybody who is thinking the market is overvalued and people worried about the fed and there's really no worth right here and it's all about the -- all about the idea that we have inflation no this is a solid deal of a subscription business that is really going to help microsoft they've been trying very quietly to build this business for the last couple of years it goes perfectly with xbox. they needed first-person -- they

needed to have their own proprietary intellectual property david, you know that the intellectual property buried within activision blizzard is probably the best. >> we also know the company has been having a series of significant challenges over the last year and, you know, you might expect, well, was this what led to this potential deal. it's not clear that that was the case what does appear to be the case, jim, is that satya nadella saw an opportunity and wants to be competitive in the gaming world. obviously, they have the platform to do that. we saw a deal last week we thought was a fairly important deal but this obviously is so far above that we'll have a chance to talk, obviously, to mr. kotick as well and get a little more background as to why and why now. but the metaverse has to play an important role. >> sure.

microsoft has the money to develop it when linkedin collapsed a few years ago because they missed the quarter, immediately, immediately microsoft moved in of course, at the same time -- actually, a little ahead, salesforce moved in. linkedin is friendly everyone is a gentleman. when i look at my twitter feed, my mention feed, i want to put people in jail i don't want to put people in jail from linkedin >> ea up 7% premarket. what names are we going to need to be watching. >> i think zynga was the beginning of what take two needed it's mobile. mobile is exciting and they had been kind of resisting mobile i think the idea that you can buy electronic arts today because of this means that you

think that metaverse can do it, meta platforms, i don't think they can i don't think activision is going to be -- i don't think there's going to be a problem with the deal. but it is going to be held up. i'm saying it will get completed. >> and you're talking antitrust. it would not appear on the face of it that this should be viewed as anticompetitive but given the current situation in terms of regulation, it's going to get a hard look interestingly, microsoft is at the back of the line at antitrust worries, which is kind of funny, given there are battles with the u.s. government from 20-plus years ago but you've got to know it's going to get a long review they're talking 2023 for close. >> you care about the breakup fee? >> yeah, you got to care about those kind of things what if they want to bring it to court, even if there's nothing to actually base that on you never know with this current

regulatory regime what you're going to face. but they seem willing to take that shot. to your point, it seems as though given the competitive landscape, particularly in the metaverse, that they feel like, hey, there's nothing we're doing here that is going to be anticompetitive. by the way, we didn't mention ten cent that mr. kotick thinks about oftentimes. >> it's funny when you look at at&t, sprint, verizon, when you talk about combinations there, well, that could raise your phone bill but, david, are you going to raise your "call of duty" bill 33 million people game gaming is incredible if the federal government deci decides, listen, we're drawing the line we're not going to let you charge more for war games. >> there's something here in terms of the metaverse and who is really going to control that.

if some of these people are right about it becoming such an important part of our life or the life of our children, let's say, you do wonder -- antitrust laws are not built for this. you wonder -- the development of this thing that we're going to talk about a lot and potentially is going to take up a lot of people's time and money. today moffettnathanson has a laundry list of the things that need to be done. if i was representing activision and blizzard in front of the ftc, i would say i have 20 companies that need to be in this business. think about it, do you think viacom -- do you think the parent company of this network doesn't have to think about the metaverse. >> we're going to get netflix earnings later in the week

meanwhile, activision was 100 bucks a year ago it's come down to 65 are we entering an environment where mega cap with tons of cash can make offers for companies that were essentially back to prior highs? >> i think so, provided that they don't get this ftc scrutiny i'm a huge believer that there are many, many undervalued companies in this marketplace. and i think that we have a -- there's interesting piece in the journal about the bear market that is gone because of the swings let's say amd and nvidia they moved up very big, and have come down big. if you look at nvidia, you have to -- these programs are written. they're written on hardware. there's one company, just nvidia the ftc should break up nvidia >> no, not necessarily

of course -- listen, no. but it's a different world right now for antitrust than we've been -- >> what do you envision? >> i don't know what to envision there's no clear road map for the companies either that makes things a little more fraught. not to mention the eu, let's not forget the eu. let's not forget the chinese you shake your head, but the eu -- >> no, i don't >> when it comes to privacy, all of these things, and they're going to have a look at this deal in a significant way. you got to get eu and china. regulatory is a huge part of any of these megadeals it's a part of deals that aren't at mega. it doesn't mean they're going to get it, but it's something -- that's one reason why the stock is trading where it is it's trading at a discount because it's going to take quite some time and there's some risk. and there doesn't appear to be anybody else here, by the way, i would point out.

there doesn't appear to be anybody willing to pay 95. >> the market can get hurt -- >> they go against this deal, right now, look, exxon has an interesting proposal if you're going to meet the target, you have to sell off the worst parts of your business in terms of its pollution and i wonder -- david, when you look at exxon, which you know very, very well, in order to get a deal done, exxon can't buy anybody. but private equity can buy some of their pieces. maybe it's a private equity thing. maybe, like the kohl's deal that we're going to have to get to, they want to sell to private equity private equity seems to be able to get away with a lot. >> yeah, they do >> you raise a really important story. this is a very big news morning. exxon's 2050 goals in terms of decarbonizing, making them more of a play perhaps on the energy transition than just as an oil

company. although, it is somewhat ironic when you look at exxon mobil's share price. it's not because of their announcements on climate or decarbonizing. it's purely because of their actual business which is doing extraordinarily well chemicals also, by the way, doing well >> this larry fink letter, i don't want to talk woke versus not woke but the essence of it is the stakeholder issue. over and over again, the stakeholder issue. throughout this earnings period already, you're seeing one major theme. people can't get people. i've always felt -- we know when we see a help wanted sign on a restaurant, i get that do we get help wanted signs at goldman and j.p. morgan? we need smart people that we can overpay. >> that was the big story friday and goldman rolls in with expenses up 33

a little bit of a miss in the equities business. this is going to lay the road map for the earnings season. >> i read through that and i said, all right, they can say 250,000 to start there is it that horrible to find people or are there not enough people who want to go into finance verses going into facebook and alphabet. >> i think that's an important component of what you're facing here, going in goldman expects you to go in facebook doesn't. >> i said something last week about how goldman -- we were talking about how -- if you go to one of these firms, you work for 25 years and then you quit and you're miserable versus when you go with google and work there for 25 years suddenly you're like saving the world. you know, and i got more comments from high-level goldman people saying, yeah, it's true i'm miserable. i don't know to me, as lennon said, my

great-great uncle, if you're rich, it's your fault. but they have to overpay to get people to work i mean at goldman? are you kidding? >> you had mike mayo cut jp on friday on the idea there's no end date to this expense guidance how many years could this go on? we don't know. if you're making a bet on banks, do you have to move to more commercial money center in this case >> how does charlie get people to work there? the contrast between wells fargo and jp -- wells fargo's quarter was fantastic. >> the narrative is, they've already done the hard things in terms of expense control that the others haven't yet -- not that they haven't been dealing with, but they haven't -- >> there's a line in the j.p. morgan piece which feels like, they're a pitiful helpless giant. you give me 2 billion, i'll move to the cloud right now one of the things that people

said over and over again, including ibm, the banks have not adopted the cloud. i think a lot of people felt that the banks had good technology i read that -- and i just said, wow, have they skimped on moving and -- their expenses are terrible, and then jamie dimon is like, fintech i don't know, i read the j.p. morgan piece and i said, that's got a little bit of a toxicity to it. when i read that -- i live two blocks from the canal. and there's bubbles, and the water is green but it's not green for st. patrick's day like in the movie "the fusion. you're swimming in there -- >> i thought it was getting better. >> yeah, sure. it's superfun. >> where are you going with this >> the corner of j.p. morgan, for heaven's sake. i'm trying to -- jamie was

telling you -- >> no, he didn't know. that's my own analysis you read through the quarter and it's like, they're going through and then suddenly jamie gets on and jamie just basically says, well, we're so far behind. we're like, whoa who knows? the cloud and -- i'm like, jamie, listen to me. have you -- can i still find bank one software? remember -- >> all these banks had great years when it comes to investment banking 58% higher than 2020 i remember wasn't that bad a year either. they've had a huge -- and the stock is reflected to a certain extent the -- the beneficial trends in their business

>> david is right to back up goldman made a ton of money. but then you put it through the prism of jamie dimon and it's like, well, that's kind of -- that's peaked. goldman doesn't have a mortgage business, auto business. goldman has -- the book value is 287. but the one thing i look at goldman, i say, what is it is it a credit card company? they have the apple card is it marcus, which they said is doing quite well is it wealth management? look at morgan st stanley, they have a wealth management business that is second to none. and they would argue that schwab doesn't have what they have. and i find -- i think morgan stanley is going to have a good number wells had a great number schwab did miss. we're going to sell a little wells for our charitable trust

because it's the biggest position we have how much money can sharp make for one person sharp is a genius. he's a quiet genius. he's the assassin cop in -- >> i don't know. >> a paramount show -- >> they call him the assassin. >> he's hoping that he throws -- jamie is hoping he's throwing a life jacket to him >> now it's like venice? now it's venice. >> i don't want to swim in the water either in venice >> yeah. >> charlie is the king of the -- >> we're going to hear what morgan stanley and bofa say tomorrow

bobby kotick and phil spencer on their company's megadeal bunch of interesting calls on under armour, airbnb, disney, downgraded gap a lot more straight ahead. don't go away. eans new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today.

if you haven't heard, microsoft buying activision for $95 a share. don't miss an exclusive with bobby kotick and phil spencer shortly after the opening bell in the meantime, premarket

continues to be weak empire plunges 33 points month on month to minus 0.7. more "squawk on the street" when we come back [music: “you can get it if you really want” by jimmy cliff]

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time to get to a mad dash on a very business monday morning for news let's get to a name that we've talked about a lot -- >> cnbc.com has an excellent piece today about how mackenzie has been hired at peloton. they have to raise price they have cost, supply chain issues at the same time, david, they got to cut jobs. and this stock is down 76% from its high the question is, this is like zoom, a couple others, does it

come back? or does everyone wants one, has one. and i think that's when you get the treadmill, obviously, that may not be as strong as people thought. but i think this is emblematic of the other market, which is the market that got too inflated not just from omicron and -- >> from stay at home, right. >> because it never should have been where it was. and that's what we're all struggling with. i saw some data dog numbers. numbers lowered. you're seeing z scaler, maybe these numbers should be lower. what you have in these price target numbers, what you have, david, is the relentless shrinkage of -- >> what about some of the better-known at-home names, zoom, for example. you could make an argument have a much more sustainable plan than does a peloton --

>> my stepson works for zoom zoom has a lot going for it in terms of being able to have a lot of cash. when that -- when that deal -- it wasn't followed up by anyt that's a problem docusign is doing well people are saying, wait a second, mortgages are slowing down we saw that from the jp morgan quarter. every one of the stay at home -- i williams sonoma. there's just this kind of grim notion that if you did it for covid, it has no tail. >> well, interesting, we haven't even talked about omicron 24 minutes into the show. cases coming down sharply here in the new york area just saw -- >> yeah, that's positive >> we've got an opening bell about five minutes from now and that's going to be followed by microsoft's phil spencer and activision's bobby kotick. yes. they're going to join us talking

about this megadeal from this morning. and, remember, you can catch us any time, anywhere, listen to us reua othow the "sqwkn e stet" opening bell podcast we're back in just a minute.

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leader in income, alternatives and responsible investing. blackrock ceo larry fink out with his annual letter this morning saying that stakeholder capitalism is not woke here's the explanation he gave to andrew. >> what i'm trying to say is, many people believe social values or environmental issues are political and woke i don't believe that and, by the way, andrew, we're connected with more and more asset owners than we've ever been before. i write about that in this world, your voice is being hijacked at times by the media, by theextreme elements of society today. but i believe more consistency in your voice, a louder voice brings that connectivity to your stakeholders >> actually in the letter as

well, makes the tie between the capital flow and the kind of net zero policies, david, that we're hearing out of the likes of exxon today. >> listen, he's the most important voice you could argue among -- in terms of shareholders overall, given their $10 trillion we did make enough of that number 10 trillion in assets under management there are plenty of people who have -- sometimes i hear it when he puts a letter like this one out, should they file a 13d since they own 5% of every single company in the country. kiddingly. seriously. should they file something because they're putting everybody on notice in certain ways at the same time, don't forget, this is still a -- blackrock itself is investing in things like, you know, huge saudi aramco gas pipelines

they still do their share of energy investment as well. >> i think that's important. i'm not saying their two-faced at all, carl i am saying there's a soft touch here you should be caring about it. yes, it's part of capitalism but it doesn't take the next step the divestiture is mentioned but he's not saying that if you want to know what gets this thing going, you just say, listen, we've had it if you don't make this move, if you don't do exxon, you don't do price targets, then you know, what we're through with you. and he's not giving up. >> at the big board, it's gelesis, celebrating a recent listing. at the nasdaq, it's america's blood centers operating more than 600 block collection sites. fourth downside gap of 1%-plus in the last 50 trading days.

>> they're repealing a lot of what happened last year. i think it was seminole when the fed made its move. they talked about the hikes as if we didn't -- we have omicron blowing across the country people are returning to work we have supply chain going if i have to read that the fed is behind the curve is powell blew it, come on. >> brings it to the story on gap. the latest data shows that restocking is going on they say things could get promotional gain in q-1, they take gap to underweight. >> when you think about gap, you think about kohl's these are undifferentiated companies. they don't have anything that's proprietary. these companies generate a lot of cash. >> yes i don't know how you excite people by generating a lot of cash it's interesting kohl's is down even though they're saying, do a big lease

back get something going here no one believes them, i guess. >> i guess not, jim. they've been there once before they tried, they're going to try again. standstill has ended as you point out. the activist in question has come back again. we spent a lot of time as we should and we will talking about this $70 billion deal. microsoft buying activision. but i want to talk about another deal that most likely jim is not going to happen but it is interesting. here i'm talking about glaxosmithkline, which is planning to still spin-off its consumer health care unit even though it's got a bid from unilever that would value it at roughly 20 times trailing ebita. and you can see what's happening to unilever. this is interesting. unilever shareholders are saying, are you crazy thinking you're going to pay that number?

20 times here's a barclays note we see the deal as being very complex to execute in normal times, let alone in the middle of a global pandemic management creditability is already an issue this deal will be hard to stomach given the many positive that is we also see. jim, you got that on one hand. shareholders saying, whoa, you want to pay that much? and then you got them saying no, thank you, we don't want this. because they think they can have this valued at even more than where unilever is willing to pay? >> i debated it. i'm thinking there's a word for what emma is doing insanity carl, the chance to raise money quickly, rather than do a spin-off, i question the judgment here. i have been a backer of things that she's been doing. but it just makes no sense maybe you negotiate, try to get a better price

but this was deadweight loss that you're spinning off who wants that stuff we found out that unilever wants to get out of ben and jerry's. i think union lever has lost its way, anyway. >> interesting there's no way for them to force this deal. this is -- uk take over law, if it was its own public country, it would be under different circumstances here it's far in excess some will say of what it will garner in the public markets they're not going to sell. there's a standstill, so to speak right now. unilever wants to figure out a way to get this thing. elliot is an activist. i'm surprised elliot is not coming out and saying, are you crazy? >> waiting for that. if you told -- i don't want to speak for wamsly if you told people at

glaxosmithkline that you were capable of getting this much money, i think they would say, are you kidding me they would tell you the first tier brands. j&j is there spending a lot of money. the aisles in the drugstore -- they're going to spend a fortune once they do that. that was kind of the point down 465 we're right back to $4,600 guys. gold man down 8% it's the biggest drop for gs in about a year and a half. >> overreaction? i don't know once they hate something, they really hate something. it is -- goldman down 30 this is not that bad a quarter six times earnings david, let me say -- >> you've been pointing out for some time that you don't want to own those high-flying companies with multiples multiples to revenues because profits are constant, if any you've been saying that for a number of weeks.

>> i've been nefgative because i'm trying to figure out what they are >> you've been negative on everything. >> i have been negative on everything because i'm a negative person. >> we did get an upgrade of z scaler today they say, look, high multiple names are in a tough spot. still signs of accelerating revenue growth, jim, eps, upside >> 479 times earnings. z scalers, i thought the upgrade is good. i like cybersecurity just because it's not -- it doesn't let up just because the market is going down. when you -- we got to ask about cybersecurity in these video games. you've got people playing at home, playing the game, playing on their pc. you could have a major hole, someone could be like, "call of duty" -- >> that's the way to get into households. >> by the way, on the tape this morning, microsoft saying they

will make games exclusive to xbox, but will continue to make some for playstation as well >> i continue to think that they are a great asset. once you get over omicron, people are going to go back, it'smy gamestop theory, they play games and pay them in ethereum i have gary gensler on tomorrow. i don't know if he's into that plan he's had it. he's had it. >> let's get more on the big deal of the morning. >> yeah. it is. microsoft announcing it is buying activision blizzard for nearly $70 billion becky joins us with two guests. >> it's good to see you. we are talking about the big deal of the morning. this is a deal of microsoft announcing that it's going to be bu buying activision blizzard it's about $68.7 billion

i would like to welcome this morning bobby kotick and phil spencer. phil spencer, obviously, the head of gaming at microsoft. bobby kotick, the ceo of activision gentlemen, welcome to both of you. thanks for being with us on this news of this big deal. i know there are a lot of questions that people have, but i think first and foremost, it has to be, how did this deal come about bobby, i'll start with you this is a company where you've been the ceo for almost 31 years. started out with a company that you bought out of bankruptcy for $400,000 now looking at a valuation at $80 billion. how did this happen? how did you get to this place? >> well, look, we've had a partnership with microsoft that goes back to the launch of the xbox we've had many conversations over the years about various forms of collaboration as we've started to see the real competition, the beginnings of what the metaverse will be like, and in that race for the metaverse, it started to become apparent that there were a

variety of resources and talent that we needed in order for us to continue on that journey. and so as phil and i started to have those conversations, we realized that now is the perfect time for a combination >> phil, when did those conversations start? and what kind of got you to the point that you're willing to commit this kind of money to a deal like this >> yeah, as bobby said, you know, we talk all the time about the future of this amazing business 3 billion gamers on the planet today. people playing in all regions, creators coming from everywhere. and we're always sharing our strategy with our partners and talking to them about their feedback i think we've always had a good connection with the team at activision blizzard about where we're trying to go this is a deal that happened quickly. i would say we really had some formative discussions about the specific opportunity late in the year and we just felt like now is the right time to add the right resources and capability to both companies. >> is now the time in part because activision shares have

been down? they were down 27% for the year to date. did that make this an easier deal to kind of get your head around >> as bobby said, when we look at the competitive set that's out there, we look to the importance to us at microsoft game, people playing on mobile, the coming metaverse, the opportunities we need with great ip we really saw this as an amazing opportunity because gaming's continued growth over the years. the it's a strong catalyst for us in the consumer categories. >> there have been a series of reports that raise questions just about sexual harassment at the company and how it's been handled. those reports have kind of questioned whether you've looked into these reports what would you say to that >> of course any issue of harassment or dw discrimination is something i would take seriously, and do we had some challenges, but we have worked through them we're committed -- it's a focus of mine and we continue to

improve the culture with the expectation of being the most inclusive workplace culture. >> this is something that you said at the time saying you were concerned about the reports. you've looked into this and feel good about this if you are going ahead with this deal >> culture is a journey for any workplace. it's something at team xbox we've been focused on for quite a long time. oc obviously going through the due diligence process, talking to the leadership team at activision blizzard about the plan they're already implements. we look forward to supporting that plan and post close we know that the most important thing to a createorganization is that the employees feel safe, they feel heard so they can do their best work. there's nothing that's more important to us. >> first, bobby, it's jim. congratulations and great deal for you and shareholders >> thank you very much >> let me ask you -- sure. let me ask you a question.

how many companies do you think are in this business a lot of people are saying big three, therefore, there are going to be ftc issues at the same time, i've been saying that there's a gazillion companies in this business and the idea that there's some protection that's needed for gamers, it seems silly how many people do you think are in the universe that are doing what you do? >> it's a great question i would say one of the motivations that we had for a partnership with microsoft is the recognition of it's a big market, but there's enormous amount of competition, whether it's resources, or sony or facebook or amazon or apple, google, or netflix, or disney. when you think about the race for the metaverse and for the more influence in gaming in the gaming ecosystem, we've seen more competition than ever before if you add to that, all the

tools that companies like microsoft make available, like a platform like cloud, you now have user-generated content that is competing in this marketplace. so the competition has never been greater and it's coming from all forms >> let me follow up on this. because even though it may appear -- as bobby just indicated -- that this is procompetitive given the current regulatory environment, it's not surprising to expect that it's going to get a very tough review. what gives you the confidence that you'll get through that review and what steps is microsoft willing to go to make sure that you get the approvals you need and are able to complete this deal in 2023 >> i think bobby hit it very well it's an incredibly competitive marketplace in the gaming space. the truth is, the largest gaming platforms on the planet are the

mobile devices out there distribution on those devices is controlled by two companies. so you look at a company like microsoft and we're bringing together content and college property to offset the distribution capabilities we don't have on mobile devices this is our opportunity to fight, to compete on the largest platform out there in gaming which is mobile devices. that's critically important to us as bobby said, we have more creators on our platform than we've ever had we have games coming from ea, activision and take two. but you look at a lot of home grown games that are able to reach global scale because of the distribution that they're finding on pc and gaming consoles it's a vibrant space right now >> bobby, you know, you talk briefly at the outset about how you got to this deal was it at all motivated by your desire or perhaps the internal problems that you were dealing with at the company? or did it have nothing to do with that? secondarily, did you get a sense from the marketplace that there

was anybody else there who might be willing, as unlikely as it seems, to pay even more than microsoft? >> so answer your first question, david, of course not we've dealt -- we're dealing with our issues culturally and making great progress there. our focus has been figuring out when you look at the library of franchises that we have and the talent that we need and the resources that we need and you think about the resources that are going to be critical going forward, the cloud and really having a purpose-built cloud, having ai and machine learning capability, having user experience and user interface capability, data analytics, and a really, really big pipeline of atltalent, we'r going to need to hire thousands of people over the next course of five years to realize the vision that we have. and what we realized when we were thinking about partners is that microsoft has this great long history, like we do, that goes back to 1980s in video gaming they have the incredible

resources and incredible pipeline of talent, a culture that is aligned for ours on a focus of creating a great work experience while there are a lot of other companies that could be interested in a company like ours, microsoft was clearly the company that made the most sense. >> phil, the stock price, just watching this right now, activision shares at $85, which is kind of surprising. this is a cash deals $95. the only thing you can guess, people think there will be some regulatory back and forth. maybe it takes a little while to get past the regulators with some of this things. it was reported earlier that there was a $3 billion breakup fee s fee. is that the case >> we're confident in our timeline for getting the deal closed we think it will close in our fiscal year '23. we're planning for that. we're looking forward to getting to work directly with the teams

at activision blizzard i think that's where all of our focus is right now, working to bobby to ensure that over the next 18 months during the close, the business continues to perform. that we're set up for that close where we can work directly together on the future of gaming >> let's talk about the things that you guys actually see what promises you think there are from this and, bobby, i'll start with you we talk about the metaverse all the time i have to admit, i don't understand it. i don't know what it means what do you need in order for your games to kind of translate into the metaverse >> if you think about, really, not the neil stevenson snow crash vision of the metaverse. but the natural evolution of what the metaverse as we believe it will be, a collection of communities that are anchored by franchises that will start with gaming so whether it's "call of duty" or "candy crush", those players are going to form the basis for

what we think will be this large, vast virtual world that is usable on any display device with a microprocessor. in order to get there, though, and this is a big part of the transaction, you're going to have to have a cloud that is purpose-built for those kind of experiences. and jim pointed out a little bit earlier, cybersecurity is going to be much more important than ever before in the way that people are going to be able to interact with each other, but also to protect our personal information. and i think microsoft has done a better job of almost any company that i know of in building out that cybersecurity capability. when you think think about examples over the long time what that metaverse will look like, there are things that microsoft has, like teams, you'll be able to integrate audio and video while you're playing your games and sharing your experiences they have the beginnings of what will be a great creator of economy like minecraft you'll be able to create content that can be commercialized or shared and that will be all part

of what will be this great virtual world connected by these franchises of games. >> phil, let's follow up on that just a little bit. in terms of what you get with activision, i mean, i'm guessing part of it is the franchise games that they have what do you kind of think is the most important part of this transaction and being able to build that out >> no doubt in my mind, the most important thing is the teams the team, the creative teams at activision blizzard that have created some of the world's most beloved gaming franchises, that's the whole future of this deal there's an amazing set of ip that bobby and the team have built and acquired over the years. those are just great opportunity for us when we think about where this world goes, where gaming goes, where our opportunity is together, it's really about making sure those teams, as bobby has been talking about, have the tools that they need to reach their creative vision, have the right culture in place

to reach the creative vision, and frankly, have context and technical capability that we can bring from xbox and microsoft to help them achieve that gaming has gone through multiple transformations and i think we'll continue to see that metaverse being another one. and i can't wait to get to work with the amazing teams when by think about where this futur and their creastivativity as we strive to reach the people playing video games. >> what do you think is the biggest challenge, not just this deal but beyond that what are things you're anticipating could be hurdles and how do you overcome them >> the hurdle in the entertainment space is kind of always the same. you have to reach the heart of the players. we're not an activity about i must do something. entertainment is about kcustomer choice, player choice.

we put the player at the center of everything we do, whether it's subscription offering, cloud offering, a diverse content. king has created some of the most amazing mobile franchises it's not an area we've had traditional strength at x box and microsoft. when i think about the ability to listen to those teams, talk about our vision, refine our platform, that's going to be an incredible journey for all of us >> i want to thank you both for being with us today on a really big day with a really big deal but we appreciate your time and hope to have you back here soon. >> learn anything? >> what i learned is that microsoft is one of the most opportunistic companies in the world and i think their calm demeanor tells me -- you may

disagree -- that they have escaped the level of scrutiny and if i was mark zuckerberg, it's defense >> it's hard to imagine facebook could announce a deal like this, really hard to imagine or for that matter, apple and amazon so, microsoft may be one of the only mega, megas to be in a position to do a deal like this and get it done. >> do you think entertainment is a broad category >> that's the way they're going to define it, right? but it depends on how the regulators see it. and nothing says they wouldn't prevail if they had to go to court to do it 18 months is a long time to allow for the deal to close. didn't get to ask bobby but the expectation is he stays on as ceo. but after close -- >> yeah, bobby said he had some other things to do i've known bobby sings he was a little boy

bobby's one of the great builders of this era and i hope that dakota is not the story in the journal i understand we're in a new environment and there's a lot of people who say we knew and therefore they have to sell. yrbl known them for a long time. >> even as we're talking about it, our cfo optimistic because of levels of capital and confidence >> how much is it down oh >> we've got a mega deal there's no doubt about it. there are those of us who thought we might not see these kinds of deals >> it is about half of the dow's decline. right now. as we reach 3600 on the s&p. yield's a big part of it 10-year 183 and energy the only sector in the green. i'll be right back

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jim, what's on "mad" tonight? >> rusty brazil. are there going to be more mergers? i have think there are going to be and the executive vice president of the nfl, he's the chairman of this company we have to find out where does gaming ever bottom i doebtd know. >> quite a weekend of football though >> well, yes and no. >> we'll see you tonight, jim. "mad money" 6:00 p.m. eastern time as we're still below 4600, dow's down cause they saw how cancer adapts to different oxygen levels and starved it. i am here because they switched off egfr gene mutation

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your record label is taking off. but so is your sound engineer. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire welcome back to "squack on the street." with breaking news from the home builders fell on the wells fargo index. anything above 50 is considered

positive but confidence has been gaining for four months and it stood at 83 in january last year the price of soft wood lumber alone has jumped about 85% in just the last three months, according to random link of the index's three components, current sales conditions unchanged. and buyer traffic also fell two points to 69 builders are also facing higher mortgage rates in the new year, with the average rate now about 50 basis points higher than it was a month ago and 75 points higher than it was a year ago. it was collected early in the month. but we are likely to see that in next month's reading carl >> thank you very much good tuesday morning, everybody. welcome to another hour of "squack on the street. we have breached a 4600 on the s&p. a bunch of things working against the bulls today.

the goldman miss, the empire miss not at all heartened by the mna with microsoft >> we are going to start with the mna. the deal of the morning. buying activision blizzard all cash and that's coming up later this hour plus, goldman sachs trading lower after surging expenses quarterly profit falling 13% from a year earlier. revenue did, however, beat you can see the shares are down 8% and a retailer in the red. gas getting down graded to underweight from equal weight. morgan stanley expects other mall-based retailers to revert back the declining path prepandemic. let's turn to the broader markets, which are under

pressure to start another week stocks are lower you just heard carl mentioned s&p is trading below 4600 we're seeing bond yields hit prepandemic highs. so, going back two years, especially in terms of the 10 year and two year. joining us is the senior vice president and joan feiny good morning to you both the fact that we do see treasury yields climbing higher, we're seeing the flattening of the yield curve here where do we go from here in terms of the bond market and the rates we're seeing and how do equities continued to take their cue? >> well, i really focus on the equity markets i look at what's happening clearly in the fixed income market the environment is very favorable right now for value stocks

it's very interesting because generally in this kind of a rising rate environment, fina financials tend to do quite well but what we've seen in the corporate earnings is, unfortunately, a lot of the big banks have had significant growth and expenses with the great resignation, the calls for higher compensation. that has really offset, if you will, the growth in their net interest income. so, it's a bit of a double edged sword right now, given rising costs for waej wages, as well as rising rates >> lot of the talk is the market has -- and even if the fed can tighten and tighten so aggressive lee and the economy kobt continues to grow, does it matter where equities are concerned or, due to evaluations, we're just due to a correction >> i think there's certainly some of the correction come nothing to play.

the market up enormously i would like to make a couple of points about putting this in contectst. int interest rates are really low. that's not an enormous cost for either consumers or business and balance sheets are incredibly strong and it points to earnings being pretty strong for the market and that suggest evaluation still need to move higher, even as we have a reset in the past, when we've seen resets, the market has pulled back but it's generally recovered very quickly so, it comes down to the question, do you want to time the, maor do you want to focus n value? >> i wonder whether you think the financial trade, if you're watching the curve and rate, makes senses from what we've heard from goldman on expenses

>> i think it's important to stay well diversified. i gave financials soekter as an example. but it's important to maintain diversity across styles. i think it's important to look at the tech sector, as well as consumer discretionary i know those have sold off significantly. but that means there are buying opportunities. and there tends to be a wide dispersian of returns and that means an opportunity for stock selection as well. >> interesting joan, you just signalled buying opportunities as well. what would you buy at these levels, given the pullback >> there's lots of opportunities. when you look at what's happened, really, since early november, you saw a lot of s stocks and maybe it's a paypal or smaller name.

these are companies with real customers, real sales and the opportunity for earnings that they may be deferring until later because they're still really growing rapidly a little less aggressive it sells into 5g, smart phones it sells software, security. so, these are areas of the economy that are going to grow regardless of what the federal reserve needs to do with interest rates j yes, there's been a lot of panic selling. so, these are good opportunities to get involved now. >> thanks for kicking off the hour with us >> thank you >> well, it is the deal of the morning, not to mention the deal of the year, at least so far microsoft announcing this morning that it will be buying activision, the giant gaming company, for let's call it

sa70 billion in cash and could get to 80 billion in total. you can see though activision shares are trading $11 below that why? certainly some concerns about antitrust, which we'll get to in a moment the man who essentially built this company from a $30,000 investment some 30 years ago is choosing to sell to microsoft. it happened fairly quickly, from what i'm hearing from talks between the two companies. and only let's call it handful of weeks, maybe a month ago that he wanted to give an opportunity to sell at a significant premium. mr. kodak, he took the opportunity. doesn't appear there are any other potential suitors or none that the approach the value microsoft is willing to give at $95 a share. but there are continued

questions to whether or not it will pass muster with antitrust regulators the question is whether microsoft would be willing to go to court, should it come to that for their part, microsoft and activision believe the deal will be procompetitive. >> one of the motivations that we had for a partnership with microsoft is the recognition of it's a huge market with recognition. a sony am, google or netflix or disney when you think about the race for the metaverse and for the more influence in the gaming ecosystem, we've now seen more competition than ever before >> it does appear this is very much focussed on that good-old metaverse.

i say old, of course it's yet to really form. and facebook is spending 10s of billions he mentioned 10 cent, which is a more formidable competitor this is where he felt like i need more resources to compete >> we don't talk about the chinese tech companies very much despite all the antitrust, regulatory scrutiny that we see regulators in the u.s. engaged in that was very telling. if it does go through, it's going to create the number three video game giant microsoft will be behind 10 cent and sony the fact these are companies that have worked together so closely for so long. metaverse kept coming up in the interview in the last hour and very interesting to see it's part of the bigger consolidation wave, given the fact that the pandemic has turbo charged activity in this area with the likes of netflix getting involved as well

electronic arts, last i checked, was trading higher and take-two saying it's going to buy zinga probably out of all the mega cap tech names, microsoft is the most insulated, potentially, i would imagine, from regulatory review, given the fact it's had its own reviews and antitrust scrutiny in years past, verses a meta, also known as facebook they're holding a press conference there are question marks as to what that's going to entail. >> alphabet and facebook already facing antitrust reviews on their own, not just because the buying somebody. it was only a couple of months ago that xbox said we're evaluating the relationshi between our company and

activision, verses the reports of sexual misconduct that happened at the company. >> whether it's the culture stuff or regulatory aspect, a lot of the sale side is saying we did not expect this offer coming it's 15 and a half times next year at 15 and a half. gordon hasken, we didn't think was a distinct possibility was stepping in with an offer like this we thought they'd be desueded by antitrust concerns and we were wrong. >> even though on the face of it, it's not clear the law is on the side of the regulators the question -- by the way, the question often times will be, if we see more mega deals,s and there's a decision to try to expose them, whether they will go to court. so much changes so quickly you simply may not want to take

that much time >> atvi still leading the s&p. a road map for the erest of the hour, including goldman's earnings by far the biggest laggard >> and quote, the worst software ever sold by a fortune 500 company. and we'll talk with one of the largest shipping companies the ceo of #lloyd will join us to discush the ongoing supply schan issues we've got a lot more "squack on the street" straight ahead don't go anywhere. i may be close to retirement, but i'm as busy as ever. careful now. nice! you got it. and thanks to voya, i'm confident about my future.

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goldman shares taking an about after reporting mixed results this morning fresh off the earnings call. >> yeah, the earnings call is ongoing and trading lower and that's largely due to cost coming in higher than expected operating expenses ahead of 3.4 billion. most of that coming by surprise and been if the. ceo said, quote, i want to reiterate the importance i put on investing and the people of goldman sachs and that it was, quote, a personal priority of mine that we invest in their success. new cfo added that they're committed to rewarding top talent in a competitive obviouslyner environment

competitive labor environment. and 30% is 2% lower than 2020. he said, quote, technology spend and engineering expense is a strategic expense for the firm that's one area we continue to invest in, quote but he said there are levers to pull to adjust the spend and that the bulk of the noncomp cost were cost related it did feel like a different tone on the guide on the cost to j.p. morgan, but nonetheless, shares are selling off it was a record year for revenues and earnings. only equity trading was really a miss compared to what estimates were, 2.1 billion. f fixed income trading and contributed to the record year and investment banking was up 45% year over year

impressively, even up 3% quarter over quarter and said, quote, we start with a investing banking back log significantly higher than 2021 despite record revenues. the stock, though, as we mentioned, down 6 or 7%. >> well, stocks of all the banks down again this morning, despite higher yields. give us a little more information in terms of how j.p. morgan's discussion of expenses being higher, perhaps than have been anticipated, differs from that of goldman's? >> in j.p. morgan's release, it quite clearly stated we're upping our guidance for the expenses for the year ahead to 77 billion and on the call there was tons of questions about it and they couldn't give hard clarification. it was a one-year increase so, people extrapolated from that, that we don't know how

much longer the costs will go on in fact, just before i came on with you, dennis coleman, the cfo said 4.5 to 5 billion in expenses from last year is tech and engineering and you should expect to keep investing in that area. for that's a small part of the total expenses and the bulk of the surprise this quarter came in the compensation expense. and they have been quite clear that there are levers they can pull if next year and the year ahead isn't a record year like the year past on that front. in this current environment, on a sell-off day, you're not going to see shares perform well and expenses are a little high and we'll see if that continues. goldman had a great year last year and started the year pretty strongly in terms of share priegs performance it's down 8% so, pretty sharp sell off. >> leading the s&p and dow lower.

always bringing the cull whr he's reporting on the banks. still to come we'll speak with one software ceo taking on elon musk slamming the self-driving service as, quote, the worst piece of commercial software i have ever seen we're going to have it on the other side of this break and we are back in two. i think you're going to like it here. umm, why is everyone... throwing things at me? look, as cfo it's my job to be ready for whatever's next. that's why i have my finance team, randomly hurl things at me. it's also why we use workday. it gives us insights, so we quickly pivot our strategy, people, planning, you name it. sorry, sir. i will aim straight at your next step. see that you do. would you like some coffee? workday. the finance, hr, and planning system

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the dawn project, putting out on a ad in the "the new york times" warning of tesla's full self-driving software. it claims it has, quote, the worst software ever sold by a fortune 500 company with a critical malfunction every eight minutes. the ceo of green hill software and the dawn project founder good to have you this morning. >> good to be here >> i'm sure many others read it as well. it's alarming but i just wuntder why are you doing this >> well, the history of a very important factor in modern history is this commitment to

the internet, connecting everything up to the internet. and every company on the plan, everybody is totally committed to hooking everything up to internet as quickly as possible. and this has created a really big problem because all the software -- ask anybody. all the software can be hacked but what we're doing is connecting up the things that our lives depend on. the power grid, cars, water treatment plants, hospitals. they're all being connected up to the internet and all that software is very easily hackable and people can take down vast structures of our critical infrastructure anytime they want for cars, there are huge problems with cars and self-driving cars. if a hacker gets control of a self-driving car, which everybody basically says of

course we know it can be hacked. with the self-driving car, all the software is the same every tesla runs the same software and they're all on the internet you find out how to hack one, you can hack all of them, literally and take control of a million teslas or 2 million and program to drive into oncoming traffic or outdoor caves or anything you have like that. so, this is a severe problem >> that's a scary prospect but your ad didn't focus on that as much as what you said was analyzing many hours of youtube videos and finding that, at least, according to what you saw, the self-driving function commits more than a thousand times as many errors you wurnlt focussed on hacking as much as, am i wrong, as much as a faulty software program >> the overall mission of the

dawn project is security and safety it's all about safety. in this particular case, the situation is very egregious. the software t , it does not wok it continuously tries to drive you into things. watch the videos there's hundreds of them every 36 minutes, we looked at the videos, it tried to run into a wall or into the wrong way on traffic or everything that could happen with your car and this is terrible i've been doing safety engineering for a very long time i've never seen anything -- no one's ever put out a product that, every eight minutes, it tries to do something dumb i put out a reward of $10,000 for someone who can show us a single product that fails that often and does the wrong thing

>> you said your report analyzed 22 videos posted on youtube. is that enough of a sampling size to make the claims you're making >> it's a substantial portion. we're doing more we did that many and said there's no question it's a situation. we've sampled other ones randomly and said this is fine we're going to do more videos. we looked through every single one. there's a spreadsheet that anitates every failure, every time it turns from the wrong lane, runs through a stop sign, each event that it does. each -- those are something that, if you did that on a driving test in california, they wouldn't give you a license. and it happens every eight minutes. you have a 20-minute test in california >> dan, it's morgan. i mean, this conversation entered the twittersphere, if you will

i know you tweeted about it and elon musk has had responses too. someone else tweeted it's so weird that the most vocal critics have a huge financial nrtsest in a competing solution. and musk responded to that indeed do you have a huge financial interest in a competing solution is that the reason you're so critical of it and started looking that >> well, no. a financial interest in a way. i have no -- as you guys say i have no financial interest at tesla. anything like that my entire financial interest in tesla is i own three of them i own three teslas, two roadsters and a model s. there's no financial interest. if people say financial interest can you say i'm a competitor i help daimler, all the big companies, gm.

we supply software for those people to do it. and that gives us information. actually, i say who better to find out the problems in your product than the competitor? they look at things, they analyze their competitor's products, try to figure things out, they tell you things the salesman doesn't want you to know i don't see why, if you say this person's a competitor, you shouldn't listen to them, that's giving the salesman his dream. no one will ever hear about anything negtative about the product. i think it's wrong to even say that sure, we're a competitor in a moderate way i make software that people who make self-driving software use to do their job. >> and certainly your background, you've worked on projects including 787 and the boeing b 1 b intercontinental

nuclear bomber and nasa's orion crew spacecraft. general, the internet of things, how can we make operating platforms more secure? who do you thing is a doing a good job of it, if not tesla >> no one is doing a job anywhere close to acceptable they just introduced a new government safety standards and security certifications. they're just paperwork absolutely yugsless. when you build airplanes, there are standards that are 100 to a thousand times more rigorous than what tesla or anybody building things and hooking to the internet they're using stuff they download off the internet. people who wrote the software did not know somebody could die if they made a mistake

they thought they were building it for the phone, for the desk stop maybe it will crash if i make a mistake. and you can't use the software on things that literally millions of lives depend on. power grid, hospital it is totally wrong. that is my mission is to get people to understand it. i went to government, they made regulations that were totally inadequate i went to the companies and asked please let's do this more carefully. and they said we do the fastest way we can, which means using software they download off the internet to hook up. and now it's all connected and that has to change the dawn project mission is change all the software. we need software that never fails and can't be hacked. that is very feasible for all the systems but no one's doing it >> how many employees does your company have >> how many what >> employees

>> oh, several hundred, 400. i don't know numbers right now >> right, you've got 4 or 500 employees. you're running a company here. is this really what you want to spend your time on as well mr. musk is certainly someone who likes to stand up and fight. he's already called your company what i think he had choice words about the company itself >> it's trash. he said it's trash >> thanks for filling in pile of trash. so, is this really a fight you want to continue to have >> absolutely. this is it the most -- this is the single most important issue. people don't get it. i couldn't get the government to do it, i said i have to take it to the people. this software is terrible. all of it. none of it is designed the right way. we do the right things we build fighter jets, we do things we build those things and they don't get hacked

people think all it can get done, we do every day. no one's ever hacked an f 35 the 787, it flies every day. the air bus, weevlg we've done dozens and dozens of systems but it's 10 to 100 times more rigorous than what is done right now. with software that's been recently added to the internet got to be fixed. this is my mission in life >> understood. well, we may be speaking again if it's your mission for life. dan, appreciate your taking time though, thank you. >> okay. thank you. it's time for a news update. >> hi, morgan. good morning the senate will debate a voting rights bill, even though it almost certainly will be blocked by a filibuster. shum rp wants republicans to go on the record with their opposition and supreme court hearing

arguments in a case involving a flag pole in front of boston city hall. they denied permission to approve to fly what it calls a christian pole secretary of state pushing for deescalation of tensions over ukraine in a phone call with russia 's foreign minister at the same time he talked about the unshakeable staying with ukraine. and bill de blasio will not compan to be the next governor instead he'll fight equality in the state. let's hit our etf spotlight. on pace for four positive days and up almost 18% for the month. big reason behind the bump is the continued rise in crude, hitting its higher level in

seven years and up 20% in the last month of trading energy the only sector in the green with the dow o offf the early lows, we're still down 513 ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq yeah... oh. don't worry i got it! ♪ ♪ ♪ digital transformation has failed to take off. because it hasn't removed the endless mundane work we all hate. ♪ ♪ ♪

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through projectup, comcast is committing $1 billion so millions more students, past... and present, can continue to get the tools they need to build a future of unlimited possibilities. the airline and wireless industries may be moving closer to a solution. hey. >> we've been talking to some of the people intimate with discussions going on between the wires all industry and the airline industry according to a source familiar with discussions, that there's a proposal that would allow a buffer zone be put in place at key airports while, at the same time, that would allow about 90% of the 5g, supposed to be deployed starting early tomorrow morning too, go through. about 90% of the 5g deployment would take place

the buffer zone at key airports and we're told that would dramatically lower, theoretically, the number of potential delays or cancellations and flights. and again, this is not finalized. they're still working on this. but don't be surprise fd we have some type of deal worked out before 5g is supposed to go into effect or turned on early tomorrow morning >> phil, you pay a lot more attention to these than we do. but we're talking again about an assembly plant shutdown due to global chip shortage how big of a deal is it? >> not a big deal. this is what we see in the auto industry on a pretty regular basis that you will see plants, from time to time, shut down for a week as they prioritize the supply of chips that are there the supply is improving. everybody agrees on that when you talk with auto executive said, they'll tell you they're seeing an improvement in the supply you're still going to see this

right now it's ford withthal plant. you may see it with another auto maker next week or two weeks from now we're not seeing the mass shutdowns we saw six months or eight months ago back to you. >> thank you we're a little over an hour into trading. all the major outages falling sharply to start the week. dow down 530 points. the s&p, a similar move lower. 4596 is the level there. and the nasdaq down 1.5% as we've seen tech and just about every other sector, kp the exception energy, under pressure as treasury yields continue to move higher. joining us northern trust asset management president, thomas i want to talk about the market and the fact weave rr seen a sizeable pullback since the start of the year. how is this changing the way

you're approaching investing in 2022 and does it change your thesis, especially coming off of a rather large gains for the s&p, for example, in 2021 >> yeah, so, morgan, first of all, good morning. that's a great question and very timely i would start with the context it's not wloelly unexpected to see consolidation or pullback in the beginning of the year. you can go back in time and track market performance after big upswings we saw like last year our base kags remains unchangepered frer we're looking for slowing but sustainable economic growth and believe corporate profits will continue to be resilient. we actually see long-term interest rates remaining relatively low albe it, they're selling in a higher range. the way that informs our portfolio decisions is we continue to actually be underweight, if you think about risk control ashts think cash, investment grade

debt or inflation protected securities we continue to be overweight risk assets. the highest overweight is in yield bond and we like natural resources. >> so, when you talk about rates that might be higher than they currently are now, but still historically low, what is -- i guess, what is the level you're targeting and given the fact that we have seen risk assets sell off the most aggressively in recent weeks, where have you been buying, if at all, given the fallbacks in corrections >> so, if you think about a few -- first of all, with respect to rates if you think are we are with respect to rates, if we were talking six or nine months ago, we saw rates being in a range. selling in the midpoint of the range, call it somewhere closer to 1 and a quarter percent we accept that maybe is more in

the one and three-quarter range. again, where we see rates today. but we're looking at that over a longer arc because we continue to believe, when you get in the intermediate and long term, there are mitigators as we get through some of the shorter term supply issues that put a bit of a cap on that. we think the federal reserve policy for a variety of reasons may be accommodative if you peek into the portfolio, where we're pushing exposures, we like high dividend stocks histo clar this hasn't been a environment but it's different because of where you see valuations and how you see stocks performing. we like low volatility stocks to balance out risks you pointed to in investment portfolio. >> your point about moderate nothingflation down the road is interesting. because there's been reporting on cohorts of traders bracing

for a policy mistake on both sides of the atlantic. in fact, the numbers come down the way you're suggesting, are you going down that far? you think the fed's going to over do it >> again, we can't sit here and rule out the fact that there are not some policy issues or there could be undershoot or undershoot the practical reality is what the fed is trying to balance, i think is particularly difficult. it's not just the mandate of maximizing sustainable employment but think about the facts around increasingly balancing the other longer term systemic risks we talk about i think we're very mindsful of it again, we still feel comfortable over time, that it's something that can be managed. >> in the past, talked about esg, such an importabout component overall in the current world of investing lair afink out with the annual letter to ceos rejecting

acquisations of being, quote, woke give me the landscape from your viewpoint, in terms of advancement of esg and whether, for example, the proper metrics are being put in place to measure the progress of corporations, for example, from your perspective >> so, one of the things is -- i think it's, in some ways, unfortunate, the politatization you get from this issue. from our perspective, we think social and governance criteria affords better risk management trs done well in an investment portfolio, we think you can get better returns we look at what we call financial metrics and a lot of the criteria that we look at from an esg standpoint, in a sense, could be considered prefinancial to be clear, it's imperically

relevant and it's also -- brings it it predicted value. some of the discussion is around stewardship. so, how do large asset managers like ourselves actually work with a portfolio companies in terms of influence that we have? and i think there are questions around that. but we ultimately have a fideuceiary responsibility to all of our stake holders we think there's a constructive way to do that in a responsable way. >> interesting conversation. stakeholder activism and monetary activism, which you touched on in the conversation too. thanks for joining us today. >> my pleasure >> coming up in the next hour, going to talk ongoing tech with wells fargo chairman of investment banking as we see big cap tech under pressure this morning. dow's down 500 worst day since november 30. , you're an owner with access to financial advice,

tools and a personalized plan that helps you build a future for those you love. vanguard. become an owner.

ongoing supply chain issues further challenged have caused ocean shipping rates to sky rocket up about 200 gift% year over year as consumers have seen costs rise it's been a major drive for companies like lloyd, which have seen share prices increase in the last year. we're joined by the ceo. welcome bam. great to have you. those who are looking for signs of relief in the chain usually point to chinese new year, which is coming up quickly i wonder is it going to have an impact this year >> probably early to tell but looks like omicron hasmade lif a little bit more complex. i've always been cautiously optimistic about the chinese new year in 2022 things would get better but i think in the end, it all depends on when the situation normalizes and that could still be

somewhere in the first hal of the year remains very difficult >> your point about omicron. although the wave appears to be close to the peek in the u.s., it's barely taking grip in most asian countries. are you in a period now where you're waiting to ports of entry in asia? >> yeah, of course that's a key question. i mean, right now over the last couple weeks the situation the asian ports has actually improved a little bit. but you're absolutely right. it's still uncertain whether omicron will also hit there and more importantly what the impact would be and that of course, depends on also how to elect and whether it will change any of their existing policies. >> rolfe, it's morgan. what will normalization look like we're coming off a record 2021 in terms of profitability for shipping companies, such as yourself i saw the bloomberg article over the weekend longer-term rates negotiated in contracts are 200% higher than they were a year ago, which sounds like we're

looking at freight costs that could at least from a shipping perspective, that could drag on at elevated levels for months, if not years to come give us a sense of what new normal looks like as we do come out of this pandemic >> mine, i think first of all it's very hard to see when we're going to get out of it i agree rates will likely remain elevated for a while what we, of course, also see, also costs is going up fuel is going up we see charter rates going also through the roof we see the cost at all kinds of terminals also going up. so, for sure we will not get back to the levels that we've had in 2018 to 2019. having said that, you know, i would still expect somewhere in the course of '22 we're going to see an easing of the market. >> yeah, of course, the ports on the west coast here in the u.s. have been getting so much attention because there's been so much gridlock record numbers of ships that have been idling off the coasts. you got chassis restrictions that are factoring into that

empty container restrictions that are factoring into that you have the harbor trucking association saying that those restrictions are slowing down the supply chain according to our own source, senior biden administration officials telling cnbc they're speaking with ocean carriers about some of these issues how are you working with officials and navigating some of this congestion at the ports and how quickly there that process take >> i mean, we are talking, of course, to officials and trying to do whatever we can to help relieve the congestion the reality of it is, though, it's quite a complex situation because it's not only one factor that causes it but as you already pointed out earlier, it's the entire supply chain from the ships that arrive in the port to the handling in the port then we have the rail that needs to move quite a lot of boxes inland then we have the trucking situation. and of course, all of that together causes combined with a pandemic, which results in

serious shortage of labor in many places for some pretty serious problems and in the end, i personally think it's only really going to turn when we see all the people coming back to work and we'll have most of this hopefully last covid wave behind us >> well, there has been some discussion of having an empty container fee at the port of l.a., that they might impose is that something that you would fight against? >> i mean, in the end fees alone will never solve this problem. i do understand what they try to achieve. i would also say when you look at the last 6 to 10 weeks we have seen a reduction in long dwelling containers. and i believe that also number of empty that we have, for instance, have out there has come down quite a lot. so to put pressure on parties to do whatever they can to relieve the pressure, that makes, of course, sense. whether fees alone normally don't resolve that problem >> rolfe, we'll be watching for

any signs of hope in terms of the chain overall. although it's been great for your business, it's great to have you thanks so much. >> you're welcome. let's get to dominic chu with a sector sort hey, dom. >> good morning, carl. the stocks in selloff mode to start out the week the action in the consumer discretionary sector in particular the home building stocks are among some of the worst performers in the s&p today. that includes names like lenar and dr holten and poelty group treasury yields continue to rise and home builder confidence drops for the first time in four months due to concerns related to inflation and shortages of materials. cu those home builders, a key fos. consumer discretionary there's more "squawk on the street." keep it right here don't go away.

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we look at the competitive set that's out there, we look at the importance to us at microsoft gaming, people playing on mobile. we look at the coming meing met, the opportunities we need with great ip, we saw this as an amazing opportunity.

microsoft is big on gaming we're continuing to invest here and see it as a real strong catalyst for us in the consumer categories. >> they're certainly investing an awful lot today with that announcement of a deal to acquire blizzard for $95 a share in cash. let's call it about $70 billion in cash. now, for microsoft, of course, not much morgan, given the enormous size of the company with a market value of some $2.3 trillion but still one of the larger deals we have seen in a very long time. it wasn't as though there wasn't plenty of speculation around activision given the pressures that company was conceivable under as a result of the sexual misconduct allegations and a lot of the employee pushback he got, but still something of a surprise to see microsoft step up and actually do it. >> yeah, that's right. you could argue given what we're seeing in gaming this was a name that was perhaps on sale given the fact that it was down 30% since the highs most recently in

the summer, given some of those investigations and some of those reports and investigations coming out in "the wall street journal" as well the video gaming names are trading higher and bucking the down trend in general today. take two, zing ga, electronic arts is now arguably potentially in play given all the consolidation we're seeing in this area as well. as i mentioned, though, all the major averages starting another week, deeply in the red. the nasdaq down the most, 1.8% there as we are seeing tech, consumer discretionary, some of these other more interest-rate sensitive names continuing to sell off also financials given goldman sachs and the fact that we saw mixed results there, too more bank earnings this week also transportation names that are going to be key to watch, david. as we do talk about supply chain and inflation and of course what's that going to mean for the fed and interest rates and thus equities. >> yeah. sometimes a deal of this size, morgan, can point people to value in the market. the fact that microsoft willing

to pay some 15 plus times ebitda for this company can sometimes bring other values up broadly speaking, not just in the gaming sector not today, though. not today. at least thus far. >> not today, although it is a merger -- i was going to say merger monday, it's tuesday. that will do it for us on "squawk on the street. "techcheck" starts now ♪ ♪ good tuesday morning welcome to "techcheck. i'm carl quintanilla with deirdre bosa and jon fortt massive m & a news this morning. microsoft buys blizzard for $68.7 billion and all cash deal expected to close in 2023. activision a company mired in sexual harassment allegations just this morning terminated 37