tv Squawk Box CNBC January 20, 2023 6:00am-9:00am EST
6:00 am
"squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm melissa lee along with scott wapner becky and joe and andrew are on the way back from davos. let's check out the early morning action with the final trading section of the week. scott mentioned a quiet session. s&p higher by 4 points nasdaq looking at 43 at the open treasury yields with the 10-year treasury at 4.31%. let's talk netflix shares of the company surging ahead of the open.
6:01 am
this after millions more sub vibe -- subscribers in the fourth quarter the first quarter that the net supported tier launched in november reed hastings is giving up his role as ceo. ted and greg will stay on. the chief operating officer will assume mr. hasthasting's co-ceo role. >> this is a valuation story they delivered operating margin guide is great. what are you willing to pay? 30 times i don't know >> different story three months ago. the stock hit a rally. as the valuation got re-rated
6:02 am
last year from 700 to whatever that valuation has come back up as the stock rallied into the number yesterday a note out that i saw that says it is too early to buy many of the reasons you suggest. >> some of the things they plan on doing like cracking down on password sharing hasn't gained traction on the bullish side, you have the argument once that kicks in, the operating leverage will continue to grow this is an interesting debate. we see the shares hanging on to the gains. up more than 6%. >> we scall that overtime. >> double ot >> i like the ring of that let's move on. shares of eli lilly. the fda rejecting the alzheimer's drug it would need to submit data on patients exposed to the drug for
6:03 am
12 months. the setback could delay the commercial introduction of the drug by several months if the agency decides to approve it biogen could benefit some analysts say it means it will have a full year to market its drug as eli lilly awaits approval. alphabet will eliminate 12,000 positions the ceo telling workers in the email the cuts are global. this comes the day after microsoft stated it will cut jobs as well meta and amazon and this news about alphabet >> and why wouldn't you cut? you have cover you have macro cover
6:04 am
you have industry cover. you have every reason to say it is time to get lean. speaking of layoffs. wayfair reporting to layoff 1,000 workers. that is 5% of the work force according to the wall street journal. this is the second round of layoffs for the company. fed officials getting everything out of their system before the central bank begins its pre-meeting quiet period tomorrow that includes new york fed president john williams who spoke last night steve liesman is joining us now. a lot of fed speak this week now we will have that quiet period, steve. >> not quite, scott. i'll tell you why in a minute. just ahead of the fed is the blackout period where officials are quiet for the ten days before the meeting john williams last night
6:05 am
acknowledged progress in bringing done inflation and loosening the job market don't get too excited. he insisted there is more work for them to do >> inflation is still high and indications of continued supply and demand it is clear that monetary policy has more work to do to get the 2% goal. >> williams said the recent data, some of which is bleak, was mixed and not out of line with the forecast for modest growth this year while manufacturing data has turned negative, williams pointed to strong job growth i asked if he altered the funds rate for the year. he said nope hewill do that with another round of forecasts in march. all of this amounts to the market which decided the gap with the fed futures pricing for 2023 and the fed forecast at the gap of 70.
6:06 am
the market expects a peak rate of 4.900 and cut after that. most fed officials are sticking to the forecast for funds rate that ends the year above 5%. they cited better data on housing inflation to decline and they point to the core service price as the reason to continue raising rates. the reason why it is not all quiet right now is i'll speak to chris waller i'll have that interview live on cnbc in the 1:00 hour. guys, not quite all quiet on the fed front. >> western front you mentioned this gap, steve, between the market and the fed i guess the biggest question in the market at this point is when does the gap get filled? at some point these two sides are going to have to come together at some point it is a matter of who blinks
6:07 am
>> i think the how is also really important here. let me say one thing and take a step back, scott the market marks to market every day. every piece of data comes in and the market processes it. what does it mean for the economic outlook and earnings j outlook and fed outlook. i asked williams if he changed his 5% he did not acknowledge 5%. we know he is. everybody on the fed is above 4.900. he said i'll do it if i need to in march the fed is on the different clock from the market. to some extent, scott, you want it that way. you don't want the fed to market every piece of data that comes out out. on the other hand, it creates the lag where they see it sooner than the fed ever acknowledges
6:08 am
it >> yeah. you don't want the fed to be blind to the data. you discussed that before. >> exactly >> you don't want them to have all of the data that points in the right direction. we're above 5% we'll stay there come you know what or high water >> i think the question is is te fed three months behind or six months behind? the fed raised the outlook from 4.6 to 5.13 in december. by then, it was probably hold the line you have five months of lower inflation data it was important for brainard to acknowledge and look at the inflation data the way we have beening loo-- been looking at in cnbc
6:09 am
the core numbers are higher at 3.5 or 3.3 she was the first person to acknowledge it we will see, scott, come march, if there is any give at all. i think of the two quarter points from here are baked in. the question is if they get down to doing it or hold the line further. to melissa's question. does the market have to come up to where the fed is? you have to ask yourself and ask -- >> or come down. depending on how you look at it. >> come up and go down in the process. what is interesting about brainard, steve, she acknowledges the problem, but acknowledges the stance that the fed has to keep at it on the path it is on. >> a little reporter's notebook.
6:10 am
i read that speech yesterday which started off. the first line is inflation has been declining i thought she was going to have a little give in her outlook of policy there is a lot of stuff in there that makes you think if you didn't have the section on policy, you think here is the fed official that is loose ening up there is a lot of stuff in there. including a difference with powell about how service inflation comes down she is suggesting or powell says the way to do it is loosen up the job market she thinks all of the other prices coming down around it like fuel and goods prices could bring down service inflation maybe we don't have to loosen up the job market as much in the outlook for policy, she suggested getting to the restrictive level for some time. >> steve, thank you. look for the interview at 1:00
6:11 am
steve liesman. stock of the morning is netflix. shares are surging after strong growth stephanie link will join us after the break. and advertisers fled twitter when elon musk entered the building now it may land other content deals. more on that just ahead. you are watching "squawk box" here on cnbc >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com. my dad was a hard worker.
6:12 am
he used to do side jobs installing windows, charging something like a hundred bucks a window when other guys were charging four to five-hundred bucks. he just didn't wanna do that. he was proud of the price he was charging. ♪♪ my dad instilled in me, always put the people before the money. be proud of offering a good product at a fair price. i think he'd be extremely proud of me, yeah. ♪♪
6:13 am
6:14 am
just look around. this digital age we're living in, that talent! it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it and now a lot more people can. so let's go. the digital age is waiting.
6:15 am
welcome back to "squawk box. shares from nordstrom sinking after the drop of sales. the department store cutting the earnings for the year. netflix added millions more subscribers than expected in the fourth quarter announcing reed hastings is stepping down. joining us is stephanie link of hightower. 16 hours after i saw you, you don't like the hastings news now you have time to think about the quarter and digest the hastings news. give us your thoughts. >> there was something for
6:16 am
everyone in the quarter. bulls and bears. you talked about the net adds. that was due to 154 new launches of content and five of the most watched ever at netflix. including the "wednesday" series that content spend led to better cash flow. we ended the quarter with better cash flow and operating margins. we got up at 170 basis points. we wanted better revenue guidance, scott, was mixed lower earnings in line revenue and modest net add growth when you add it up, the numbers are not going up that much only 1 million in sub adds and free on cash flow. this is a very competitive environment. increasing prices.
6:17 am
they want better subs and they will have flat content spend it doesn't change my mind after the quarter yesterday. especially trading 28 times. it is interesting that the sell side is not behind the name. only 29% of the sell side with buys on this thing it is not overly loved it had a nice run. the multiple is high >> melissa is saying that as well as she characterized it as a valuation story. the stock has run a lot into the earnings now if you tack on another near 6%, you do have to rethink what you are willing to pay for it. also in light of the hastings news you could take they are in the early innings of transformation. hastings stepping aside is a big deal or you suggest they just knocked it out of the park on the subs number. they seem to be in a good place. they got people in that role now
6:18 am
who know what is going on. especially with the ad supported tier he would not leave if they were in a good place. >> they are in a fine place. there are so many unknowns they are transitioning the model. we don't know how that will come about. you have massive competition all over the place disney is under enormous pressure to get dtc right. they will eventually this is so much competition and unknowns to your point on valuation, 28 times earnings for total revenue growth that just fell -- rose 1.9% are you paying that much in terms of multiple for that little growth on revenue although the net sub adds were well ahead, they were below the levels last year i don't see the trajectory of
6:19 am
growth just yet at this multiple >> hasn't the competition picture changed, stephanie, from a few months ago competition and the stock which you own disney, will be paring back on spend on scrtreaming netflix is in a better position and not spending on content. everybody will not spend as much on content that is actually a good thing for netflix. it shows it is in the pole position in the crowded market >> that's true everyone will be pulling back on content somewhat there are so many players. not just disney. warner bros. and paramount so many out there that i just think the landscape has changed. i'm not 100% sure disney is actually going to reduce content spend. i think they have to reduce sgma
6:20 am
spend which rose $8 billion from 2018 up 85%. that is where i think they cut costs. not on the content side. disney has said, iger said they have to fix content. they have to fix by spending i'm not saying there is so much wrong with netflix they are the industry leader there is opportunity for them. i don't like the valuation the stock has run quite a bit. when you look at the numbers, what are you getting for 20 times? you are getting a 2% revenue number and 7.5% year over year net add loss i don't find it compelling >> let's switch your attention to alphabet. cutting jobs this morning. 12,000 6% of the work force refresh my memory. you sold this stock when you bought meta? is that right? you moved out of the name. i'm sure you have thoughts about
6:21 am
big tech in terms of vshrinking the work force >> i'm not surprised to hear alphabet cutting costs meta has done it twitter has done it. just about everybody salesforce we are seeing the undoing of the stay at home trend and the frth of zero interest rates these companies got fat and happy and you see that unwind. digital advertising. we know it has been weak for a long time. you know cloud is slowing a bit. i still like the cloud story long term. the total addressable market is enormous we are going through a soft patch. there will be opportunities. you know i own meta. have been suffering with that for sure all of faang has seen a slowdown it has been all of them haven't performed in some time i think we have to get through
6:22 am
this soft patch and get through to the other side. meta is actually quite cheap i think there is more that they can do on the cost cutting side. i do think they are making progress in terms of reels and they can monetize whatsapp i'm tempted, scott, but it is still trading at 19 times. let the dust settle a bit. >> see you, steve phanie coming up, twitter had advertisers pressing the pause button when elon musk took over. now landing content deals. we will go inside that story next when "squawk box" returns girls... the chess club has gained an edge on our bake sales. we need more ways of connecting with customers, fast. i know some consultants with great ideas.
6:23 am
can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech. that could really help us manage inventory. and save us a ton of dough. then let's take back our market share. checkmate, chess heads. girls, i said “bedtime”! there are some things that go better...together. burger and fries...soup and salad. like your workplace benefits and retirement savings. with voya, considering all your financial choices together can help you make smarter decisions. voya. well planned. well invested. well protected. i am here because they revolutionized immunotherapy. voya. well planned. i am here because they saw how cancer adapts to different oxygen levels and starved it. i am here because they switched off egfr gene mutation and stopped the growth of tumor cells. there's a place that's making one advanced cancer discovery after another for 75 years. i am here... i am here.... because of dana-farber. what we do here changes lives everywhere.
6:24 am
i am here. lomita feed is 101 years old this year and counting. i'm bill lockwood, current caretaker and owner. when covid hit, we had some challenges like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us. see if your business may qualify. go to getrefunds.com. why are 93% of sleep number sleepers very satisfied with their bed? maybe it's because you can adjust your comfort and firmness on either side. see if your business may qualify. your sleep number setting. to help relieve pressure points and keep you both comfortable all night. save $1000 on the sleep number 360 special edition smart bed queen now only $1999. only for a limited time. what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions
6:25 am
against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create 92% still active? seems high. seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. rent a peloton bike or bike+. terms apply.
6:26 am
interesting report from the information that twitter's fourth quarter revenue down 40% and more than 50 adv 0500 adver paused spending. advertisers are leaving, but twitter is landing deals with sports leagues here is axios reporter hope king >> good morning. >> i don't know if you have thoughts of the information report, but i wonder how it shakes out with what twitter is losing and gaining >> what twitter is losing is more advertisers i think the important thing to note is we are going into super bowl season. the journal had a story out talking about dangling
6:27 am
advertising promotions if you are an advertiser and spend over $500,000, they match that in free advertising what it underscores is media companies cannot quit twitter. i think twitter as a combination of live television with text and now a little bit of tiktok coming in. i don't have tiktok. e never downloaded it. if you look at the features on twitter, that for you section of the app which is very controversial is very much like tiktok it engages people and feeds new things that you haven't seen before i think the combination of that is to learn and sports networks and leagues. >> as you see the revenue stream changing, hope, i wonder how you
6:28 am
characterize twitter is it a declining asset? is it selling off the kegerator and doing the fire sales to raise extra cash elon musk is out there you never know what he will do is this a business in transition is this a matter of time before it comes back? >> it depends on the time period we give the company. right now, it is in a lot of pain it is also in transition one executive has said this is a 12--week-old company for a 16-year-old platform i think that evenncompasses the leadership changing things up quickly and very publicly. you also have a user base that has been there i think i passed my 13-year anniversary. it is very different from when i joined if you are on twitter, you love it, if not, you are on other
6:29 am
platforms. the key is to keep active users engaged. if they are moving toward the tiktok model, musk talked about turning twitter into youtube you are drawing in another host of people coming in. that's a different set of c content. >> i feel the story is about the power and peril of the platform. the content providers and media companies all see the power of it whereas the advertisers see the peril of it. i don't necessarily see that changing any time soon if it doesn't, what does that mean for twitter's bottom line in the effort to become profitable and musk to make money? >> i think he has to ititerate. he has to update and change his mind within the same week at times. he is racing against the clock to your point, if you can't do
6:30 am
it fast enough, as you said, the declining asset as melissa said. if you can't retain the number of users to keep up engagement, it will probably be in a more per perilous state >> hope, thank you they may not have enough hope king of axios. coming up, the ftx drama heads back to court today. eamon javers will tell us about the battle and china reopening. what does it mean for u.s. relations with beijing and the second largest compeconomy? as we head to break, we look at the s&p winners and losers.
6:31 am
>> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable and secure oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business.
6:32 am
meet jessica moore. jessica was born to care. she always had your back... like the time she spotted the neighbor kid, an approaching car, a puddle, and knew there was going to be a situation. ♪ ♪ ms. hogan's class? yeah, it's atlantis. nice. i don't think they had camels in atlantis. really? today she's a teammate at truist, the bank that starts with care when you start with care, you get a different kind of bank.
6:34 am
good morning welcome back to "squawk box. we're live at the nasdaq market site in times square s&p 500 looking at 5 at the open nasdaq looking to be up 50 points genesis filing for bankruptcy protection following the implosion of sam bankman-fried's ftx. genesis is owned by digital currency group owes $9 million to customers. ftx back in bankruptcy court. eamon javers is joining us now with more. eamon. >> reporter: good morning, scott. a lot of money on the line in delaware we saw the dramatic late filing yesterday by ftx's former compliance officer alleging conflict of interest and wrongdoing by sullivan and cromwell
6:35 am
the law firm representing the bankruptcy proceeding. the 17-page document, sullivan and cromwell overbilled by millions manipulated the filing to generate fees for the firm made false statements and aided and abetted securities fraud sullivan installed john ray as the ceo of the furthermore to h -- firm to have a supporter it is not clear after the late filing yesterday whether he will be able to do that today with the significant allegations that are dropping in the proceeding ftx's new ceo john ray did support sullivan and cromwell this week saying the firm played an integral role to recover money for customers. other filings reveal a pay scale for sullivan attorneys working
6:36 am
on the bankruptcy. four attorneys billing more than $1,000 an hour and three with over $2,000 an hour. john ray is looking to reopen the ftx exchange telling the wall street journal that everything is on the table back to you. >> thank you, eamon javers. faa says a third party contractor is responsible for the last week's safety systems outage that grounded all nifligt for hours. staffers were working on the system when certain files were unin ttentionally deleted. t-mobile says hackers stole information from 37 million customers. it happened in november. the stolen data is addresses and dates of birth
6:37 am
the second breach in the past two years. coming up, china reopening and what it means for corporate giants doing business there. check out alphabet it will eliminate 12,000 positions which is 6% of the staff. reminder, you can watch or listen to us any time on the cnbc app >> announcer: currency check is sponsored by interactive brokers. the professionals gateway to the world's markets.
6:39 am
6:40 am
under president xi's mantra of common prosperity, there are two ways to achieve that so everybody gets a piece of the pie. the other is growing the pie so everybody gets the pie they ben pefitted from the form to the latter. >> that was morgan stanley's ceo james gorman on "squawk box" yy yesterday. let's welcome michelle cabrera >> pleasure to see you >> what do you make of the way that gorman characterized?
6:41 am
do you agree >> he is reflecting the chinese vice premier was there in davos. he stated china is back. he is making for more investment they need to do this they suffered so much under zero covid. they need to revive the economy. i would say the historical fact pattern is you have to ask when they are doing this is it tactical and temporary for the last ten years, xi jinping made a very radical ideological shift away from the things that led china to grow that was started under jinping business confidence has been hurt in a shift from more reliance on state-owned enterprise and sucking up the capital from the banks and g golden shares.
6:42 am
look at what happened to jack ma yes, that is what they are saying right now for now, that's what they want you have to wonder how much you can rely on them to continue on that viewpoint. >> when people ask you what is our relationship with them and what do you say? friends? foes frenemies? >> i think the security statement under biden makes it clear. they are a strategic competitor. we have to be concerned about what they will do in terms of hurting our national security and we have to work to make sure that they are not going to hurt national security. that is the reason why there is constant talk of reverse syphios coming now they are increasingly talking about outbound investment controls where the u.s. government in some form or fashion can tell an american business you can invest in china. >> that is interesting
6:43 am
i don't think companies buying other companies in china more like private equity going in and investing in malls. is there a security concern? that has been going on and perhaps still is to some degree. >> absolutely happens in the private equity level not just malls it is all kinds of things. a.i. chips. technology when they talk about reverse, which could come executive order or legislation and congress, they are talking specific covered areas. a.i. chips. some talk of large capacity batteries. critical minerals or more broad. anything related to military industrial complex anything related to the intelligence services. there is even talk and this is what gets the business community concerned. anything dual use.
6:44 am
it will not come to that, but the scope of the thing is yet to be nailed down that's why we haven't had it yet. it's coming in some form >> who do you think needs who more in what some describe as this reverse globalization or at least paring back a dramatic move to globalization. now we hear about onshoring and chip factories built here and manufacture this here. who needs who more >> at this point, the chinese need the united states for sure. they need growth they managed to have hundreds of millions of people emerge from poverty. there are still millions living in poverty they need economic growth. the united states, at the same time, as we start to move with the chips act for example, that was done under the national
6:45 am
security we want to control our chip supply you get it that becomes a de facto industrial policy. industrial policy historically means sub as sidizing industries it leads to the change in how we think about our economy. something we have to really think about and be thoughtful about moving forward >> we think about the relationship with china and the u.s. in terms of who needs who more in corporate america, it had always been china. we lived without china because of the covid shutdown. we understood what it meant to a business to take that away now where do we stand on the notion that china is the next leg of growth? >> it is a real pickle for american business. it goes back to the original point we were making earlier the shift when xi jinping says he is a believer in the private sector how much do you believe that is that tactical and temporary
6:46 am
what american business found out is xi jinping can change his mind on a dime and suddenly what was policy before is not anymore. what degree does business have confidence about staying there at the same time manufacturing for textiles and iphone. all of this is concentrated there for a reason cheap labor. they work hard at that there are few other places with the capacity or scale to be able to achieve that. that's why it is so hard for american business and why they are worried about reverse. i was at a meeting for the council on foreign relations bob o'brien and i asked him about it he was completely on board when the event was over, everybody in the room, all the participants came up afterwards and said we have to do reverse democrats and republicans.
6:47 am
6:48 am
6:49 am
the first time you made a sale online was also the first time you heard of a town named... dinosaur? we just got an order from a dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. godaddy. tools and support for every small business first.
6:50 am
6:51 am
higher by 46 points. take a look at treasuries as well had a real low in yields of late, but they've gotten off the mat a bit. there's the ten-year note. 3.44, i think that's what it says. >> your eyes are good. scott mentioned netflix, blowing past subscriber expectations, the cheaper ad supported plan launched and there's a leadership shake-up. hastings will become executive chairman of the company. the stock surging. here with more is mic moffettnathanson great to have you with us. does a quarter change your view of netflix >> it doesn't. it really doesn't. what we've seen, there are good
6:52 am
quarters and bad quarters. there was a pull forward we take the big picture view we take the narrative as getting much better. i think the stock is ahead of itself i think people are hiding in it for some good reasons and i guess drawing too fast, too far, we think they're better opportunities other places at this point >> opportunities and better places like what it sounds like -- it all comes down to valuation. >> yeah, i think meta and alphabet are really attractive entry points here. i know people are worried about the ad numbers but the stocks have fallen so much and i think people have taken the problems in 2022 and thought they were structural and they were circu cyclical to me, it's the better
6:53 am
risk-reward. >> in terms of netflix, if you wanted to make a bullish case you could, and the couple levers that still haven't come in full effect so far this year is the ad-supported tier as well as a password-sharing crackdown we didn't see anything kicking those fourth quarter results higher because of those two items which will gain some traction presumably in 2023. do you discount that do you think that's in the stock already? >> i think that's in the stock already. i think the run we've had and expectations in the market are for a reacceleration of growth that's what we're all forecasting. i think those -- some of those levers are real. i give them credit for quickly fixing -- last year was a major problem. again, i think, you know, what you've articulated and we've all
6:54 am
modeled, the ad tier takes awhile for it to kick in and they talked about that on the call last night. it's a second-half longer-term thing. it's just amazing how quickly the tone shift has changed again and i just think you want to lean into netflix when people start worrying about the patterns right now it's all systems go. and i agree with you the data points look good in terms of cash flow, margin, reacceleration of growth it sounds great. but where there already. the stock has run so much without a lot of numbers changing into the spread. >> isn't it all the more impressive, though, as you suggest, it, quote, takes awhile for that to kick in. and they were able to do the kind of sub numbers they did those are blow-you-away numbers. >> they're really good numbers without a doubt. what's happened, scott, you're
6:55 am
growing in lower markets the growth in revenue per user, there's a mix shift going on they've had an opportunity to grow in some of the markets that they've not penetrated well. i give them credit that was a good quarter on subs. the next quarter guide is a little bit -- they delivered great. what's happening, as other companies are slowing down in spending, the fly wheels kicked in it looks like the content spending is getting more sufficient i think the benefit of their models really shine through here, they're wondering what's going to happen to the competition. they start slowing down spend as the linear models start to weaken in '23. the setup is good for a structural standpoint. i've not seen that in many, many years.
6:56 am
so i think the streaming wars are coming to an end which does favor netflix. that narrative change is a big part of what we see in 2023. >> how does the hastings news influence you if at all? >> you know what, he's still involved both of the people stepping up have been tested i'm going to see that when reed sees something that needs to be fixed, he's going to speak up. i don't see it as a major shift. we were more concerned with the disney shift a couple years ago. this not as much >> thank you >> good to see. tesla will be among the hundreds of companies reporting results next week. coming up in the next hour, phil lebeau is going to tell us if recent price cuts are generating more interest among buyers, and alphabet joins the list of tech
6:57 am
giants slashing jobs head to help relieve snoring. so you can both stay comfortable all night. save $1000 on the sleep number 360 special edition smart bed queen now only $1999. only for a limited time. ♪ icy hot pro starts working instantly. with two max-strength pain relievers. ♪ so you can rise from pain like a pro. icy hot pro.
6:58 am
6:59 am
osisko development is a premier gold mining company with a goal of achieving mid-tier gold producer status with the company's advanced-stage projects located in north america, headlined by the cariboo gold project in bc and the tintic project in utah. osisko development this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. good morning investors trying to hold on to the early morning rally. central bankers making
7:00 am
statements about the state of the global economy this morning. shares of netflix streaming to the upside after the company reported better than expected subscriber numbers and will i am embarking on a new endeavor we'll bring you the highlights of that interview as the second hour of "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc live from the nasdaq market site in times square. joe, becky and andrew are making their way back from the world economic forum in davos. u.s. equity futures at this hour, just showed you a few moments ago, still mixed the dow would open lower s&p and nasdaq would open higher nasdaq get thing a boost from those netflix subscriber
7:01 am
numbers. that's the entire tech sector looking pretty good this morning. take a look at treasuries. there is the ten-year note 3.44 the two-year at 4.16 gold continues to climb as well. oil as we take a look there, crude is at $81.04 that's up just shy of 1% and crypto has been on a big run of late. where are we today there is bitcoin still above 20,000 up 20% in the a week or so and up, well, down a little bit this morning. but nonetheless, pushing the door on 21,000. >> let's get to dom chu. >> good morning. if you take a look at the picture overall, what we have right now are shares right now of certain key tech players out there that are making the moves higher if you look at alphabet, those shares are higher by roughly 3% on some of the breaking news that we got this morning with regard to the job cuts that are happening at alphabet.
7:02 am
it could be 6% of its workforce, upwards, about 12,000 jobs it's never good news to hear about job cuts but investors are applauding some of the cost-cutting decisions there. the ceo says he owns the decisions that have led google and alphabet to where they are today. we're watching alphabet shares as well. take a look at what's happening elsewhere in technology. we're watching apple shares right now being called a top pick for 2023 by analysts over at credit suisse they like the brand positioning, the services business. we're watching apple shares up fractionally on that bit of news also on the downgrade front, we're seeing cowen downgrade shares of salesforce they do think some of the executive departures that we're seeing there will cause some disruptions as they have a restructuring effort under way they see macro headwinds
7:03 am
and we'll end with an upgrade of ralph lauren on that luxury side of consumer discretionary. up 1.5% right now. barclays, they think that company is positioned well they also think that they have some real inroads to be made in their direct to consumer strategy as well ralph lauren shares getting help there. melissa, i'll send things back over to you. >> dom, thanks. futures at this hour, once again, a bit of a mixed picture. trying to break this losing streak that we're on investors trying to hold on to that january rally there's your up to date look at the futures. the dow would open lower the s&p has been down a couple days in a row. let's talk markets now with sherry paul, senior portfolio manager and private wealth adviser at morgan stanley. also senior equity strategist.
7:04 am
it's good to have both of you on linda, your take on where we are here we have this nice rally going, a little bit of upset over the past few days. where do we go from here >> well, it's actually been one of the strongest starts to a year on record, almost wherever you go with the exception of oil and the u.s. dollar. a big, big run-up. we should be consolidating now through the end of this month and maybe further. but there's still a lot of momentum in this market and with all -- lots of stocks underneath the biggest ones rallying, it's hard to be a bear here right now it looks like the pain trade is definitely to the upside so many people in cash too long in cash they're becoming inpatient. >> it's interesting to hear you say that do you agree it's hard to be a bear here? i feel like most people are regardless of this start of the year that we've had.
7:05 am
>> thank you, melissa and scott, for having me. i think right now there are two things that are weighing on investors, number one is the condition in which we're investing which is really the economic climate and that involves geopolitical policy, questions around the fed and, number two, what's the smart thing to do with our money my job is to help people go from primal fear into practical portfolios and right now this market presents a tremendous opportunity for long-term investors. it's the bottom line and so the answer is that the market is going higher over the long term. in the short term, money should be placed in destroyed areas of the market we make money in down markets. we want to keep it up in up markets. rebalancing on a selective basis into technology and continuing to own our favorite areas which are health care, utilities and staples, to provide that sort of income balance to a portfolio
7:06 am
which is crucial going forward and so, you know, you could ask yourself which bull market or bear market are people talking about. that would hinge on time horizon. right now my biggest concern for investors is that they stall out because indecision is the death nail of performance. people need to move out of cash into practical portfolios going forward. if they do that, there's a lot of opportunity going forward >> so you don't think we're going back to the october lows, sherry >> well, we already had a few retests of the -- of the october low. we started that process in august and so if you talk to sort of technicians and technical trainers, which is one way of looking at the market, we've kind of already hit those retests. i think that instead of, though -- i think we got to break this cycle of perfectionism that's coming to investing where people want to know the answer before they place money. that's not the chassie of
7:07 am
capitalism, forward thinking yes, maybe we might. however, i think in the long term right now, there are a lot of great companies that are at the discount and it always amazes me that's when people are afraid to step in, when things have gotten actually cheaper. >> so you must not think we're going back to the lows either if you declare that it's hard to be a bear is that a fair characterization of your view >> no, no, actually, that's not fair it's tough to be a bear right here there's too much momentum in this market, too much money that's looking to chase now after being in cash for too long we believe this year is going to be a volatile one. we very well may test last year's low we very well may go to 3400 for the low end for this year. we think it's going to be a wide-range year. very well would end the year at the high end of that range, maybe up over 4,000 -- >> but -- i'm sorry to interrupt
7:08 am
you -- >> lots of volatility within -- >> what am i playing for now if it's hard to be a bear for the near term, what am i really playing for if you still think we could go back to those levels if not breach them. >> yes, i agree with your other guest. if you're a long-term investor, you can find pockets find pockets of value right now. there are pockets of value in small cap areas and the cyclical value areas, homebuilders, not timely they're inexpensive now. areas of the market where they're inexpensive. if today, year to date, bitcoin has been the biggest winner year to today do you think that's a market that you think is in fear? that is not. look at your portfolio there are places where you can peel off we're overweight value, we're
7:09 am
overweight cash still with money on the sidelines, and the defensive areas, still the defensive-paying areas i think it's going to be a volatile year, there's lots of places for volatility. we've not priced in earnings declines this year we're going to get out of what would be a mild economic recession and, you know, just stay tuned and really, it's pick your spots >> linda, you mentioned the cash on the sidelines and you're overweight cash and a lot of investors are overweight cash. traditionally that has been an argument for thedry powder on the sidelines that will go into equities but people are looking elsewhere. why should you be in the riskiest part of the company when you can be in bonds, you can go to high yield and get a better yield, in fact, that's what some people are recommending at this point is that assumption this time around, should we take that with a grain of salt, that the cash on the sidelines will help the equity markets it may go some place else. there is an alternative, many.
7:10 am
>> yeah, yeah, that's a great point, melissa and i want to -- there's a difference between a trade -- and building a constructive portfolio. why not do all of those things because right now they all present their own lane of opportunity, so you mentioned the bond market, having some money in cash right now. we're getting 3 and 4% in money markets. we've got 3.5% on a two-year treasury good dividend yield in certain areas of the market and this further emphasizes my point which is sitting in one lane because you are waiting for perfect things to come forward is not investing the solution set is to find the corridors of opportunity and there are plenty like you just mentioned. with regard to like a market setback and a profit reset, resets are not crises. we just came out of a crisis that's the thing that people fear the most when they hear recession. that's very different from a
7:11 am
natural course correction. and so a profit reset, and we're seeing this now displayed at the corporate leadership level that not all companies are going to reset their balance sheets in the same way we're going to see how decision-making and corporate balance sheet management distinguishes winners and losers even within the sectors. what i'm urging investors to do is to move away from lazy market cap-weighted thinking into sector-specific liquid dramatic strategies that emphasize in a subsector way those companies that we know are sort of battle-tested and ready to deliver for shareholder value on their balance sheets you could say that's the case for credit in addition what is not a solution is sitting on the sidelines and waiting as if the economic data which we know is a past tense -- is a past tense set of information to keep you from looking forward and moving through, you know, a natural cycle which is reset we know that economies reset
7:12 am
we go through recessions, we come out of them, we move forward and that's where i'm encouraging. notwithstanding retesting lows, but that's a temptation, right somehow we're all going to wait for that >> all right ladies, thank you. >> that's my primary point. >> we'll talk to you both soon thank you both coming up, the u.s. conference of mayors will be meeting with the president today to discuss the most pressing issues facing american cities. we'll speak to francis suarez. >> we pretty much always have some crypto conversation with you. i don't think we -- >> i think all of that has been a waste of time. and why you should waste my -- >> you think the whole thing -- >> going to zero and it's fake >> bitcoin is a hyped-up fraud it's a pet rock. it doesn't do anything it's a pet rock. >> bitcoin >> you can own it all you want --
7:13 am
>> i'm talking -- it's billions of dollars. >> i don't care about bitcoin. we should drop the subject >> the response from the miami mayor coming up. in the meantime, check out futures. we are higher on the s&p as well as the nasdaq. the dow looking to lose 45 at the open "squawk box" will be right back. >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com. 92% still active? seems high. seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply. [office sounds] ♪upbeat music♪ ♪♪
7:14 am
7:16 am
it was march 2021 when our next guest tweeted sam bankman-fried that he was, quote, overjoyed that your commitment to our community advances our efforts to be the most crypto city on the planet joining us now with how he feels about the crypto mayor these days, the mayor of miami, francis suarez great to see you >> likewise. >> you were overjoyed when ftx decided to put their headquarters in miami. you praised sam bankman-fried. looking back on that, did you wish you asked more questions? >> i think everybody who invested in ftx wishes that they had clarity as to what was going on certainly behind the scenes i think some of the smartest people in the investment world that were on their -- and did exte extensive due diligence and are
7:17 am
much more sophisticated and have much more sophisticated tools than we have weren't able to detect that. certainly i wish for crypto in general which has certainly taken a step back in this crypto winner as a result of those scandal and is as a result of the general market conditions. i wish none of that would have happened i wish they would have been responsible with their customers' money and part of it is the government putting guardrails on what they can do with customers' money. >> you have wanted for miami to be known as the crypto center of the united states. do you still take your salary, your city salary in bitcoin. >> i do, as a matter of fact it's been a good investment. if you -- you have to understand i get paid every two weeks so i didn't sound -- now it's at
7:18 am
20 sometimes people misunderstand that you're buying it every two weeks, you're buying it in the fluctuations since i bought it -- or since i started taking my salary in bitcoin, my salary is up it's been a good investment. i think that's part of the problem with this conversation about bitcoin, and it's interesting, jamie dimon's frustration, i heard the prior segment, sort of expresses the fact that obviously we live in a 24-hour news cycle world every fluxuation is subject of great conversation bitcoin is up 20%, 30% you know, again, you can't be constantly on the ups and downs. you have to talk about this technology in a more -- understanding that you're -- we're in the early stages of development of blockchain
7:19 am
technology and that is good for cities' ecosystems. >> when you're sort of moving miami towards bitcoin in terms of welcoming people who had bitcoin and block chain projects it's a time where the regulatory framework wasn't necessarily as developed to keep that industry on the rails so to speak, and we're seeing that now with the fcc issuing so many different statements about things like, you know, lending -- to lenders, lending out crypto for yield there's so many parts of the industry that had gone on for years and years, completely unchecked. do you feel in any way a part of that sort of hype machine that helped crypto get maybe too big for the regulatory framework that exists? >> that's an interesting question the way that you frame it the regulatory environment wasn't there there's no doubt about that, right? i think that's incumbent on the right -- on the regulators and on congress and obviously the
7:20 am
people who impose those regulations. but you always expect people who do business to do business ethically. that's an expectation. i'm sure every single investor, for example, of ftx had, right when they present them with balance sheets that they're scrutinizing to determine whether or not they make an investment, they expect the balance sheets to be accurate. you never expect people to misbehave. having said that, i think the industry was screaming out for regulation i called for regulation throughout the process i had a crypto conference for mayors where we talked about regulation and i think the offshoring of a lot of these companies was also troublesome if the united states had put into place the right regulatory framework, maybe some of these companies would have been on shore and they would have been performing with the right guardrails which would have avoided some of the things that have happened. we can't go back in time but we can look forward and i
7:21 am
think now, you know, elected officials, particularly at the federal government level, have to roll up their sleeves, do the hard work of understanding how this technology works, why it's important, and i think when you look at inflation, which is at historic levels, when you look at the debt ceiling debate that we're having this week, when you look at the deficit that are going to be crushing to future generations and the manipulation of, obviously -- for obvious reasons that the fed has to get involved in to try to stabilize all this, that screams for investing in things that are outside of the fiat system which is why it's no wonder to me that bitcoin is up 30% this year. >> you actually believe that the move in bitcoin this year is representative of something more than just simply investors taking a look at what was last year's, quote/unquote, trash and investing and bidding it up in
7:22 am
the early part of this year as the nasdaq has risen, bitcoin has been correlated with that. and i have to say, throughout much of the discussions since the demise of ftx, i've heard for so many supporters including yourself who come on and suggest that the regulators are the primary ones to blame. that ftx, you know, has allegedly, at this point, committed a great fraud. but they're the -- the perpetrators of -- the perpetrators of this -- what sounds like a ridiculous notion at the time and it still does today. with all due respect, that bitcoin is going to replace the dollar and that it's a tremendous store of value, et cetera and that had more to do with the hype machine or this belief that drew so many people into this asset class than anything else
7:23 am
>> well, with all due respect, you know you don't know the future nor do i. i think we live in a world where when people lose money, right, or things don't go the way they expect, everyone wants to blame someone. as you said, we live in a capitalist country where people risk capital sometimes it works out for them, sometimes it doesn't and we have this -- i think a lot of this with all due respect media-driven when something doesn't go right, we have to find someone to blame for it, particularly when it involves just simply investing in something, when something goes well, because, you know, maybe in six months, bitcoin is at 30,000, 40,000. are you going to have me back on the show and apologize to me and say, mr. mayor, you were brilliant, supersmart to be someone who believed in technologies that have some fundamental deficbenefits that fiat system doesn't provide? i hope you do. you don't know the future.
7:24 am
i don't know the future. i think what's interesting about this technology is the -- obviously the blockchain which is a way to, you know, account for each transaction the fact that it does have -- operates outside of the fiat system which is something that people i think find interesting. i don't know that anyone said it's going to replace the dollar >> plenty of people said that. i'm not suggesting that you -- mr. mayor, i'm not suggesting that you said that but there are plenty of people who suggested that it was going to replace the dollar. >> it has a lot of benefits. it has a lot of benefits it creates efficient transactions i think you would acknowledge that the movement of money is inefficient and hyper -- and too expensive. and i think it allows for cross border payments in ways that, you know, the current financial system has for whatever reason been inefficient at. there's been a lot of momentum
7:25 am
to digitize the dollar as well, right, and create a token-like system with a dollar we've seen issues with not just bitcoin or ftx, but we've seen issues with stablecoins which we thought were going to be stable. >> thanks so much for your time. good to see you. >> thank you, guys thanks for having me on. coming up, one week after tesla price cuts, they're seeing a surge in buyer interest. but those who own a tesla might not be too happy. time now for today's aflac trivia question. what is the acronym httpshs ort for. the answer when cnbc "squawk box" kopts what do you... got there? a hospital bill for me? mm-hmm. for $1,200? ga-a-a-ap! did you say "gap"? yeah, he did. he's talking about expenses that health insurance doesn't cover. ga-a-a-ap! uh-uh. aflac! that's why there's aflac. it pays you money to help close that gap.
7:26 am
7:28 am
. now the answer to today's aflac trivia question. what is the acronym https short for? the answer, hyper text transfer protocol secure. >> in the market for a tesla now might be the time to head to the dealership phil lebeau joins us now with more phil >> it was a week ago that tesla said it would be slashing its prices here in the u.s. as well
7:29 am
as in europe and other parts of the world and after that, what happened was a surge in interest in tesla vehicles. these are new numbers from edmunds which tracks how many people are looking at websites the model y, the second most researched vehicle it was 60th the week before. the model 3 has jumped to 11 these are substantial price cuts that tesla initiated on the model 3 and model y. how substantial, 6% on the model 3, and $13,000 or just under 20% for the model y. well, that's good news if you're in the market to buy a tesla, not so good if you're somebody who has one and says, maybe i'll cash in on the interest that's out there. why? according to edmunds, the average price was down almost $18,000 since june now the high was in june
7:30 am
it's come down about $18,000 about 24%. in terms of a percentage, that is a much larger drop in a used tesla percentage-wise than for the market overall i think the market overall was down 11%, used teslas down 24% don't forget, we get teslas q-4 results next wednesday i suspect a lot of questions for elon musk during the conference call, if he's on the call. we expect he probably will be. and the real question is going to be, guys, what is happening to the auto gross margins? 26.8% is where they were at in the third quarter. many believe they're going to come down substantially when they report their q-4 results. and the question is, where do they settle out in the first half of this year, if not later this year? >> with the price cuts, the margin is definitely going to come down. that's math -- >> 100%. >> and the federal tax -- i mean, the tax credit, phil,
7:31 am
seems to be maybe one of the most important components of the story because those price cuts put -- >> yes -- >> the 3 and the y in contention for that tax credit. >> yes, provided you have the right income threshold that's the part of this, melissa, that cracks me up you hear people saying, oh, now i can qualify for that really how much are you making? i make $250,000 a year you're not going to get that credit it will spur demand, there's no doubt about that >> still to come, roger ferguson joins us to talk about what could signal a soft landing, where he sees the fed taking rates. don't miss thomas peterffy on retail iesng anvtind where customers are putting their money to work. you're watching "squawk box" which this is cnbc because is it really a vacation home if you have to share a house with a host?
7:32 am
♪ only with vrbo what if you were a major transit system with billions of passengers taking millions of trips every year? you aren't about to let any cyberattacks slow you down. so you partner with ibm to build a security architecture to keep your data, network, and applications protected. now you can tackle threats so they don't bring you to a grinding halt. and everyone's going places, including you. let's create cybersecurity that keeps your business on track. ibm. let's create
7:34 am
7:35 am
one tough talking and one dovish talking central banking. kuroda telling us we will continue the current extremely accommodative expansionary monetary policy while lagarde says stay the course no question about that here's the upshot. don't expect japan to raise the upper band for its ten year any time soon like it did last month. lagarde's comments point to a 50-basis point hike term global bond yields are higher over the past six months as a result of the central bank moves. almost doubling, but still very low. and european yields rising the most as it plays catch up with high inflation problems and with the us. of course, they're off a little bit this month, down 25, 30 basis points you've had better inflation news
7:36 am
as well. central banks puzzling over what the reopening of china means lagarde saying it means higher price inflation. for europe, john williams was a little more -- said it was a bit more mixed could go either way. i'll be asking this question and others later today to chris waller we'll bring you some of that interview live on cnbc, scott, around 1:00. >> look forward to that. steve liesman. the stock market continues to worry that the federal reserve could risk causing a section after lael brainard reiterated that interest rates need to stay high. for some perspective, let's bring in roger ferguson. he's also the former ceo of tiaa and a cnbc contributor roger, great to have you with us i'm going to ask you the question -- >> nice to be here. >> who is right when it comes to pricing what that terminal rate
7:37 am
will be? right now there's a huge gap between what the fed thinks it will be and what the markets think it will be i think steve liesman said it's a 70 basis point gap that's quite a difference. who do you think will get this right in the end >> i think in the end, the fed is probably going to get it right. i think they are quite committed to getting to a terminal rate that is somewhere over 5, the market does not expect that. the reason is that i think the fed is concerned on not making a mistake of stop-go that was made in the 70s i think they see resilience in the labor market, giving them a higher degree of confidence and, frankly, i think their definition of a soft landing is one of a very short shallow recession and they're willing to risk that. and i don't think the markets agree with that as something they would be willing to do. >> amongst the wild cards that the fed may need to think about as possibilities, roger, things to factor into their monetary policy, i'm wondering if you think the china reopen is going to be a major wild card or if
7:38 am
the debt ceiling and whether or not -- if that grows contentious, if we go close to the cliff, so to speak, could that also factor >> i think they both factor in but in different ways. i think the china reopening is much more of a macroeconomic phenomenon that has to do with the real side of the economy so the question of whether or not oil prices will pick up again. whether or not the reopening creates opportunities both for a more stable but maybe a more unstable supply chain. and so i think they watch the china reopening as having some fundamental impacts on inflation and how well the global economy works. the question of the debt ceiling, again, i think is, basically policymakers and the hill playing chicken with each other and they're playing a pretty dangerous game with the full faith and credit of the united states. i think at the end of the day,
7:39 am
cooler heads will prevail. but it will create a certain amount of market volatility that the i think the fed will have to manage, but we're look at that as not having a fundamental impact on the global economy most likely. >> do you think the fed is really as data-dependent as they would suggest? because the criticism -- and there certain is criticism regardless of what the data is suggesting that they seem to be on this path to go above 5% come hell or high water and that the fed chair himself is too obsessed with the makes of the 70s and his own and their own creditability at this point that they're going to go to where they go no matter what the data shows. >> look, i think they are data dependent. they're looking for some consistency in data. one of the things that the market does is, every time there's a slight movement in a positive direction, softening up, inflation lower, the market
7:40 am
assumes the fed is done. the fed is being consistent. they take note of the improvements but suggest that one data point is not a long-term trend. i will have to give your argument credence and that, yes, they do not want to repeat the mistakes of the '70s but i wouldn't think that means they're not data-dependent i think they need to be convinced and it takes more to convince a central banker in these days than it does to convince markets that are prone to optimism and hoping for a turn and so i think that's where the disconnect is. but i couldn't say they're not data-dependent i think they want to see consistency and don't get thrown off by one or two data points. >> got to leave it there roger, good to see you thank you. all right. coming up, andrew ross sorkin caught up with music artist will i am in davos. we'll break you that interview after the break. and netflix shares surging
7:41 am
7:42 am
7:43 am
7:44 am
transformation i'm a young global leader, so are you. >> yeah. >> and when we came in, maybe we brought a young youthful vibe. but these young global shapers, it's a different vibe. these kids are -- they want to save the world they want to -- you know, and they're so excited to be here and share what the community, you know -- their solutions and their hard work. >> a lot of what you're doing here is talking about your foundation, some of the really interesting and important work that you're doing around s.t.e.m. education who are you talking to here about that >> so i come here to hunt for mentors and new skills, new perspectives -- >> i like that hunting for mentors. >> that's what inner city kids need they need expertise in the field that they're interested in going in >> you're involved in a lot of things between the foundation, between your entrepreneurial work, between your music, the list
7:45 am
goes on and on how do you manage your time? >> music took a lot of my time and i'm so happy it did. because it allowed me to transform my life, philanthropy is my response and my giveback to the folks who provided the free lunch program, a recipient of the do-gooders. i'm one of those kids. and my philanthropy is that. me paying it forward and continuing that work and now i have other dreams. i have dreams of having my own company to show the kids what's possible in the world of tech if they take this s.t.e.m. path. >> tell us about the company and what that dream looks like >> so creatives are everywhere there's creatives in music, there's creatives in film, there's creative in journalism, there's creative in teaching, creative in students, creatives in medicine, wellness, fits,
7:46 am
creativity solves problem and in that field of creativity, there's no enterprising tool for us if you're in finance, there's software for you but for creatives, we're working on a messenger and then we have a drop box and a transfer and email and we sometimes asszoom i created this singular platform for networking, collaboration with ai in the loop, it's called fyi.ai to use ai to help you focus your ideas. >> there's a lot of people around here in davos talking about chat gpt, everywhere what do you think of it and what that technology will do, the possibility of it, but also the other side of it >> chat gpt, that's the most
7:47 am
liberating, powerful creative pilot banter engine that humanity has ever seen it's going to spark a new renaissance. >> can you imagine a day where you are singing a song written by ai? >> you got to see the new songs i just wrote last week. >> because you put them through the system >> i'm a writer. i don't need a co-writer sometimes i need a banter partner. sometimes i need a sounding board. it's a better sounding board sometimes i need somebody to push me. this is a quicker push so many times you're like, come here, tell me what you think about this you got to meet -- you got a different option here? and you're like, hurry up, hurry up, i'm going to lose this flow. and you get inpatient with the
7:48 am
person because they're stuck in their world. maybe they were like in a meeting or have a relationship issues, everybody is in their zone and you can't expect this. >> this could be like a writing partner. >> it is not could be don't think of it as it's going to replace me. no, it's going to help push you. it's an instant banter >> what's the platform you like these days tiktok guy, instagram, what do you think of twitter, by the way? and the new elon musk world. >> i love instagram. it's like this -- i don't want to love it, but i love it. >> because >> because they're taking on my data and data is gold there's no other solution out there where -- but i love instagram. it's an awesome product. dang it. if only they could tweak their business model >> to hear more of andrew ross sorkin's interview with
7:49 am
will.i.am, check out a special episode of our daily podcast follow "squawk pod" to hear will.i.am and other big interviews from this past week >> coming up, investors beingein on netflix we'll talk to tom rogers next and a quick check on shares of google the tech giant announcing big layoffs today. the company eliminating 12,000 positions. wel veoron'lha me this developing story in the next hour "squawk box" will be right back. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business. [music - cover of blondie's “dreaming”]
7:50 am
at&t 5g is fast, [music playing] ♪ imagine something of your very own. ♪ ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪ ♪ dreaming is free. ♪ accenture, let there be change. this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done. i'm okay. just look around. this digital age we're living in,
7:51 am
it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it and now a lot more people can. so let's go. the digital age is waiting.
7:52 am
after a rocky year, netflix founder reed hastings says he will step down he will still remain in the role of executive chair our next guest says hastings will be the driving force. it's good to see you. >> thanks for having me, scott good morning. >> good morning. let's pick up on that thought, this view of hastings leaving but not really going anywhere. >> well, from personal experience, i'm executive chairman of a public company and executive chair men have a lot of influence on strategy, direction of operation i would suspect his influence over the company will continue in a big way, particularly
7:53 am
having two co-ceos this is a tricky situation they've worked together for a long time and clearly have a good working relationship. no two people see eye to eye on everything having an executive chairman there to sort through things if disagreements develop, i think reed will continue to play a very major role there. >> speaking of reed, what's your read on the quarter which was pretty good. subscriber numbers blew out of the quarter. >> they have a lot of hit shows and they hit big with the sub numbers. i don't really decide if a quarter is good or not good solely based on sub numbers. those are often overblown in the streaming arena. but i think their five points that they made in their earnings report, which really sum up for me why netflix is in a league of its own, which i've been saying for a long time, and well on its
7:54 am
way to becoming the most valuable media company in the world. first, most importantly, as they pointed out, they're not anchored down by legacy media issues, which are really confounding all of the other major media companies. similarly, they're not burdened by debt. the other media companies are increasingly feeling that issue. they have the lowest debt to ebitda ratio in the media world. a little over one times. three, they've been fighting this bear thesis for a long time that they'll never be cash flow positive they're now showing with 1.6 billion in free cash flow in the quarter this year going to 3 billion next year. the they are well on their way to being a real free cash flow conversion machine four, as they pointed out, the vast, vast majority of television around the globe is going to be streaming and they are the leaders in streaming
7:55 am
only 40% of viewing today in the developed countries, including the united states, is streaming. the 10% or less in many other countries. they have so much opportunity still as the leader in streaming, as all television becomes streaming television and, finally, this plan to take these hundred million, 100 million users who are not subscribers who have been taking the service for free and finally having a basis to convert those to paying subscribers, it's going to reaccelerate, i think, sub growth going to re-accelerate revenue growth having an ad tier is going to accelerate that. >> tom, does this quarter, does what netflix have done, does it give hope to the other streamers or does it underscore the point that netflix is really on top
7:56 am
and the other streamers have a huge mountain to climb >> i think much more the latter. all of the others are going to have to pull back on their spend. they're going to have to raise price. beet o both of those things are going to help netflix competitively. when you start looking at some of the numbers that drive netflix's ability to raise price with a great value proposition versus what others are going to try to do, which is pull back on content spend while they raise price, netflix compared to disney+, say, 1200 original episodes in the quarter. disney+, 200 70% of the top ten list of watched shows every week for the quarter coming out of netflix. when you are dealing with that
7:57 am
kind of advantage in original programming and viewing and engagement in that programming, it is really hard for others cutting back, trying to raise prices they cut back to compete effectively against the kind of momentum that that gives netflix. >> you don't think real quick, tom, before we let you go, you don't think the ad supported tier will ultimately lead to tradedowns >> well, i think that was the big worry and they indicated that initially at least the ad tier is not taking people away from other plans and -- >> that just launched, right it's a little early to declare victory though. >> absolutely. that's the first indication, but it may do some of that but the advertising tier on top of the subscription price, they pointed to hulu and they put a stake in the ground there saying, look, in the next
7:58 am
several years hulu having a 10-year advantage on advertising and only being a domestic service, they think they will well exceed hulu's numbers >> right >> hulu, when you add the ad revenue to their subscription price, they do at least as well as the pure subscription plans do the so over time i don't think that will be an issue for them what they really have to solve is the people, password sharing, 100 million non-paying users they didn't have a subscriber problem, they had a monetization problem amongst subscribers out there. if they can solve that, they are going to have some terrific reaccelerated greater momentum. >> good to see you always. see you soon tom rogers. >> thank you. coming up, the latest out of washington over the btde ceilings and what lawmakers can do to avoid default. "squawk box" will be right back.
8:01 am
good morning more pain in the tech sector google's parent company announcing the biggest round ever of layoffs. meanwhile, netflix shares with a hot number. a big management change. details on that straight ahead and debt ceiling reached the country bumps up against its borrowing limit. what that could mean for investors today and in the months to come the final hour of "squawk box" begins right now.
8:02 am
good morning and welcome to "squawk box" here on cnbc. we're live from the nasdaq market site in times square. i'm melissa leah long with scott wapner joe, becky and andrew are all making their way back from the world economic forum in davos. they will be here on monday. let's get a check on how u.s. equity futures are setting up. the s&p 500 looking at about 11. nasdaq higher by about 76. alphabet as well as netflix, big gainers as well as s&p this morning. treasury yields, we're pretty quiet, 3.431% is where the 10-year. >> melissa just mentioned google parent alphabet to announce job cuts they will eliminate 12,000 positions. that's about 6% of the staff ceo
8:03 am
ceosundar pichai said over the past two years we've seen periods of dramatic growth and we're dealing with a time different than what we planned for. here are some of the other stories investors will be talking about today t. netflix shares surging after the streaming giant added millions of more subscribers than wall street expected in the fourth quarter. reed hastings is stepping down from his position to become executive chairman and cheap operating officer has been promoted as ceo. the lending unit of crypto company genesis one of the latest victims of turmoil. genesis global capital filing for chapter 11 bankruptcy protection along with two other companies. they froze customer redemptions in mid november following the collapse of ftx. it said in the bankruptcy filings that the derivatives and
8:04 am
customer businesses could continue client trading operations and we are learning more about what caused an faa outage last week that delayed flights last week. a contractor accidentally deleted files while working to synchronize a primary and backup data base. more than 11,000 flights were ultimately delayed or canceled. >> is that the flight version of a fat finger thing >> i guess so. >> all right a little under 90 minutes until the opening bell on wall street. cnbc's senior markets commentator mike santoli joins us with what he's watching what's on your mind this morning? >> well, scott, market kind of pausing in a broad sense here. we are e we have had a pretty stiff pull back over the past three days had a 4% gain in the s&p in the last couple of weeks it leaves us really in this kind of middle zone that we've been in as everyone is pointing out, here's your peak, january 3rd
8:05 am
last year. this has not proven it's willing to surmount or able to surmount the longer term downturn obviously still in play right here also, we're about flat on the six-month basis. we spent an enormous amount of time over the last six, seven months right in the zone let's call it 3700 to 41ish hundred on the s&p 500 that shows you there are two plausible opposing outcomes that people are watching and believe are live which are softish landing and earnings don't really fall apart and then obviously a hard landing where you're going to have to retrench even more. that's held the market in the suspended animation for a while. look at treasury yields. the decline in yields refreshing things like consumer spending and mortgages. it's paused as well and it's at an interesting spot here above 3.40 you go all the way back to last spring that was a peak. maybe this is starting to find its footing. we'll see if that happens. a lot of room between here and the old highs where we're
8:06 am
figuring out where the fed is hoping to get to and the overall curve is upside down in a steep way. take a look at sector work cyclic calls have held their own. the equal weighted consumer sector which neutralizes the outsized amazon and tesla. this is industrials. pretty solid outperformers over six months though you see it curling lower. staples, utilities actually been weak coming into the year. some of the under tow for the market isn't the worst economic message. we don't know if that's going to continue, scott. >> on the note of the fed, melissa a little while ago asked roger ferguson, former fed vice chair, about the disparate between what the bond market is suggesting and what the fed is saying, and who was going to win that tug of war. one side is going to win eventually how they do it may be a messy process. it's going to come to that point. he suggested the fed's going to win, as have others. that's --
8:07 am
>> yeah. >> -- an interesting scenario for what the market may do >> i mean, i think that what the market has to do is price a huge range of potential scenarios, which have to include either the economy really buckles or that inflation comes down so fast the fed feels like it doesn't have to keep rates as high. so if you have a 20 or 30% probability that's in the mix, you will price bonds that says the fed has to reverse i think everyone has in mind that the fed in october of 2021 was saying maybe we get to 1% next year and then where do we get to over 4 perf% in that year things change and we understand why the fed has to keep the party line and repeat it constantly, because we don't want the market to front run it. i think right now the market is looking at two quarter point hikes in the next couple of months and then maybe that's it. that doesn't leave you too far from where the fed says it's going to ultimately get to
8:08 am
the fed says it's going to stay there for a while, and that's what we just don't know. >> some are suggesting they're going way past 5% and stay there for a while. that's the greatest unknown of everything >> yeah. well, that would require probably inflation gets a new life and they really feel as if it's not doing the job and i don't think the market is quite there yet. i think if anything people have basically been pricing in the premise that inflation is no longer, you know, enemy number one. >> no, the market is not in the zip code that's clear we'll see you throughout the day. thank you. that's mike santoli. coming up, the fight over the debt ceiling wrapping up could you juan's national strategist chris kruger explains how he sees the showdown play out. stay tuned, you're watching "squawk box" on cnbc and one thig a firefighter is plan ahead. you don't know what you're getting into, but at the end of the day, you know you have a team behind you that can help you.
8:09 am
not having to worry about the future makes it possible to make the present as best as it can be for everybody. why are 93% of sleep number sleepers very satisfied with their bed? maybe it's because you can adjust your comfort and firmness on either side. your sleep number setting. to help relieve pressure points and keep you both comfortable all night. save $1000 on the sleep number 360 special edition smart bed queen now only $1999. only for a limited time.
8:10 am
thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh just look around. this digital age we're living in, ahhhhhh it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it and now a lot more people can.
8:11 am
so let's go. the digital age is waiting. welcome back to "squawk box. we turn a little bit more positive s&p 500 now up by 12 1/2 the nasdaq looking at 81 the bitcoin back in the green. the u.s. officially hitting the debt limit, but in washington that's just the beginning of the story lawmakers banking on the idea
8:12 am
that it likely won't become a political problem for months ylan mui has more. the old kicking the can down the road something they've become experts at doing, ylan. >> reporter: yeah, that's right, scott. the house and senate will be back in session next week. that's when the lawmakers will have to start thinking about the looming debt ceilings limit. third way estimated that an actual default could result in the loss of 3 million jobs, a $20,000 drop in the average retirement savings and a $130,000 increase in the cost of a mortgage republicans argue this is all fear mongering house budget committee chairman jody arrington said democrats and republicans should rein in unsustainable spending before it is too late. mitch mcconnell was confident
8:13 am
yesterday that the country would not face a financial crisis. >> in the end i think the important thing to remember is that america must never default on its debt. it never has and it never will but we'll end up in some kind of negotiation with the administration under which the debt ceiling can be raised. >> reporter: right now congress does have time to reach a resolution treasury believes it can use the extraordinary measures through at least june but, scott, the problem is neither side is at the negotiating table just yet back over to you. >> when you talk about neither side, is the greatest rift at this point between democrats and republicans or the freedom caucus part of the republican party and mccarthy >> reporter: yeah. i think that you're right. the division within the republican party i think is going to be a really important dynamic to watch you know, the reality is that there are members of both
8:14 am
democrats and the republican party who believe that having this conversation about fiscal sustainability and reining in government spending is really important, but there are lots of republicans who don't believe that that should be a condition of raising the debt ceiling. so i think you'll start to see some of those more pragmatic republicans try to distance themselves from the hard-lined conservatives over the next few months. >> ylan, stay with us. jamie dimon, just one of the many business leaders who spoke with joe, becky and andrew in davos about the fight over the debt ceiling dimon had this message >> we should never question the credit worthiness of the united states government. that is sack crow skcrow sangt even questioning it is the wrong thing to do. that is just a part of the financial structure of the world and this is not something you should be playing games with at all. >> joining the conversation now to talk about the debt limit fight and the potential limit
8:15 am
chris kruger with cowan washington group ylan is still with us. great to have you join the party, so to speak this is the number one thought on investors' mind is this 2011 the s&p 500 was down 15% are we going to see a repeat of that >> it could be worse, right? 2011 you at least had the two parties in agreement that there should be some type of negotiation, right you had the discretionary spending caps and you had the super committee, et cetera also in 2011 then speaker boehner had a 24-seat margin speaker mccarthy has a 4-seat margin it took them 15 votes just to elect a speaker, which in theory is the easiest vote of the year, this being the hardest vote of the year so unfortunately, 2011 is the right analog, but it could actually be worse than 2011 just
8:16 am
given the structure of congress and the tight margin within congress and the fact that it's not even that they're at the negotiating table right now. the white house would argue there shouldn't even be a table to negotiate at because this is sacrosanct, we aren't going to negotiate with a gun to our head. >> debating over the negotiating table is a terrible way to start this whole process, chris. i appreciate there is the sense the united states should never default and there could be a debt downgrade which we saw in 2011 is that on the table in your view as part of the it could be worse scenario that you're drawing out? >> right i mean, 2011 we didn't default and look what happened. >> right >> also, the debt to gdp levels in the last ten years have skyrocketed. we're at 120% of debt to gdp
8:17 am
the debt ceiling's a little over $31 trillion so almost any way you kind of slice this up as a comp to 2011, it is frightening and at least it's starting earlier, right yellen has already invoked extraordinary measures but also just because we're in extraordinary measures, that shouldn't be sort of a cooling bomb, right? this is not normal there is execution risk with extraordinary measures this is based off of future receipts you have some outstanding questions on rate hikes, on the education department's decision to freeze student loans. so, you know, the x date is always a moving target >> ylan, do we truly know what
8:18 am
kind of specific spending cuts the freedom caucus wants to try and negotiate with speaker mccarthy and whether, you know, medicare and social security, what have largely been viewed as the third rails of politics, are really on the table or not >> yeah. we don't know the specifics, scott. i mean, there are some members who have said they will not cut medicare, they will not cut social security but that would mean you'd have to make massive cuts throughout the rest of the federal budget in order to make up for the cost of those entitlement programs and i think that that is -- that is a strategy on the side of the freedom caucus because they don't want to expose themselves to additional political risk and i think that when we discuss the debt limit and risk to investors, the problem is that in washington even though everyone's talking about the debt limit, this isn't really a fight about fiscal policy, right? this is really a fight between factions of the republican party. this is the power struggle that
8:19 am
we saw play out during the house speaker vote just now playing out in the fiscal realm. and so there aren't true policy concessions that really democrats or moderate republicans could make in order to appease this crowd. one of the problems during the speaker vote was that many felt like the ball kept moving. that could happen again this time and i think that is where you see the real danger to the markets is there's not a recipe for resolution >> what does mccarthy do, chris, in the end right? you said to melissa's question back to 2011, it could be worse. what does he do knowing that he could be called to a vote for speaker at any moment because of the deal he cut to get the title in the first place >> that's a great question i mean, what we will start seeing this spring though is the house republicans will try to pass an fy '24 budget.
8:20 am
so before we get to the x date we're going to have some sort of trip wires that we can see what those demands look like. this process will start february 7th with the state of the union by president biden there will be a republican response to that biden's fy 24 budget will come out sometime in march and then you'll see how mccarthy attempts to navigate the debt ceiling fight when they put out their budget, which they say they want to balance over ten years, which is theoretically possible. i mean, politically i don't think it's possible but -- so we'll see a number of sort of previews how they attempt to navigate that, how they try to pass that budget, what those vote margins look like, if they're still at a four seat margin but, again, like 2011, there was a 20 plus seat margin and you had a fairly, you know, steady hand at the tiller with speaker boehner and his team it's going to be a long way to
8:21 am
the x date but we will have some trip wires before that the. >> ylan, we spoke earlier this week on the exchange about this issue and something has stuck in my mind in a very haunting sort of way you mentioned the notion of accidental default, and that to me seems extremely frightening given the backdrop, you know, in terms of the in fighting, factions and all the different ways this could go wrong >> reporter: yeah. so there are a number of ways that folks in washington are sort of floating that could potentially be an escape hatch, one being a discharge petition, another being a maneuver that would allow the president to raise the debt limit and congress would have to have a 2/3 majority to override that. so all of those things are possible ways to get around the fact that, you know, a clean debt limit increase can't pass the house at this point, but all of those things are incredibly complicated, would take time to
8:22 am
negotiate and just sort of pull off just by the arcane processes in congress. in the meantime as chris was mentioning, you have this moving target of an x date. we don't have a defined deadline for congress to act and that makes, you know, sort of backing out the process and the time line for when all of these other steps need to take place very complicated. >> chris, lastly, we're going to get a deal, right? it's just a matter of when, not if >> at cowen, we're hopeful of that at the end of the day when washington is at the edge of a cliff they build more land and they kick it to a committee. you're seeing the outline of that, romney's trust act and manchin is talking about that. some sort of process-driven compromise they'll kick it to some type of committee, hopefully, and then we'll see if that committee has an enforcement mechanism like in 2011 when we had sequester the so we're not predicting
8:23 am
default, but this is not just a story of binary is there a default, there's also a question of a credit downgrade issue and then there's also the issue of the underlying debt which is not going away, it's going up and to the right. so at some point, right, dc will continue to kick the can until the can kicked back. >> chris kruger, thanks and our thanks as well to ylan mui. coming up, netflix stock jumping but a management change prompting questions about what's next for the streaming giant julia boorstin will break all of that down for us. st> reminder, you can get the be of the squad pod. listen any time. we'll be right back. u.s. bank! can she help? how about a comprehensive point of sale system... that can track inventory, manage schedules- and customize orders? that's what u.s. bank business essentials is for. (oven explosion) what about a new oven, can u.s. bank help us there?
8:24 am
8:26 am
netflix shares jumping julia boorstin joins us with the latest julia? >> reporter: that's right, melissa. netflix 7.66 million new users reed hastings stepping down as co-ceo to become executive chairman with former head of product great replacing him with ted ser ran does take a listen. >> they both have such amazing talents and gifts and to find a platform where they've been able
8:27 am
to contribute is fantastic >> reporter: now netflix no longer provides subscriber guidance, but the company did say that they project modest positive paid additions in the first quarter also noting that it is possible that there was some pull forward of subscribers into the fourth quarter. now fourth quarter revenue was pretty much in line with expectations and while operating margins topped what analysts anticipated, earnings did fall far short of expectations in part due to a non-cash unrealized loss related to euro-based debt. now as for netflix's new ad-supported tier, the company did not reveal any specific numbers but they did say that they see the opportunity to be just as large as hulu in the next several years. >> we see that engagement from ads-plans users is comparable to the non-ads plans. so that's really a promising
8:28 am
indication it means we're delivering a solid experience and it's better than we modeled. that's a great sort of fundamental place for us to work with >> reporter: new co-ceo greg peters and his partner talked about their plans to roll out a crackdown on password sharing more broadly in the first quarter. they say it should drive improved overall revenue, which is part of their overall expectation of expanding margins this year. melissa, if everything goes as planned, they should be able to resume their share of buyback program this year as well. >> how does it change, i don't know, the path of sub ads in terms of the password crackdown? i would think initially there could be churn but in the longer run it will be helpful for netflix as many of the bulls say? >> reporter: yeah. i think that's exactly it. they do say that there is some possibility that, say, in the first quarter when they're
8:29 am
rolling out some of this crackdown they will not see that much growth, but the second quarter, which is typically a very weak quarter for netflix in terms of subscriber additions, they say the seasonality will be different. the second quarter is when they should actually see some benefit from it. it's a whole new world for them but they think there is as many as 100 million people out there who are using netflix and not paying for it and the opportunity is so big that it's worth having this little moment of transition to try to get some of those people to start to pay. >> and what's your take on reed hastings becoming executive chairman it was interesting reading through his blog he will continue to focus on netflix stocks doing well. it seems he's very aware of investors and how they perceive this news, but this ceo transition, the succession planning here seems better than the process disney has and better than what disney has right noud, which is nothing
8:30 am
>> reporter: well, what's so interesting about this, melissa, in a lot of ways i think this was expected as soon as reed hastings announced that ted serandos, who was the content chief, was going to become his co-ceo, people saw this as a succession process people thought ted would take it on himself and there wasn't going to be another co-ceo situation. i think this was always in the works from the moment we heard he was stepping into a co-ceo role i think it's possible hastings would have left the role earlier if it wasn't having as hard of a time as it was last year netflix lost subscribers at the beginning of 2022. it's unprecedented struggle for them so i think there was a little shade thrown at disney, a lot of talk about how smooth the succession planning has been and how they're not bogged down by any legacy businesses, melissa.
8:31 am
>> thank you. coming up, alphabet slashing its head count the tech giant with the largest round of job cuts ever shares rising. we'll talk about it next. apple making moves to bring more technology in house we'll have a breakdown of what that could mean for key long-term suppliers. and tomorrow mess peterffy, discussing the up and down trading on the streets we've seen in 2023 the stay tuned, you're watching "squawk box" on cnbc with models that fit any lifestyle. and innovative ways to make your e-tron your own. through elegant design and progressive technology. all the exhilaration, none of the compromise. the audi e-tron family. progress that moves you. [music - cover of blondie's “dreaming”]
8:32 am
[music playing] ♪ imagine something of your very own. ♪ ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪ ♪ dreaming is free. ♪ accenture, let there be change. does your vitamin c last 24 hours? only nature's bounty does. with immune 24 hour plus you get longer-lasting vitamin c plus herbal and other immune superstars. get more with nature's bounty. the first time you connected your website and your store was also the first time you realized... we can do anything. cheesecake cookies? [together] the chookie! manage all your sales from one place with a partner that always puts you first. godaddy. tools and support for every small business first.
8:34 am
welcome back to "squawk box" here on cnbc taking a check on futures. s&p looking to be up 9 nasdaq up 73 and netflix big gainers. let's show you crude and how that is fairing. yesterday wti at the highest level. it is up by .7 of a percent. it's been positive nine out of the last ten days. one of our top morning movers as we mentioned, google parent apgoogle is cutting jobs they're here to talk about alphabet and the layoffs they are just the latest.
8:35 am
>> yes apple is the odd man out without layoffs. let's talk about what sun sundar prichai said in the blog post about the layoffs he talked about ai that was the buzz word we got the report in "the new york times" saying the co-founders of google had to swoop in and tell leadership, hey, we see this ai momentum going. microsoft is investing heavily, chat gpt and there's this code red alert going on within google this entire memo is ai, ai, ai, ai it's clear they missed the boat on this. one thing that stuck out, we've been ai first for a couple of years. i haven't seen that. google has not found its second act yet. they are trying to say it's ai now. at its core, advertising and search company it's going to be interesting to see how much investment they actually do plow into ai and what that looks like on the
8:36 am
product front too. >> pretty forthcoming in that email to employees that they expanded too much in a different economic environment >> right. >> it's sort of the reality that all those who sit in his seat are coming to grips with >> especially in the tech industry that's why we're seeing these layoffs. remember, let's rewind back three years. we thought we were going to be locked indoors forever i.t. spend through the roof not just on consumer side and enterprise as companies figured out how to get employees to work great for microsoft, google, apple. let's talk about apple we saw mac sales put up insane numbers during those two years and now it's all coming back to roost as people get out. >> i would imagine apple is making investments where does alphabet stand in all of this?
8:37 am
>> they've been working on this. they have google assistant or even if you talk to the google app in your phone, it's pretty good speech recognition is amazing. they have done little chat bots. you can make a restaurant reservation without speaking with a human being none of those have broken through, especially not in the way we've seen chatgpt and capture people's imaginations about the possibility of this tech. >> you mentioned apple is the outlier who hasn't announced any layoffs to this point. what are your expectations there? >> when i talked to tim cook last after the last earnings, they are cutting costs we've been deliberately hiring throughout the pandemic. we're going to be even more deliberate hiring in this kind of macro environment look, we know they don't spend money on crazy science projects all the time they're not burning $10 billion
8:38 am
or $13 billion a year on the metaverse like meta is doing they are very deliberate they're very focused their product portfolio is extremely focused and relatively small small compared to their peers. a lot of apple's hiring is in retail too that can adjust and there's a lot of turnover in retail. >> they're spending a lot to on shore which is some degree of hiring it's not just careful, selective hiring. >> and diversifying their supply chain. that costs money outside of china, it's not going to fix it. the tsmc a month or two ago, that's not going to take away what they use tsmc in taiwan but it alleviates the pressure. >> good to see you. >> thanks. >> steve could he vac. rocky markets over the past few months haven't stopped retail investors from opening up new accounts
8:39 am
interactive brokers saw a 25% increase in the fourth quarter from a year ago. the stock up close to 40% over the past six months trading just about 5% off of the 52-week high here to talk about the state of the retail investor and rates as well is thomas peterffy. he's the chairman of interactive brokers. welcome back to "squawk box. that's a pretty unbelievable number i would almost have thought that people were running for the hills, not running to sign up. >> they are not running but we pay very high interest on idol cash people who have eyeidol cash wih us in their brokerage account, we pay them 3.83% interest and that's more than they would get anywhere else so that's why we get all these. >> okay. so the hunt for yield is helping
8:40 am
you out. >> yes. >> i hear you on that. the. >> right. >> how would you -- what do you think the state of mind right now of the retail investor is based on the kind of flows that you look at, the kind of trades you see, et cetera >> well, people -- people have widened out on their stock positions or they have hedged them so the retail investor is not really bullish they are more likely to trade options. there are people where options trading is really going gangbusters, which it's very, very active market so that's what's happening now all this, of course, is going to be very complicated by the sec proposal for the new trading rules because i just
8:41 am
spent a long time going through these portfolios, and if they were to pass as written, that would be excellent for interactive brokers but i think it would be horrible for the marketplace because you can call off markets. there would be no big offers reasonable that would be tried, they would be very wide and they would be easily manipulated so the mid prize, the sec would keep jumping up and down so it's not going to work as written. >> you're eluding to the fact that the sec wants to require brokers to auction customer orders i believe that's what you're talking about. do you think that that's actually going to take place >> it's not that they want to auction them off they want to force them to trade
8:42 am
up the mid-price or very close to the mid-price and so if that happens, then there will be no incentive for people to put in mid-term offers so the mid-price will become meaningless, a meaningless price. so if i want to buy a stock and i know that i will buy from the mid-price because that's how the sec wants buyers or sellers to meet, if i put in a bid, that will raise the mid-price and make my stock buy more expensive so i will not put in a bid i will put in an offer to lower my price if i want to buy. so -- which hasn't been sold too
8:43 am
well. >> let me get your view, if i could, about where we are, not only from the market's standpoint and what you think the fed is going to do by virtue of the seat you sit and the flows that i suggested you see quite clearly. i'm looking at a headline not necessarily related to you or your company but more broadly speaking futures and options flows are betting on the fed stopping short of 5% in spite of the recent fed speak obviously futures and options trading at the heart of what your business is is that your view? is that what you see >> so i do not know how that will be apparent from option order flow i don't see that connection. >> but don't think -- you don't think the fed can get to its 2% target any time soon, is that correct? >> oh, definitely not. i don't think that will happen of course not. but i think that will be set
8:44 am
aside with 3 to 4% eventually. >> thomas, i wanted to ask you about the vix specifically and what your take is. the there's been a lot of criticism that given the discrepancy where the fed sees the terminal rate and given the looming debt ceiling debate that's coming in washington, there are so many different things to be worried about and yet volatility of the vix remains very low when we are seeing much more volatility in the bond market and the currency markets. what's your take on that >> it's a very interesting market the vix is very low. you have all of the very upsetting possibilities and the market keeps going up even though the fed keeps telling us they are going to keep raising rates. so it's just -- it's a mystery somewhere. i don't understand but i would
8:45 am
not buy the fed. i tell my questions to stand on the side. >> when you say you wouldn't fight the fed, i think that's what i just heard you say -- >> yes. >> -- does that mean you think in this what seems to be a tug of war between the bond market and the fed, that the fed is ultimately going to win? >> of course why wouldn't they, right what would stop them from winning? >> well, maybe inflation is coming down to the degree to which they're not going to have to go to where they suggest they are and that's what the bond market is sniffing out >> it's not going to come down to 2%. >> where do you see it coming down to? >> 3 to 4. the. >> when you say you tell your customers to stand to the side, what does that mean, thomas? >> i'm not -- i'm not bullish on the market i think the market is going to
8:46 am
come down. >> that means open an account at interactive brokers for 3.6% rather than keep the money -- >> that's better than j.p. morgan chase. >> 3.3 -- 3.83%. >> 3.83. >> much better. >> even better >> it is better, right >> tempted to open an account right now. better yield than i'm getting. >> yes, please >> thomas, you take care of yourself we'll see you back here certain soon, i'm certain of that. >> coming up, we'll get jim cramer's first take on the final trading day of the week. chart master carter braxton worth. stay tuned you're watchincng bc live from the nasdaq at times square -surprise! -for you, mama. ...can help you open those doors. by proactively reviewing your entire portfolio. with an eye on taxes and risk.
8:47 am
doors were meant to be opened. why are 93% of sleep number sleepers very satisfied with their bed? wmaybe it's because you cansk. gently raise your partner's head to help relieve snoring. so you can both stay comfortable all night. save $1000 on the sleep number 360 special edition smart bed queen now only $1999. only for a limited time.
8:49 am
let's get down to the new york stock exchange. jim cramer joins us now. jimmy, it's good to see you. i just would love your take on netflix, which may just keep this nasdaq move that we've had since the beginning of the year going. what's your take here? >> i think if you tried to figure out what would be the greatest single quarter and conference call you could have, they did it times two. i mean, it was a remarkable quarter because a lot of people had already come in with holes, they had kind of given up on the company and it turns out the company just didn't have the fresh slate.
8:50 am
it's like the old days where you're scrambling and trying to say, i'm going to scribble -- i'm going to watch "emily in paris. it was like an explosion of content in many different countries that you watch -- you watch in subtitles plus i think the advertising, the tier is going to be good it was just perfect. it was the best call of the year so far. >> so how do you balance that against the valuation which, you know, melissa and i were speaking about earlier she said, it's a valuation story. it's hard to get away from that despite all of those great things that you just said. >> well, i have to tell you this might be the anomaly we're back to it's an addition story. i thought that it would be constrained by the four walls of what we've seen since october when rates peaked and the dollar peaked, which is if you don't have good numbers you can't go
8:51 am
higher but i think that netflix uniquely was able to tell a story but just said, we are reaccelerating and if you're reaccelerating and getting ahead of the pack in the rest of the direct dtc, what happens is is that it becomes the one stock that all of these people who don't care about valuation, it becomes their stock. they have something that they like look, it's fanciful. >> 6.4% now up i wanted to ask you about eli lilly, jim, which had a tremendous run the setback on the alzheimer's that could be an issue here. >> well, look, i don't think they had enough people in their trial. >> yes >> i think they tried to cut their trial short. that is not what i would have done think is all about weight loss the reason why the stock has been hot is the weight loss drug, which it's going to be a couple of months approved for everybody, not just for diabetics. that's why the stock's been
8:52 am
strong oh, ugly chart not the -- their competitor biogen so i think this is -- this is your last opportunity before they bring out a drug that they're going to charge $1700 for per month and get it because it's going to reduce your weight by 15%, which is a remarkable, remarkable thing with very few side effects >> have you got a quick take before we let you run and get prepared for your show on google, these layoffs? >> we're still liking companies that fire people they added 12,500 last year. now they're cutting 12,000 how about cutting cap ex they targeted $9.5 billion in cap ex do they need that? now i want to see firings and i want to see cuts in cap ex isn't it easier to go buy visa, master card, buy things that go well when the dollar is coming down you know the truth, i watch your
8:53 am
shows. the stuff that's working is traditional stocks with earnings that go up, and if you do them by cutting versus revenue growth, then they last for a couple of days but if you do them by revenue growth with disciplined costs, it lasts for, well, since october. so let's not -- let's not get too carried away about how a company cuts rates, cuts people. we want revenue growth. >> by the stocks that do stuff and make things. you still like those. >> do stuff and make those don't give up on lily right before the launch? holy cow, anybody who's overweight, which is 330 million people in the country, 317 million people, they're going to want this drug the biotech thing was a kinard you have to have 100 people for a year that's one of the smallest tests i've ever heard. >> just about five or so minutes away from you. >> hey, great to see you guys.
8:54 am
>> you as well we'll let you know what you need to know ahead of the opening bell on wall street. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha! or you could use workday. omaha. the finance, hr and planning system used by over half of the fortune 500. for a be-agile-like-an-mvp world. workday. for a changing world.
8:57 am
let's take a look at what the chart suggests might be in store for us with carter worth founder and ceo of worth charting. it's always great to see you you're truly not a ray of sunshine in terms of what you think the markets will do. what do you see in the charts at this point >> i think we're all inclined to always seeing a direction coming that might be the temptation to avoid. my own hunch is that if one can look out six, nine months, i don't think you can look out much further than that, when someone ever tells you about their three year price target you should probably move to a different room, but the point is looking out six to nine months, there's a strong probability in my mind that we are going to be in the unch category said differently i think sideways down the dow captures the market looking out quarter to quarter there are a lot of interesting things on the surface.
8:58 am
for instance, we know consumer discretionary have led the broad market in every turn since 1962 and this year consumer discretionary are up handsomely. it's up more than 5% but interestingly the real winner this year, of course, is philadelphia philadelphia semiconductors up 7. philadelphia oil services index up 7 the philadelphia gold and silver index up 10.5. >> i thought you were going to do a chart of the eagles season. >> that's next i'm going to rely on you for that, exact. >> it says you remain lower yields and lower equities. then i see you want to play the tesla bounce to 155 plus how do you square being negative equities but so positive tesla to me that doesn't work. >> well, remember, each and every stock, it doesn't -- in principle how can it work that
8:59 am
nike is up 40% off of its low or any other stock? rebounds have nothing to do with the stock or the valuation something that gets so over sold or over bought you get counter trend moves. this counter trend move in tesla, while i think it's, you know, got room to run, it doesn't change the circumstance that tesla's highs presumptively are in for all time. >> against this backdrop carter, though, you like gold. which seems to make sense. if you see the risk/reward being flat to the down side, maybe you want to go outside of equities >> well, that's right. so independent of -- and be there are sectors beyond obviously precious metals that look good and individual stocks. there is the thinking that gold should always be a part of a portfolio but, indeed, if there is a contraction in any sort of pivot, gold is telling us now and will continue to tell us
9:00 am
that are it should be owned. >> carter, thanks. i'll see you tonight on "options action." worth charting we're down on the dow in terms of where we stand at the open down 40 but we're looking at green arrows for the s&p and nasdaq helped by alphabet as well as netflix. it's been great, scott >> yeah. >> do it again some time. >> bye, mel. >> all right "squawk on the street" is up next have a great weekend good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david favor the market absorbs the netflix quarter, these layoffs at alphabet and before the blackout window begins. our roadmap begins with netflix. smashing subgrowth the stock is surging. >> plus, tech layoffs, they are spreading. alphet
186 Views
IN COLLECTIONS
CNBC Television Archive Television Archive News Search ServiceUploaded by TV Archive on