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tv   Squawk Box  CNBC  February 27, 2023 6:00am-9:00am EST

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since elon musk took over. it is monday, february 27th, 2023 "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 rebecca quick along with joe kernen and andrew ross sorkin. everybody get your jacket ready. i have the jacket today. you are jealous. >> it changes the dynamic. you are not doing it it's only been 27 years. we'll change it. come on, andrew. >> it actually, the jacket should be reserved for special occasions.
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it does look good. you both do it you are out in washington or other places, you wear a jacket. >> for you, it changes you i think it changes me for the worse. >> to have a jacket? >> yeah. >> to go without a jacket. >> yeah. >> it looks wise. >> just to make you feel better, i won't wear one tomorrow. >> thanks. let's look at the u.s. equities we are looking at green arrows there is significant ground to make up from last week the worst week for equities for the year last week dow off 3% s&p down 2.7%. 3.3% for the week on the nasdaq. the numbers indicate the fed has more work to do. that is why treasury yields are where they are right now the spread got wider with the 2 and 10 north of 85 basis points
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3.95% for the 10-year treasury the 2-year treasury is up at 4.38 that is all why the dollar had the best week last week. last week was the best week for the dollar we have seen in 2023. meantime, reports that elon musk is laying off 200 more employees at twitter that is 7% of employees that remain twitter shutdown the slack channel last week preventing employees from chatting with each other or looking up company data some employees discovered they were logged out of the laptops and that's how they found out. esther crawford looked to charges for those blue check marks. she gained fame after a photo of
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her sleeping on the floor of twitter hq went viral. 70% of the original staff has been cut since musk bought the company. she has become a musk supporter and love of the company. the company not showing much love for her pfizer pfizer has money problems. looking to acquire seagen. seattle genetics according to the wall street journal report, seagen would like a premium over the $30 billion market cap merck was in talks to buy seagen last year for $40 billion, but they failed to reach agreement seagen has a cancer antibody cocktail for cancer cells. kills cancer cells and targets those without killing other cells. normal cells
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that's the problem with chemo. it is approved for hodgkin's and other lymphoma in the meantime, shares of u.s. railroad union pacific. the firm saying the company ceo will step down and expects to name successor this year the firm is under pressure from the soroban capital partners it called for fritz to be rep replaced the company needs new leadership to get the trains to operate safely and on time the hedge fund overs $1.6 billion stake in the company fritz is looking forward to working with the board to identify the next ceo. berkshire released the annual report over the weekend and warren buffett's letter to
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shareholders the company was impacted by the $67.9 billion in investment losses that accounting rules require. that's are numbers that warren and charlie said for a long time you should not pay attention to. pay attention to the swings in profits and losses they said when it benefitted them and with the bigger profit. they own so many stocks and when they drop in value and the market down 18% last year and when those dropped in value, that is effected revenue up 9.4% to $302 billion. earnings rose to $31.8 billion berkshire is in american express and bank of america and coca-cola and moody's and occidental and paramount global. it pushed back on the criticism of the buybacks. you are told that repurchasing
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are harmful or beneficial to ceos, you are listening to an economic illiterate or a silver tongue demagogue the 92-year-old buffett said at berkshire, there is no finish line berkshire will have a boatload of cash with u.s. treasury bills with the wide array of businesses cash pile at $130 billion at the end of 2022. the fight over the fiscal spending, berkshire offers modest protection from run away inflation, but this is far from perfect. fiscal deficits have consequences >> i see we may be living through some of it right now i don't understand the silver tongue part. the demagogues
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they sound like economic illi illiterates. >> it is a populist argument >> i hear him say a lot of people -- >> i think you are the minority. >> why silver tongue >> it is something that sounds good to people who are maybe not as -- >> they are not -- it is not a comment on whether they are right. whether they are spoof speaking in. >> i see your point. i think for a lot of people, when they say those things -- >> it does corporates at this point, they have people convinced -- they have people convinced that all ceos get paid
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by the stock going up. basically a lot of reasons for buybacks you can't always hire more people or spend it here or do this that's why you have boards and ceos to decide how to deploy shareholder capital. >> he is not saying all share buybacks are good. if you pay too much for it, it is not good. >> that is the one piece of this which if you look at enough studies -- it is a little bit like mergers 50% of mergers are failures. so -- >> de-merge those. >> if you look at buybacks on the hwhole, are they good or ba? you could argue they are bad insofar as they are destructive. if you have the cash lying
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around, would you be better off buying back stock 50% of the time we should get better stats the odds are it will not work. would you be better off in something else >> just because ceos are no better than anyone else at predicting the future, especially on the stock. we know about insider selling and buying you can use it, but long-term, they don't know what they're doing. >> that's not true >> you think they are good at this >> insider trading, legal version of it -- by a mile, every academic study i have seen on insider trading, they are very good at selling at the right time >> buy back at the right time. >> we should have somebody on. >> i have not looked at the numbers in a long time when you look at selling, the
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accuracy on selling is better than the average investor. >> the cfo comes in and says what maybe that's why >> we should do a study. >> we should look. >> not defending all share buybacks if you say all of them are bad, you're wrong the annual meetdining is comingp again. you can watch exclusively on cnbc.com and on air on cnbc on saturday, may 6th. shareholders can send in questions for warren buffett and leadership at berkshire of the. happening over the weekend, news publications with the washington times and post said they would no longer public work by dilbert scott adams he was discussing an issue where
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26% of the people disagreed with the statement that it is okay to be white adams chose to live in a community where few or no black people lived and advised his white viewers, in his words, get the hell away from black people. elon musk responded to the twitter comment on the news by saying the media is racist musk tweeted for a very long time u.s. media was racist against non-white people now racist against whites and asians same with colleges and high schools in america maybe they can try not being racist he writes all about dilbert. he was able to look at funny -- >> we had him come in here many years ago. >> he has a unique and
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perceptive view of middle management he lived it every day. dilbert. >> at first, i thought this was a little the twisted i read what he said. whoa okay i get it when we come back, we will talk strategy in the week ahead as we await a flurry of retail earnings speaking of retailers. target is set to report before the opening bell we have an exclusive with the ceo brian cornell. stay tuned you are watching "squawk box" and this is cnbc >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com. erve,. i promise our relationship will be one of partnership and trust. i am a fiduciary, not just some of the time,
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equities s&p closing below 4,000. >> becky, it is a little bit last week was the market coming together with the outcomes for the fed are inflation that we thought was narrowing. it may not be narrowing as quickly as we liked. the market was coming to terms with the fact we might have a rockier path to inflationary outcome. >> just because inflation numbers are picking up again >> we haven't conquered inflation yet. we have strong growth. the good part, the silver lining, the numbers we got from retailers and cpi and ppe and all of the economic data will look to strong growth in the u.s. that is reminding us that is not
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a good idea to bet against a u.s. consumer. on the flip side, the fed cuts later this year. the good news on the growth side, but pausing and not good news on the inflation side >> kelsey, the silver lining is all of a sudden, treasury and fixed income is a good place it has been a while since anybody liked anything in fixed fore income >> absolutely. the move we have seen in the last 60 day is the tradeoff in yields if you are worried of not getting allegation in fixed income, you are getting another opportunity to do so the market re-pricing is reasonable given the strong data in january i also think it is important to smooth through some of the data because you have very weak data in december and very strong data
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in january now what we are looking at is the trend. we still think the trend is lower inflation and weaker jobs, but happening at a slower pace than the market anticipated. >> i guess my question is if you are looking at fixed income, corporate fixed income, are you getting paid at the risk with the potential for higher rates and potential for recession? >> you are getting come pepensad with the yield risk. that cushion is really there and it hasn't been there for a very long time. if you think about yields of 5% or 6% and you can get that with limited duration, you will be protected. also, we do think the fed is about 80% done with the cycle
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you are getting income, but also diversi diversification. as the economy weakens, we think the cumulative lag in policy will start to bite the longer duration fixed income will provide the balance when equity markets weaken ultimately. >> kelsey, i did not pay attention to treasury yields last week when i was on vacation i'm shocked at the 10-year treasury at almost 4%. >> it has been a large move. so basically we have gone from the market pricing in the fed terminal rate below 5% to now closer to 5.5% that's really on the back of the resilient consumer what we're trying to ask right now is is policy at 5.5% going to be restrictive enough i think the yield curve which you had at minus 85 basis points
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is going restrictive here is what i don't hear people talking about. banks across the board are tightening lending stan dards an loan demand is falling that is a good leading indicator of slowing economic activity the rate hikes are impacting the economy and it will show through this year. the fed will be able to pause. it is just happening in not a straight line. the data zigs and zags. >> that is interesting i have not heard that. scott, we have pulled back is this enough of a pull back for you to get interested in things or is there more pain to come >> i think this is a level where we can be buying not incredibly aggressively. you were talking about the fixed income market. the option market is an interesting place as well.
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the option market is pricing in 8 basis point move every day in the 2-year treasury for the next six months that is really insanely the volatile for the risk re-asset until that number comes back down, it will be hard to get very aggressive in terms of risk allocation wit we see that happening in the spring the expectation is hard to get aggressive until the 2-year treasury comes down. >> scott and kelsey, thank you more coming up on """squawk box. you don't want to ssmi the interview with david solomon from goldman sachs on live investor day
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welcome back college is difficult and expensive for all students, but for young people of color, it is insurmountable one school is looking for a path for a student to get the jobs that college grads get we have cnbc correspondent sharon epperson here with more on that story. good morning >> andrew, we visited the school in brooklyn which is not a traditional trade school the lab school is changing the way post-high school education is delivered partnering with the business community for six figure tech jobs these two stufound high school students struggled in college. >> we learned college wasn't serving our students >> reporter: they found the marcy lab school for low income
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students of color. the program focuses on the skills they need for the jobs they want without a college degree the education includes classes, in interships and job opportunities. >> spending years with students led them to see students have potential and true hiring pipelines. >> reporter: devante had trouble for the engineering degree. >> i realized college wasn't us st -- sustainable for me >> reporter: he started at the marcy lab school starting with meditation and journaling and setting goals free for students. the program started with the class of nine and now 67 are
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enrolled they are learning engineering and coding and networking. >> a lot of laptops and monitors for coding a lot of spaces to just get to know one another and talk. >> yes, marcy is big in the economy. >> reporter: she is finishing the program with the paid i inte internship >> i'm doing a career where i can grow >> reporter: now 24, duncan is a software engineer at sq squarespace. making $140,000 a year >> not only were they teaching me how to code, but survive in corporate america. that is not something you get in col college. >> reporter: marcy grads other than over $100,000 in salary the community they built is worth much more. >> increasing number of companies have embraced the idea of skills based hiring as the answer to obtaining the caltalet
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they need. tech jobs with a four-year degree increased last year, most required a bachelors degree that is up 51% from years ago. andrew. >> interesting question for you are employers limiting themselves by considering candidates with college degrees when they are hiring that is the perennial question >> many say it is important to look at people not necessarily based on their degree, but on the skills you need for that job. that brings in non traditional candidates it brings in opportunities for more women and people of color to get the jobs. they are looking at that in terms of retention and in terms of job development and the difficulty is making sure the onboarding process is correct. that is true for anyone. >> thank you for this. we have a programming note
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on april 4th, equity and opportunity event. we will look to bridge the wealth gap for a more sound economic future. register at cnbc.com or scan the code on your screen. coming up, we will talk about the fed fight against inflation with former fed vice chair roger ferguson that's next. we have been celebrating black heritage with the cnbc teammates and leaders in business here is tiffany mcghee >> i graduated from morgan state university which has been a historically black university. it gave me the space to learn and grow in the environment where i could see myself it gave me the tools to navigate in thetry whe often i'm the only one in the room it is a standard and expectation
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good morning welcome back to "squawk box" live at the nasdaq market site
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in times square. we will open 140 points higher on the dow nasdaq up 70 points joe. the fed battle is getting more complicated with the inflation report for the look at the fed rate hike path, let's bring in former fed chair roger ferguson he is now a distinguished fellow with the council on foreign relations and cnbc contributor roger, good to see you the murmuring of 50 basis points went up a little it is not a 50/50 yet, but it is close. we got a number on friday that might play into this i keep asking the same question, roger. is it possible things go gradually until it happens all at once? this friday, it will not be 500,000 new jobs, probably could it disappoint -- i don't
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know if you call it disappointed if it is soft. could it be much less and last month is an out lier >> i think it was an outlier i think the most important message, you know, going through the ups and downs we're seeing here is inflation is very much a clear and present danger the fed has more work to do. the market has come around to recognize that by pricing in, perhaps, 50 basis point number more importantly, pricing in a higher terminal rate and taking out of the market the expectation of the pivot toward cutting rates toward the end of the year the market is finally getting the message that the fed has work to do and the fed itself, i think, fully recognizes that as well. >> is it still pandemic related
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the stubbornness of inflation? there are those people, roger, that point to the highs we reached for inflation which are in the rear-view mirror now. everything is lower than it had been it is not going as smoothly and as quickly as we hoped for is there something different than what we're used to in the labor market it seems like a post-pandemic phen phenomena. is there something different with the wage price spiral >> we are not yet seeing the real wage price spiral what we are seeing is a very, very tight labor market. we are seeing a very uneven economy with some areas clearly slowing because of rising rates. think about the housing sector yet, i think there is still pent-up demand for services. we see in some of the low and moderate jobs and services that
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there are a number of openings this is a fairly unusual configuration, joe the baseline is in the balance in the labor market is clearly feeding into inflationary pressures coming down, but within the target. the fed needs to get its head round that the fed may be tightening more than the market expects currently. >> that seems you can explain the service inflation and demand from the same thing. people did not travel for a long time or go to restaurants. they did not employ enough people because the demand wasn't there or couldn't get employees. people wanted to stay home all of these things are, i don't want to use the world transitory, but i don't see the endemic systemic causes there.
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i am still hoping we don't kill the papatient. we haven't we don't look at that as a good thing. we look at it as a stubborn thing that won't roll over. >> everyone wants to see good jobs created you want to see them created at a wage level consistent with the fed 2% inflation target. that's a bit of the rub. when you do surveys and i have done surveys of ceos and they are expecting to increase wages 3 or 4%. not the numbers we saw before. the fed is attempting to hold on to as much of the job growth and forward momentum as they can consistent with bringing inflation back down. what is interesting to me is how
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much forward dmost mementum is e economy. the reopening of the economy was service oriented and that hasn't faded completely just yet. >> consumers mixed picture again, obviously, like everything home depot maybe that explains it walmart said they are not seeing people buying the most expensive things are people running up credit card bills do they have money left from the government programs? could that be a quick change >> i think we might be getting close to the end of that there is some evidence of increasing consumer indebtedness for sure remember, the job market is strong wages are not growing as quickly
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as inflation there is still catch up to be done you put that together and consumers are surprisingly resilient. the final point i would make is most of the interest rate increases are going into, obviously, interest sectors. most consumers who have mortgages, fixed mortgages, not v various -- variable rates we are still seeing resilience which one should welcome from consumers. >> pretty steep yield curve, roger. i guess that means we go higher which maybe means the possibility of recession is greater. then you cut, i guess. is that how you read it? >> i read it that we will go higher than the 5.25 to 5.50
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built in the market from last week's dpata. it would not surprise me to see a number higher than that. i think you are right. i don't expect a sudden break. the risk of recession still remains with us because the fed is being forced to tighten more and more there are vulnerabilities to the point you are making that are not yet clear. will the consumer run out of the forward momentum that they seem to have? will weak netness in the housin sector spread? a lot of information suggesting the fed is moving at 25 basis points, but signal higher terminal rate. >> leaving the possibility there's a lag although there are arguments there. you think if we are going higher, you do 50 to get there more quickly i think they are keeping that 25 just in case they are under
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estimating the lag effect. roger, thank you we appreciate it friday, we will know more on friday >> thank you, joe. >> february is a short month >> it is loretta mester >> she was on. we talked about it. >> now she says 25 it's hard to go back to 50 after 25 you freak everybody out. >> hard to go back to the farm when we come back, a big pay day for blackstone's steve schwartzman. he brought in more than $1 billion last year. and we will have peter kraus on why he doesn't see the economy heading for a soft landing. a reminder, you can watch us any time on the cnbc app when you choos
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blackstone's ceo steve schwartzman took home 1 p$1.27 billion last year. the 2022 haul topped the prior
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year earnings of $1.1 billion. >> extraordinary >> he's not happy. he might be. you can't assume he's totally happy. >> money doesn't buy happiness >> it helps. an update on missing chinese investment banker. the filing did not mention any specific investigation a representative did not share additional information when contacted. china renaissance showers have pl -- shares have plunged in hong kong he was the firm's founder and ceo and controlling shareholder. business in china. know what you are getting into. let's talk about the film box office
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"cocaine bear" brought in $23 million this weekend the movie inspired by the story of the drug runner's plane crash and residents of the small town tried to escape a bear that ingested a duffel bag of cocaine. disney's third "ant-man" had the biggest week to week drop. falling from the debut of $106 million to now $32 million still, the movie generated $364 million globely. -- globally. it raises questions. we had the tent pole films that got people back in we had the lull periods. you cannot have the lull periods. this goes back to have we transitioned to watch more on
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streaming. >> have we changed our behavior? >> right die hards go see "ant-man" the first week and others say i'll watch it in three months i'll do that. >> part of it is the window. that is something that happened in covid they shortened the release window to get it on other options. >> has that changed behavior you go see "ant-man" if you love it or wait three months. i don't know when we come back, crude prices down 16% from a year ago. some analysts are warning we could see $100 crude that story is next reminder get the best of "squawk box" on your daily podcast app 'rcost a te. wee ming right back. >> announcer: executive edge is sponsored by at&t business
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>> is your sense
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, welcome back to "squawk box" this morning oil prices down 16% from where they were a year ago when the war began in ukraine there's been a number of analysts calling for $100 crude in the coming months supported by china's opening joining us now is energy aspect's founder and director of research good morning to you. what do you think? i was just at the pump by the way, and it actually felt better, but maybe we're headed the other direction. what do you think? >> sorry, you cut off there a little bit were you saying pump prices are going down >> i was saying for a moment it felt like it was getting better, but maybe it's getting worse what do you think? >> i mean, look, right now it's a shoulder season we've not really had any heating demd. diesel deman wea icularly in the s.ther some preu pump prices but themer we do expect lot er ps actually at pumppecily because to get rts e ing et it from much rther afield itot nsari going to be from europe because europe is run material that used toe gane, so i think yed pr thisummer, but not mp e short-term >> as yoenset crude gets t00is that real yeagaiot nowlf of the we have ntorto run down. thatds tppen first, but e reing in china is real we are seesomey, very stng mity ers. jet fuel dd growth is going to be very strong as well. but it is a matter of time we do need to run down the built up inventories first. >> is there any -- you know, every analyst we've had on recent. >> right now it's a have very strong east versus west divide the east is growing strongly but the west is weak weak manufacturing, if that has a bigger impact on the rest of the world and europe, which has managed to just about stay out of recession gets weak again, i think then, yes, there is a risk that we don't get to $100, but i
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will say with the billions of people who are coming out of a three-year lockdown effect in china, we are seeing it in the mobility numbers, and that's why we remain confident for the second half of the year. >> i've got a weird one for you. we've been having a big conference around this table for the past couple of weeks about esg, the backlash against esg, and specifically the way investors are thinking about investing in oil today have you seen a shift at all in terms of just the conversations you're having? >> yes, i think it's a great question, actually i think, you know, we've been through this last few years, at least five years i'd say very much focused on green and on renewables i would say in europe, that conversation is still very much present, but there's a sense of realism kicking in because it's never been about we shouldn't, you know, lower carbon emissions. it's about what's the true cost of it, and how quickly can we do it i think those are the two
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questions that politicians have never really grappled with with the energy crisis that we've gone through last year and still right now prices are very high both for gas and oil despite the gas price correction compared to historical levels, right? i think there is a sense of realism creeping in that demand is growing, it's not slowing down therefore we need the energy supplies as well by energy supplies, i mean oil and gas specifically. >> thank you so much for joining us appreciate it. >> thank you >> with that in mind, a couple of assignments for everyone, electric grid. could be blackouts, power o out outages. there's a big reason to shut down natural gas and coal powered. if the wind stops, it's not going to be, and vanguard, the ceo of bucks, tim buckley affirms his fi dduciary duty to
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clients. >> that happened a week or two ago. >> it did. but i don't see larry fink following along. >> i think larry's done it quietly. he's trying to slowly step away from things. but van forward made a good point and did it directly. that was a couple of weeks ak. twe're going to hear from target tomorrow before the opening bell bringing you an exclusive interview with ceo brian cornell. "squawk box" will be right back.
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good morning, investors trying to recover from the worst week of the year futures this morning are pointing to a higher open. and after a we can a of inflation data that showed the economy is not cooling as fast as we maybe expected, jay powell and company are looking for ways to respond plus, warren buffett's message for the buyback and dividend haters. he's not mincing his words in his annual shareholder letter. that story and more as the second hour of "squawk box" begins right now ♪ good morning, and welcome
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back to "squawk box" here on cnbc we are live at the nasdaq market size in times square i'm andrew ross sorkin along with becky quick and joe kernen. nasdaq looking to open about 70 points higher. look at the s&p 500 up about 20 points meanwhile, let's she you treasury yields. that's been part of the story, if not the entire story this year and last year, maybe the year before. but ten-year note right now at 3.953. the two-year at 4.834, becky. >> sent a big move rapidly i want to get over to dom chu. he's nogot a look at this morning's premarket movers. >> we're going to have to start with shares of union pacific, which is surging in the market up around 8% just around 100,000 shares of premarket volume, this is america's most valuable publicly traded railroad operator it's catching a bid on news that
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ceo lance fritz will step down from his role later on this year in order to facilitate a change in leadership at the company now, the move comes as hedge fund has been actively seeking change at union pacific. those shares have lost around 30% of their value since the highs you saw right here back in march of this past year. also in the news, deal chatter in biotech and big pharma. shares of seagen up 18%, roughly 50,000 shares of premarket value. the company is in talks, citing people familiar with the matter, those talks are early stage and there's no guarantee a deal would result but seagen has been talked about as a possible takeover target given its cancer product pipeline pfizer down about 1% in the premarket trade. big retail names due to report
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earnings later on this week. there's a slew of s&p 500 and other types of companies within retail across all indices that are reporting. target shares up a half a percent right now, lows down fractionally, best buy, costco, macy's each of these better known names will give us an indication of the health of the american consumer when they report results. this is a very heavy week to close out the earnings season for that retail sector i'll send things back over to you. thank you. >> the dow, the s&p and the nasdaq coming off their worst week of 2023 our next guest famously and successfully bet against sub prime mortgages as depicted in the movie the big short. an impending paradigm shift. steve, good to see you. >> good to see you had you on set last week we had one of our frequent guests sri on, he wasn't even
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saying that he likes two years at 480 he likes long duration ten-year at 4% and thinks you're going to make money on those instead of, you know, going for 48 a lot of times you worry about principal risk duration if it goes too long, and he said do it you're buying bonds for the first time in a long time. >> we're buying bonds, especially treasury. i like 48 over 4 because 48 is bigger than 4. >> but it's only two years, if it's going to really slow down. >> in this world, two years is an awfully long time. >> i suppose people who are going long duration are expecting a recession. i think the times are so corp. k complicated right now. you have guests who come on and say there's going to be a recession. other folks say it's not going to be a recession and then they're not sure it's a very complicated time.
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>> that's why i asked, a paradigm shift buying a two-year note doesn't sound that profound to me. what paradigm shift are you talking about? >> let me define paradigm, first of all, it's a set of assumptions that are so deeply in your head you don't even know they're there. you don't believe in your paradigm you inhabit it the paradigm that has existed for the last ten years has been that because rates have been zero people have been paid to take risk, and so they've invested in tech stocks, and they've invested in hyper growth stocks meaning big revenue growth, no earnings, and valuation be damned. so assuming that we take the fed at its word, which is obviously questionable, and rates will stay higher for much longer, i think the days of people beating the market by just investing in tech are going to be over, and we're going to go to a new paradigm, which i'm not 100% sure where that's going to be.
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we won't really know until we get there. there will still be tech stocks to invest in i think the days in investing in companies that have no earnings or have multiples of 200 times will be gone there will be a lot more themes like infrastructure, maybe greenification, bringing back onshoring of the industrial sector in the united states. it's not clear yet i think that's where the market is going to go and bonds. >> over the years, 5%, 6%, we saw tech do fine, and tech stocks do fine over the past 30, 35 years, whatever it is now, we're going from zero back up so obviously it's on a relative basis. it's much worse than it was, but historically doesn't seem like you just stop buying tech. >> i'm not saying you stop buying tech. i think you'll be selective. when you're talking about companies, i'm not going to name names that have high revenue growth and negative earnings, i think it's going to be very hard
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for people to buy those stocks anymore. >> did we go through that in 1999 too >> we also went through it last year. >> it happens. >> those companies were down 75 to 90%. >> it's happening in streaming now, too, isn't it >> the business is what consumers want like streaming but is not what wall street is going to value right now you just have to find a way to make that profitable >> yes, you do but not everybody's going to be able to make these businesses profitable some of these businesses are -- i think, some of them are very flawed they just keep showing revenue growth and negative earnings it's going to be very hard if not possible and there will be some companies that will be able to get profitable and they might make interesting investments if i'm right, the days of investing in companies of negative earnings at multiples of revenue will be crazy. >> you're not calling for a big crash. you're calling for a mild recession, is that -- >> i mean, look, if you believe
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there's enough companies out there that have these models that are dare i say broken, the question is what happens a lot of restructurings? >> there will be restructurings like there always are. >> does that feel like 2002, 3 to you if you were to talk about a comparable period, what is this thing? >> there is no comparable period when is the last time we had inflation, i'm going to regret saying this, i was in college. i won't define what that means who was around in investing when that happened? a handful of great investors, that's it. and then add to that the fact that you have ukraine, supply chain problems, i don't think anybody can really call at this point whether it's -- i mean, look, i have more of a negative bent than other people generally speaking if i had to lay my life on the line i would say we're probably going to have some type of recession, how deep i have no idea, but i respect people who
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disagree i just think it's such a ti difficult period you really can't make that call i do think we're going to go into a different mode of investing over the next several years. like you said, if you combine two two-year treasuries at 4.8%, how could that environment be the same when rates were 0. >> right how about corporates do you worry about -- >> i worry a little bit about corporates in the sense that if we go into a recession there's no rush. >> right >> munis >> that's not my area of expertise. but you know -- >> tax bracket >> stop. just risk free treasuries 4.8 is a nice place to be clients have different objectives there's no shame in putting some of your clients' money in 4.8%, especially if they want it. >> i'm not going to ask you for the whys, but when you were in college and we had that inflation, i was there for that
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too. it was definitely different. i can find a lot of one-offs to account for this inflation right now, which makes me -- that's why paradigm, i'm not sure that we need a word that big. i still think a lot of it is pandemic reopening related in terms of supply chain, the labor force is different now >> i actually disagree i think this has become more structural in the sense that -- >> is it from the fed and from the fiscal stimulation being too much >> i think that's too hard to say. >> so you don't know where it's from. >> i do think that part of it is there's definitely a labor shortage, that things are being onshored we've gone from a 30 to 40-year period where things were offshore, and that was very deflationary nobody realized how brittle that supply chain was and now companies don't want that anymore they're bringing it onshore. that's great from certainty, but it's higher costs. there's no question about it >> for labor. >> for the labor market.
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>> and it's great for the labor market. >> although it's closer so it's a little better in terms of getting it from the other side of the world. >> the labor costs are going to go up. i find it ironic for the first time in 30, 40 years labor wages are going up and people are having -- they're getting hysterical about it. >> only because they're not keeping up with inflation. >> correct >> nothing costs less than $6, i do it myself because i'm really good >> if you go to dollar tree, you'll find it less expensive. >> shop rite is a lot less expensive. >> what do you go to kings >> kings >> yeah, do you go to kings? >> occasionally. >> there's nothing less than $6. >> it's all very pricey. >> huh >> it's all very pricey. what percentage are you putting into bonds >> we're really starting with treasuries and we're laddering it >> right. >> part of the problem everybody
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has right now over the last ten years people have made so much money in their accounts if you sell something you have massive tax gains and then, you know, to take the tax gain that's -- like let's say 35% and put it in something that makes 4.8% is not the easiest thing to do. you know, sometimes you're able to offset the gains and the losses and then you put the money in. >> so people don't want to -- people don't want to sell because they've made -- >> nobody likes to sell when they've got to pay taxes if the stock goes down 90% -- >> i've got one more in the big shortish way, crypto, do you have a view? >> i do, but it would take about a half hour to tell you how negative i am about it. >> i think that's a reason for you to come on back. >> okay. >> real estate, they're not making any more of it. you ever heard that? >> i have heard that >> we've got to go. >> yeah, plastics. >> thank you. coming up on the other side of this break, markets falling to a five-week low amid
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stubbornly high inflation. what is the fed's next move? we'll discuss it after the break. and a number of big retailers reporting this week. we're going to preview the week ahead. "squawk box" coming right back
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respond. steve liesman joins us with the changing outlook good morning to you, steve. >> good morning, an true markets priced in a lot more fed hiking last week eight fed speakers, so the question is has the market priced in enough tightening? deutsche bank doesn't think so they wrote over the weekend, the latest developments further reinforced our forecast for the fed to tighten a 5.625%. those developments of course include better income numbers we got last week, better housing numbers, firmer inflation and those still low jobless claims the market is priced below deutsch's 565 with a peak funds rate in august of 5.41, moving down to 5.29 by year end note that that april contract at 4.89, shows the market still expecting 25 dips in march with some betting on a 50 and there was also some musing about a 50 basis point hike in the hallways of the u.s. monetary policy conference on friday in new york most fed observers were sticking with this idea that the fed
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would stick with the slower pace of 25 basis points in march, depending upon the jobs and inflation data next month indeed, jpmorgan writing, the pressure sis on for february dat to showing a return in line with the fwoels of central bank to generate a soft landing. just talking about it with steve there, you can see it in the new name survey. in december 52% saw a recession beginning this quarter that's down to 28% in the february survey, and you're seeing all over the map about when a recession might begin the key to listening to the fed officials this week is whether they believe the can you not fr - current framework of going by 25 is sufficient to address inflation. many fed watchers expect what's going to happen is the terminal rate in the march forecast will
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rise above 513 andrew. >> oh, goodness. did you hear by the way, steve, not your steve, eastman from -- i call him from the big short, that's not fair, but did you hear this last segment we had about buying bonds and treasuries >> yes, i did. yeah >> i mean, but it was an interesting sort of conversation because he said you have all these folks who have made an enormous amount of money, they don't want to pay taxes, obviously. they're thinking do we sell our equities, put them in treasuries, and which way do treasuries go the prat this poi? i'm sort of curious given what you think you spend your time thinking about what you think is the right answer. >> one of the first things i thought was most interesting is something we've been talking about is how the tech sector has proven itself to be one of the most sensitive to interest rate hikes. the idea that money now has a cost is now going to be critical in terms of who gets funding and
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who doesn't. i think that's probably good for long-term productivity and good for the economy long-term. if anybody and their brother and or sister could get a loan or equity funding in order to open up a business, i guess there is some tradeoff in terms of less innovation but perhaps capital will flow to better innovation now that it has to be choosier so to speak. that's the first thing the second thing is it's a good question and i think you guys asked the right questions. it's easy to put your money into 2s or 6s or 1s, but then you have what the institutional investors called the roll year-overrollover risk you have to make a decision two months or six months down the road i don't know, andrew i think the question is what happens with that data in march. if it's worse, you know, you may not be at the high yields that we're going to be achieving here >> steve liesman, thank you, sir. great to see you. >> pleasure. coming up, government
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spending, the debt ceiling and the president's wealth tax debate we're going to talk about what's at stake for the future of america. check out the futures this morning. we are rebounding a littleit b from the worst week of the year last week. coming right back.
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welcome back, berkshire hathaway released its report over the weekend berkshire reported a loss of $22.8 billion for the year because the company was impacted by $67.9 billion in investment and contract derivative losses that accounting rules require. those have been numbers that even when they're up charlie hmonger and warren buffett don't pay attention to that. revenue was up, operate earnings rose to a record $30.8 billion berkshire hathaway as warren buffett pointed out is now the biggest shareholder in eight s&p 500 companies. american express, bank of america, chevron, coca-cola, hewlett-packard, moody's, and paramount global buffett pointed out in his letter that berkshire hathaway
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ergonomic and burlington northern santa fe would be s&p 500 companies as well. all of those companies earn more than $3 billion annually that's something that only 128 of the s&p 500 companies do. one of the things that buffett pushed back on in his letter was criticism of share buybacks. he said when you are told that all repurchases are harmful to shareholders or to the country or particularly beneficial to ceos, you are listening to either an economic illiterate or a silver tongue demagogue, characters that are not usually exclusive. in terms of keeping the large conglomerate together even after he's no longer running, the 92-year-old said at berkshire there will be no finish line buffett also said berkshire will always have what he called a boat load of cash in u.s. treasury bills its cash pile stood at $130 billion at the end of 2022, and on the brewing fight over fiscal overspending by the federal government, buffett
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wrote that berkshire offers moderate protection from run away inflation, but this attribute is far from perfect. huge and entrenched fiscal deficits have consequences he's talked in the past about how even a wealthy family can overspend. i think that might be what he's looking at when you look at u.s. deficits >> mm-hmm. >> still to come, the biden administration pushing for higher wealth taxes to help pay down the debt, but will raising taxes even be enough to cover more government spending that debate is coming up next. and then later, aperture investor ceo peter kraus on why he says a soft landing is not in the cards. does he mean it's going to be a hard landing or no landing at all? we don't know. that's whey yy you've got to wa. you're watching "squawk box" and this is cnbc. >> announcer: this cnbc program is sponsored by baird, visit bairddifference.com.
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check the markets, seeing some green on this monday morning, up 126 points on the dow, 66 on the nasdaq. s&p right around that 4,000 level, i think 3970 is where we closed on friday after we tried
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to make an assault on the mid-4000s only to turn around with that rough week we had. it's now in the books, it's only four days. you can do a lot of damage in four days. >> the nasdaq was down 3.3%, so it was losing, what, 7, 8/10 of a present on a day. >> the dow ended up getting back al its gains treasury, 3.96, five-year, 4.2, two-year, 4.84%. oil is its spr, i mean, china's reopening. war continues to rage, $76 i don't know, i don't know whether that's, you know, is that spr related still selling out of that. crypto is -- you would have thought it was a pretty rough week, a riskoff week it's maintaining it's below
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24.5, 24.5 is where bitcoin was now, 23.3. >> nasdaq's back in bear market territory. it's down 21% from its recent highs. >> recent highs. >> yeah. >> president biden's plan to cover government spending by raising taxes on the rich continuing to play a major part in the u.s. debt discussion. one of our next guests says social security has now become the elephant in the roomment joining us now is alison schrager, a senior fellow at the manhattan institute, and indiana law professor david gamage who has been a tax adviser on senator warren's team. let's throw into the mix, i mean, i don't mean to do this, but steve schwartzman made a billion dollars last year. so we can talk about sort of how all this plays out just to be -- make this maybe marginally more of a debate or provocative, david, given that i know exactly where i think you stand on all of this, what do
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you think of the idea of raising social security, at the same time, you know, elizabeth warren has sort of had this mixed view of all of this. >> social security isn't a problem in and of itself, right? so i would make three key points one, health care costs are growing unsustainably, if we don't fix that, health care can't grow faster than the economy forever, then no amount of tax hikes or spending cuts will suffice to the reason we have any problem with social security is deficit finance tax cuts for the wealthiest in the 1990s, al gore ran for president trying to use the surpluses. we had big budget surpluses in the 1990s to shore up social security instead president bush and the republican congress passed major huge deficit finance tax cuts for the wealthy, which created our current problems, and that was continued under trump and the republican congress in 2017, so if we -- social security doesn't need cuts in and of
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itself so long as we address health care costs and if we shore up our tax system. >> alison, i assume you disagree >> yeah, i mean, my read of the reading the cbo report and the social security trustees report each year is just -- i mean, that's not the problem social security is due to start running deficits really just because we have an aging population, and it's a pay as you go system where current workers pay for older workers, and when you have an age structure where you have more older workers -- or not more but a higher proportion of older workers, your payroll taxes are not going to be able to cover social security. the tax cuts that went to the -- to richer people aren't part of payroll taxes. social security is funded by payroll taxes. so i don't think that -- i know that really wasn't the problem here >> allison, joe and i were talking about this last week there was a paul krugman column
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last week in the new york times that looked at the cbo scoring of social security and medicare into the future, but also went back and was talking about what the same scores looked like in, you know, ten years ago or more than ten years ago, and the suggestion was actually happily that, excuse me, that health care costs have actually -- i don't want to say flat lines, but have not risen the way i think the expectation was, and if that is true that maybe we don't actually need to cut back on these costs the way some had expected. >> why are we conflating medicare and social security in the first place? i don't know we're talking about health care costs with social security, conflating -- they're both behemoths that we're going to have to deal with i don't know, that confused me anyway, go ahead, allison. >> i thought that was an interesting column he seemed to put a sunny spin on the fact that life expectancy was falling. so gee, maybe social security won't cost so much
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i don't know about you but i'm hoping that life expectancy continues to rise just for my own retirement there is health care costs and social security, and it is i guess true that if we continue this unfortunate trend of people dying earlier social security won't cost as much, but i don't know if that's something we should be rooting for. >> zeke emmanuel model >> actually, traditionally like report each year and often you see the year social security payroll taxes no longer continue to pay for everything been going down health care is another issue obviously there's a lot of inefficiency, and you know, ways to make -- to contain costs. a lot of containing costs means innovation, that's not something we should clamp down on either >> david. >> yeah, social security is key program for the wealthy -- sorry, for the economy for the elderly. i
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it's had a major impact of preventing poverty among the elderly. we've known about the aging population for the 30, 40 years, we had a plan to deal with that in the '90 if we hadn't borrowed against the social security trust fund instead had we stored those funds investing for the future, we wouldn't have a problem with social security today. i don't think it's the right solution for our country to return to an era of poverty for the elderly because instead of shoring up social security in advance. >> david, if you could wave a magic wand, you get to be the president, you get to run the senate and you get to run the house. you can run the floor, what are you doing? >> what am i doing >> i'm enacting president biden's plan to raise payroll taxes that would solve social security in the short run. i'm tamping down tax avoid dance, that corporate and ultimate minimum tax passed last year was great i would enact president biden's billionaire minimum income tax,
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and international income tax gains and trusting the state and i would deal -- on a bipartisan way ideally with the rising health care costs in the long run. that would solve all of our financial woes at the federal and state level and put our economy on a path for sustainable growth. >> can i ask you one question about the billionaire's tax, which we heard president biden talk about again, but again we don't really have all the details. are you taxing what might be described as stock, right? i mean, this would be something that has not been sold >> correct the billionaire's income tax, it looks at what we call true income it looks at have you had your stock or other investments go up massively in value and not waiting for sale the problem with a tax system that waits for sale is it's very
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easy for the wealthiest among us to not sell their stock, to borrow against their increases, very easy to do, and then at death it all goes away so most of the wealthiest in america pay very little tax. that's the problem that this is meant to address. >> do you think by the way, and maybe allison can get in on this, i'm not against trying to tax the wealthy. i would like to tax realized gains or maybe prevent what you're talking about, which is skirting the tax by borrowing money. is there any other way to do this so that you're actually just taxing either realized gains and/or there's some kind of tax related to loans over a certain amount and, by the way, would that actually solve any problem >> there are other solutions at the end of the day, though, the other way to go about this -- well, you could do it with a pure wealth tax, elizabeth warren's wealth tax, or the other way is that consistently applied progressive
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assumption tax over time but to do that and make it work you have to have a political environment that sticks with its commitments. you can't have one party that when it comes into power cuts taxes. if you have a party that can be expected to eventually come into power and cut taxes then a progressive assumption tax just means the wealthiest wait and don't -- and eventually get out of tax in the long run if you -- without a consistent political environment committed to tax enforcement and funding the irs and shutting down tax avoidance only in my view something like a billionaire's minimum income tax that gets that massive huge amounts of increased gains without waiting for sale or something like an elizabeth warren wealth tax. >> i assume you don't like the way david's doing it, but do you think there's a different way to do it? >> i agree that we should have a progressive income tax i think we should go to things like step up in basis or carried interest but the numbers here
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really don't add up. first of all, a wealth tax is not really feasible. i think we know rich people don't tend to keep their assets in public makts and if we had a wealth tax i'm sure that number would go down quite a bit, which would obviously be bad for everyone the feasibility of a wealth tax is a huge issue. i think even that aside, the latest cbo report says we're on track for an 18 -- more than an $18 trillion deficit if we did all of the things he just mentioned and then some, just taxing people who make more than $250,000 or they're wealthy, that only comes up with $10 trillion the wealthy just don't have enough money and there's only so much we can tax them to pay for the government that, you know, we already have let alone the government a lot of other people want. >> so what would you do? >> i think we're all going to have to sort of pay more the rich are going to have to pay quite a bit more, not through wealth taxes but through sort of cleaning up the tax code and including progressive taxes
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and honestly we're honestly going to have to learn to live with a little bit less too. >> allison, david, both messages some tough medicine to take. thank you. appreciate it. all right, coming up, illegal problems with oligarch asset seizures and whether the whole sanction program has actually been effective. robert frank takes a look at that story next. and later, the cfo of fintech company block on the state of small business, the buy now pay later service industry and much more. and a reminder for you, you can get the best of "squawk box" in our daily podcast, just follow squawk pod on your favoriteodst pca app and you can listen anytime we'll be right back. atter your , at pnc private bank we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why? what if you were a global bank
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welcome back the futures the dow up 131 pointings, s&p 500 up 18, 19 points nasdaq up 72 points. we've got a programming note tomorrow morning we're going to talk to goldman sachs's chairman and psychiaceo david sol momon the u.s. and european governments made big announcements when they seized dozens of yachts, villas, and
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private jets of the russian oligarchs and promised to send the sales proceeds to ukraine, but the seizures of these assets have turned out to be a big legal problem, and robert frank joins us now with more i'm still waiting to get my -- no, they don't have anything of mine, robert >> good, joe, and they probably won't, but remember last year president biden announced that they would, quote, identify, hunt down, and freeze the assets of the oligarchs the justice department has since frozen about a billion dollars in total assets. the problem now is what to do with all of them the government can't take possession or sell an asset until it's gone through forfeiture that's a process where they have to prove in court that the assets are illegal proceeds. that could take months or even years. the doj announced friday the beginning of a forfeiture process for luxury real estate belonging to the oligarch victor
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vexelburg, the homes in miami beach, and the hampton are valued at $75 billion. the rest of the yachts are still floating in legal limbo. a yacht that was raided in fiji last year, the doj sailed it to san diego where it is still sitting in the port of san diego. the u.s. government meanwhile i.e. taxpayers are paying the crew and the docking fees. so they won't say how much they're actually paying. the u.s. has not begun the forfeiture process so they can't sell it or transfer ownership meanwhile, a 115 foot yacht seized from an oligarch and held in croatia has escaped from authorities and is now missing joe, so these oligarchs very good at hiding their stuff. >> so the crew's still there, that's kind of interesting
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you got any numbers about what something like that -- that's a big one. that looked like the love boat. >> so typically a yacht costs about 10% of its total cost to maintain every year. that's about a $500 million yacht so it could be typically $50 million a year to maintain that's if it's sailing if it's just sitting there with a minimal crew, it is still minimum hundreds of thousands of dollars a month just to keep that maintained, clean, not getting damaged by the sea water. >> asking for a friend, what's the depreciation on a $500 million yacht so it comes out of the dealership, if you will, at $500 million does -- it doesn't go up typically, i don't think it usually goes down, but how much down does it go and how fast >> well, andrew, it's a great question in the past prior to the pandemic, you would see, you
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know, depending on the build quality and the maintenance typically about a 20 to 30% depreciation over a period of five plus years. over the past few years, yachts have actually traded for more than people paid for them because there's such huge and overwhelming demand for yachts if you order a mega yacht today you're not going to get it for at least three to five years so the premium on boats that are sitting in the water has been higher they have appreciated since people bought them that may change in the next few years, especially if some of these oligarch boats come on the market and there's more supply >> seems like it would also be a function of liquidity. >> bid opportunity if you just wait. >> people looking for things to -- yeah robert, is it like art does it follow the markets canine of up and tdown valuation >> it's not just the stock
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market it typically follows global wealth creation. during the pandemic we saw massive wealth creation. so unprecedented demand for boats, cars, everything expensive, and again, no sign yet that that's slowing, but we expect it probably would, just because it was unsustainable >> robert, thank you when we come back, a number of big retailers set to report their results this week including target, lowes, macy's and more a preview of what you can expect is next. sk and as we head to a break, let's take a look at this morning's winners and loses in the s&p 500. union pacific leading the way up by about 9.5%. "squawk box" will be right back. good night! hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star.
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i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck. retail earnings this week will give investors a clearer read on how the consume ser faring target tomorrow, lowe's and kohl's on wednesday, and macy's on thursday. for a look at what to expect we have the managing director at morgan stanley si simeon, what do you think? >> we definitely have an element to preview there's been a saying we've been using -- nothing is terrible,
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but everything is a little worse. that's kind of the tone that walmart and home depot said, and the tone for more. >> walmart basically said they are seeing signs of cracking home depot was a little more optimistic how do you match that up >> so they sell to different customers, but there was a thread that was similar in both reports, in that even their core customer was slowing, that we were starting to see less consumption of discretionaries goods. you're starting to the the narrative that the core customer is weakening
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>> let's look at target shares the last week or so. obviously they felt some pressure that affected the entire group of them has there been enough of a sell-off reflected what would be the good news, and what would be bad news >> for target, the about ig debate is how much margin recapture happens in 2023. i think the question is, what do they guide to? right now they're earning around a 3.3% ebit margin they were earning at the peak of covid north of 8%. their normal margin range is in the 6s the markets has somewhere in 5 and 5.5 ebit margin. the in gus is a credible path back to that level and over time target is sitting on $30 billion more revenue than in 2019.
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so how do they take that extra revenue and convert it to structurally higher profit that's the good news the bad news, if it takes longer than investors expect to get that profit back, whether it's fulfillment costs, supply chain costs, the longer it take to get back would be bad news. >> what do you think of the stocks >> it's one of the more intriguing and -- it's a phenomenal franchise they have a great brand. if you look at 2024 estimates, the stock is already pricing in a pretty healthy rebound, in margin and in sales. we're on the sidelines, we're intrigued, we're waiting for a better entry point. >> how about lowe's? the ceo has gotten credit for a good job to this point
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>> it's a tricky balance they both are phenomenal companies. they operate in a phenomenal sector it sells against one of the largest depreciating assets that people own, a home they have done a great job driving sales, driving margin. i think it's more of a macro -- lowe's is more inexpensive relative to home depot you're paying for the potential to drive margin, but both are susce susceptible. lowe's has actual le less exposure to the pro. that means potentially less slowing. so nudge environment, lowe's looks a little less attractive >> just with the real estate outlook overall, not enough
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inventory out there for it, maim people are forced to renovate? >> that is the bull narrative. that's fighting the classic empirical model, which says 6 to 9 months after home prices start to fall and/or after home turnover slows, you should see a pretty sharp decelerate in home improve demand home prices peaked in terms of the rate of growth around the summer time. right now we're in the cross-hairs of when the top line should start to slow lo and behold we are seeing some severe slowing home prices have still not turned over yet. six to nine months from here, that's what we're braced for back to your argument, which is the bull case, which is the decoupling, greater demand spoke shultzer than homes, and people are staying in their homes and
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therefore spending a big of a tug of war. we lead with the empirical model. we expect a slowdown in the second half. even with that, the estimates look somewhat reasonable already. >> simeon, thank you very much. >> thanks for having me. tomorrow on "squawk box," brian cornell will talk with us, a cnbc exclusive we're going to talk to peter kraus, and give us the market, and shares of block are popping last week a the company's cfo quk x"s mius "sawbo icong right back after this.
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good morning stock futures in the green this morning, as we get set for the first trading day of the week. major averages coming off their worst week of 2023 with arren buffett is still
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bullish on the u.s and block rewarding investors so far this year we'll talk payments, crypto, so much more if her first post-earnings interview. "squawk box" begins right now. ♪ good morning welcome to "squawk box" here on cnbc, live from the nat dak market site. i'm joe kernen we are in the green for the first day of the week after the toughest week of the year for the bulls last week, 132 points not dow, nasdaq up about 60, and the s&p right around that 4,000 level, probably around 3985 or
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so with today's gains. and there is the ten-year, ever so close to 4% two-year split big inversion with 4.83. let's get you caught up with some stories pfizer is in talks to acquire seagen according to "wall street journal," citing people familiar with the people, the paper says any agreement could potential face a hard antitrust review, still seagen shares are up union pacific says it expects to name a successor ceo this year to the current chief fritz' announcement came around hedge funds partners called for him to be replaced
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that stock up pretty significantly. this morning bank of america upgrading the company, and raising the price target you can see that stock is now at $12, a gain of just over 10%. over the weekend berkshire hathaway reported a loss for the year that was impacted by nearly $68 billion in certain accounting-required losses just because of the big stock portfolio that berkshire owns. if you're looking at revenue, it was up by 9.4% buffett opined on several issues, saying when you are toll told that all repurchases are harmful to shareholders or the country, you're either listening to either an economic illiteral or a silver-tongued demagogue.
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you can watch the livestream in may. that is saturday, may 6th. shareholders, by the way, can send in their questions. let's get over to mike santoli. he's been digging into the market's recent resilience, despite tailwinds turning into headwinds. good morning, mike. >> we were undergoing in the s&p 500, the first 5% pullback from a high of the year it's placed in a delicate spot, but that's amid a repricing, a reset in a hawkish direction of fed expectations, and brings it on a discat spot here's the s&p going back a year, right below where we closed on friday, you know, less than a percent down from there the other people is we were talking about this a lot, right, in the first part of this year,
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and we're kind of where this all comes together, so you have to prove, it usually there are dips to get into. otherwise trading range under proven otherwise we could be just bouncing around the market itself trying to discount ahead >> and you see it really was declining since october. that's when the stock market bottomed this is basically a and now it's picked up again, this is something that keeps equities on its heels. you have this wide range of potential outcomes and with market yields, and leaves a lot for stocks to chase around coming in hotter than expected
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but unlike last year when the numbers were all over the map. constituent not a bad sign from here industrials and consumer discretionary over the last eight months, this is consumer discretionary equal weighted that's staples, and utilities defensive. they've underperforming. so, that's all happened by may of last year, since then, it seems like that, you know, sturdier economy is being reflected in the makeup. >> mike, that's fascinating. i wanted to ask you if you would way in for just a quick moment on a bit of the warren buffett debate we were talking about over the weekend about the b buyback story.
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it's very mixed, in part because stocks have gone up. buybacks seems like they have made money unclear if they have outperformed the market, in part because they have become the market. >> yes, exactly. essentially they're almost universally embraced by companies. companies that buy back on a net basis more shares than they're issuing through stock-based compensation and equity sales, yes, they tend to do better if funded by cash flow. there's always nuances in aggregate, though, it probably makes the more official allocation across the system you have companies that don't have a productive use for that capital, they buy back their stock, it goes into investor accounts, they can do with it what they did. keep in mind, he said don't tar
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all the buybacks some are ill-advised if they're done at a reasonable price, then, of course, they can be a good deal for shareholders and the system as a whole. >> mike santoli, thank you, sir. let's dig deeper into the markets with our next guest. peter kraus, ceo of aperture investors. good to see you in person here. >> thank you. >> when it comes to a soft landing, you're a bit skeptical. you don't think it's that ease,. >> i don't think soft landings are highly probabilistic they can happen, of course, but i think the market continues to underestimate the strength of the fed's conviction to fight inflation. inflation doesn't come down that quickly. if we go back and look at time periods of inflation, it takes not months but years for inflation to resolved itself
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it's really unlikely that the fed will reduce interest rates within the next 18 months. i don't think the marketing that fully digested that. that's why you see the market trying to get ahead. we also have an unemployment rate today that's 3.4% that's remarkably low. if we have that much employment in the country, it's very hard to have a recession. so there's some real chance that you can have a modest recession or a real growth slowdown, and that that's what the fed is trying to engineer >> meaning it's going to be painful, but not for everyone? >> no, i think this is -- what's going to be different from what we have seen in the last 20 years, this will be a more extended cycle you know, in '08, the world fell apart, but within nine months, it sort of came back in '20, it was a three-month
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kind of decrease and then recovery this is likely to be a much longer cycle you have to beat inflation that takes time. that means the fed will have tightening financial conditions for a while. that will reallocate capital you'll see leveraged companies try to refinance that would be challenging. you'll see default we haven't seen a cycle like that for a while >> do do you do as an investor in that environment? >> i think, you know -- whenever you ask that question, i always sort of answer from a longer point of viewed. trading is not really investing. the idea that you shouldn't buy equities here because they're expensive or might go down doesn't make sense at the end of the day, it's a reason point, over the next two years, the market will be
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higher, and will probably earn more than -- >> we're below 4,000, but just barely is 4,000 a turning point for you? is it that important to be -- >> no, just in general the point about the industrial base which underperformed last year, now performing better, utilities and intersensitive securities like reits are having real challenges. so reasonable returns, multiples, will multiple expand like we saw in the last two years? no they're not going to let those go they shrunk pretty dramatically already. that means that stocks go up, because earnings go up that's what we'd like to see >> maybe not norm at for the last 20 years -- >> that's exactly right.
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>> but pre 20 years ago. >> you didn't buy stocks at high multiples expecting multiples to shrink here we're in that market with earnings will matter, and differentiating between stocks and -- >> yeah, that's where i was heading. our deficit isn't going down, so we'll have debt service with higher rates whether it's a hard landing or soft, it will be permanently probably dampened by all of our interest expense the economy will not give you the tailwind >> and interest rates will not give you that tailwind, either we lived 15 years of very low interest rates, unusually low interest rates we've all seen the chart of interest rates going from the 80s. that's not going to happen again. that's done, finished. >> what do you think about the yields from now?
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>> we have, we have an inverted yield curve. what's surprising is the ten-year is not at 4%. if you're looking at rae interest rail, you have negative real interest rates. if you have a positive real rate and inflation between 2 and 3, you can do the math. >> could i ask one question, would you prefer dividends or buyback? if you have a choice. >> buybacks. >> for tax purposes? yeah i think, look, there is a thing about dilution that maybe is worth talking about. if you have stock out there and you continue to put stock out through through compensation, you have in fact permanent dilution that's always a headwind if you're buying stock back, you're dissolving that dilution. i think that's a more effective
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way of dealing with capital allocation dividends are not very flexible. if you increase dividends -- >> but does it mean that the compensation scheme that we have all created in this country has been more expensive than we thought. >> but that's a result of the tax incentives. >> partly that -- good question. yes, in fact for a long time, you know, stock options were actually reflected, then that changed. in the tech world, they used that dramatically. >> of course. >> and it changed. the answer is we don't necessarily calculation and stock-based compensation is real compensation. >> not only is it real, but more expensive, because then you have to buy back stock to prevent the dilution >> well, yes, but you can say to the employees would demand higher cash comp if they weren't getting stock, because stock has an up side. >> potentially
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light, that is the question, and then there's skin in the game argument >> there's a lot to put meat on the bones for the silver-tongued demagogues that never consider the capital structure. elizabeth warren said you're buying back stock, juice your compensation that's the only reason it's either illiteral or demagogue. >> stick out your tongue it's not silver, it's coated >> fungus-y. >> oh, stop. the cfo of block joins us first on "squawk box." following the fourth quarter results, those glasses, kraus, i don't even know what those cost. they're so nice. they are, right? they're beautiful. no way, no way
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we just had peet you are kraus on, i don't know if you heard what he was saying, but he had similar views, whatever supportive tech stocks that had to do with a near-term pivot, that doesn't look likely at this point. you're not necessarily bearish, but that next leg won't be around until at leastnext year >> yes, i followed the segment prior. i definitely great i think a lot of the big boom we've seen in tech stocks, it was a big bowen off the trough in october, is based on that the fed will quickly pivot i don't actually see that under will many any economic scenario until we get pretty far out of the 2024, might be deep into 2024, because we just essentially finished the first quarter of tech reports, and the
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way that companies for the most part distinguished themselves this particular period is by scots cutting. i could fire more people than you can fire for an aggressive growth to be or tech stock, that's not a long-term thesis >> and we concluded with peter kraus, and i've heard is so many times -- if you can identify companies that will grow regardless, should you buy -- should you focus on fundamentals of the individual -- it's not a monolith you can't just buy techs
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>> that's right. i probably -- if i could built a portfolio that had all sectors represented, i clearly wound underweight the tech sector, and that's about 25% of the s&p, but you're absolutely right, joe i think there are some companies with a short, intermediate, long-term thesis i see some interesting opportunities in automobile and industrial semiconductors, a couple cybersecurity names, even some data networking companies some of them, they're actually old school that i'm interested in right here, right now i've been doing this a long time i prefer to get into the weeds of the fundamentals with individual companies, but you're absolutely right fundamentals, i don't want to said they don't matter, because
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i just highlighted a few, but overall, it's no fun for me. i don't have any particular edge, but i am pretty adamant in my belief there will be no pivot, at least until next year, so you have to have companies that will grow throughout a recession and can withstand another higher plateau >> if you're in school and someone suddenly tells you multiples can be anywhere from 10 to 30, wean even try to figure out earnings at that point? so give us -- what are your top five you would buy right here, paul >> yeah, so i think in artificial intelligence, i think that alphabet is way overdone on the down side. that's probably my favorite faang. i lie st micro electronics,
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microchip, in data networking i liam extreme networks, juniper and probably my favorite is arista networks. i would say those are companies that will withstand thestorm i would be probably in cybersecurity give honorable mention to palo alto networks. >> yeah, our friend was just on the cramer show last week, i think. that seems to be firing on all cylinders. those are great names, paul. buy them today or if they go down a little, buy them then, i guess in your view >> i think they're okay, but again, overall, i would like the sector some of these names have come up based on the belief of what the fed will do. that's tragic, i think. >> paul, thank you. >> yes, sir. paul meeks a programming knocks, cathie wood will be talking tech on
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"squawk on the street", 10:30 eastern time i like her glasses, too. >> a million five? >> when? both timing and direction. >> that's her prediction for a while. >> the market cap of where it goes, and do the $21 million, and you can come up with your own number >> well, some people think it's zero when we come back, we're going to ask the cfo of block where she sees crypto prices going in 2023, and what's driving profits at the payments company. a reminder for you, you can get the best of "squawk box" in -- aai pcast aai pcast we'll data-driven insightsnessig and boundless curiosity.
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welcome back to "squawk box. rick santelli live at cme hq these are january preliminary, down 4.5%, that is the weakest mount-over-month change going all the way back to april of 2020 strip off transportation, and it
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zooms up into positive territory. so we can see the culprit here, up 0.7, when you strip out transportation that's the best number going back to march of last year, up 0.8 for, and exaircraft, much better the change expected, that's for capital expenditures. finally, as we switch gears from order to shipments, up 1.1%, that's a powerful number, the best since october last year interest rates are hofrlg about where they were, 3.94 before the date was released. two-year notes are the only maturity on the treasury curve that's taken on you the post-covid yield close three years, about 13 basis points away. five years, 24 basis points away ten-year, 3.94, about 30 basis points away from the 4.24 high
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yield close back in october, and it hasn't closed at 4% or higher since november 9th it's one of the main reasons that many are questioning exactly what's going on with the inverted curve and how much damage may be caused to the economy by the federal reserve's tightening policies, of course, as we see many maturity becoming the trend, even though the markets have really come more in line, taking recent data with respect to where the ultimate line in the sand may be for the terminal rate. back to you, becky. >> thank you, rick dow futures up by about 168 points steve liesman joins us with more what do you think of the data. >> is rick still there i don't want to let him off the hook he said discussion of the terminal rate. what are you hearing down there? i'm reading guys over the
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weekend telling me 5.6, what are you seeing >> oh, yeah, there's a lot of talk about that. the problem is that i still adopt see some of these trades snug snugging up if you take a three-year note, for example, the high water market is 4.65 it's at 4.52 granted, that's not a huge difference, and you take a 30-year bond, the high yield is 38 the point is if traders felt as aggressive as some of the recent conversations have dictated, why aren't they selling more aggressively, pushing yields more in line with their ultimate thoughts on the process of the federal reserve? >> that's a great question that's a great question. why aren't they putting their money where their mouth is quickly, i want to explain what happened in the month of december, boeing got a huge order from united
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that boosted the new orders number that's why you are north of 5% that came off this month, so now we have the headline number was down, but take another out the transportation, and you have a better number both on the shipments and in the orders that could go into the steam that we're talking about of boosting the first quarter gdp outlook. this was the quarter where 52% of may forecasters thought that the recession was going to begin, and now it's down to 28%. they're kind evof scattered whe the recession might begin. one quick word, where i'm speaking completely out of turn. january was a huge weather anomaly month, much warmer than expected february, it continues we don't know if some of what we saw because of the warmer weather continued into february, despite the storm that's on its
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way. we might get a second month of data which shows stronger than expected -- stronger than the seasonal adjustments, maybe until march before we know what's really going on in the economy. you have to watch the data and the weather, too. and we have a friday jobs number coming up, too -- >> not this friday, becky. next friday. that's right you know, i made the same mistake. >> i thought the 3rd was fine. i thought when it was a 1st might be a question, but the 3rd is plenty of times to report the numbers. >> i'll give you the bls's number if you'd like to complain if you want the number friday, i'll see what i can do, but it's the 10th now >> that's really going to feel
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like the next one comes fast. >> that would be like a cavalcade of number, isn't the pci look around the 10th, too? >> i think you might be right. >> that's too many numbers, that's overload. >> yeah, but rick can handle it. that's one of the things we pay him for. >> i'm not worried about rick, but the markets, if they can handle it. >> counter -- ppi is the 15th, cpi is the 14th >> okay. >> that still will be one week with a lot crammed in. >> if there's nothing going on in your life on 3rd, the ism services >> and then good friday is when we get the april number? is that right? >> what day is good friday
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>> the 7th yeah >> when are the academy awards i can't believe i'm asking that. >> yes, good friday is the 7th you're right, becky, good friday is the 7th of april. also the day the job market comes out. >> okay. it's going to a great friday, a fantastic friday. >> what do we want when it's good, it's bad when it's bad, it's good >> thanks, steve thank you, rick. block up more than 20 pick and roll, the stock popped against last week when the company reported a 40% year-over-year rise in gross
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the ceo saying the cfo will take on new responsibilities. she joins us now good morning to you. >> good morning. thank you for having me on. >> thanks for joining us. >> it's been quite a remarkable little ride recently what do you attribute the shift towards? >> we had a very strong 2022, delivering record gross profit of nearly $6 billion nearly a billion in ebitda this is all through our purpose of economic empowerment, in tur investigating sellers, which is a financial services mobile app. we have served million of small businesses through square, and with cash app, we served 51 million monthly tr transactions, what is exciting to me is to see
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increasing daily utility across each of these ecosystem. for square, sellers who took on four or more of our monetized products made up 44% of our growers profit that's up 15 points over three years. for cash app, we now have five revenue streams that delivered $100 million or more in gross profit so our customers are finding great value for our platforms, increasing daily utilities, ultimately that's leading to a more diverse and broad business for us. >> what do you make on the pressure that's come to bear over the last 12 months, on the entire fintech space, and what that's done to the psyche or mind share of emf employees in s space? >> we're mindful of the uncertainly environment that we are all living through we're being incredibly
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disciplined about our pace of operating expense growth and pace of hiring we are slowing our pace of hiring in 2023, as we announced on the call. but we still expect to grow head koi count by 10% we grew on a combined company basis by 21% year over year. that growth actually improved to 25% year over year, and i think this comes down to the breadth of our platforms, our ability to see both sides of the counter, not just sellers, but also buyers ultimately that's what gifts you agility in our ability to adapt, and the products we're dolphing, the ways in which we can go to the market, the realtime data across millions of sellers and consumers. >> you obviously because afterpay, it's been about a year after the closing of that
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transaction. is there more regulatory scrutiny on that space obviously interest rates are up. what do you think of that product and that world >> sure, what we are seeing is improving trends gmv growth improved from q3 to q4, and then into january and february this is all the while we maintain loss rates of below 1% of gmv clearly this product is delivering value to consumers, certainly relative to traditional financial products like credit cards that can lead consumers into a negative debt spiral once a consumer misses a payment on our platform, we pause their account and look to see them get current. we ultimately want to enable a responsible lending activity that enables or customers to get
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fair access to credit. what that means for us, as i said, improving growth rates over the past couple quarters on afterpay and a new revenue stream we developed through 2022 around ads and affiliate revenue, now reaching up to $100 million for revenue in 2022 for us we can grow -- >> given the regulatory screwed any on the space, you may be doing it right there may be clearly some others that may not be doing it as right. long term, do you see just a couple players consolidation? what happens >> ultimately we welcome the regulatory questions and education and scrutiny that is what levels the playing field for the companies that are abiding by our responsibilities to our customers we're there to help education, inform, and transparently
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represent or services to our customers. >> i also wanted to ask about bitcoin. you have by $is.83 billion as of q4, revenue down 7%, you also have bitcoin on your balance sheet. how much is there right now? >> over $130 million as of the end of the year. you know, look, ultimately for us this is a long-term, potentially transformational initiative, to build utility into the eosystem. we believe the internet needs a currency that will bring down costs, particularly for undercurved consumers around the world our focus is how to build resilient utility, but we're doing it in a disciplined way.
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we have less than 2% of our employees base and operating expenses, and less than 5% of the gross profit balance sheet devoted to bitcoin ultimately we're going to experiment and learn for the long term. >> jack dorsey has always been an evangelist for bitcoin for a very, very long time what's your cost basis on the bitcoin that is on the balance sheet? when you guys sit around in a room together talking about what the value of this will be in the future, what do you say to each other? >> the cost basis we made the purchases over the past fewer years. the first purchase was $10,000 ultimately this is a long-term initiative for us. we believe there are efficiencies needed in this information system we call money. when you think about things like decentralized identity, and you think about the potential for
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cross-border payments, the potential for an ability to custody of your own funds without the existence of a centralized financial institution, those are transformational opportunities that we want to experiment and learn on in the near term. finally a hardware question, a very practical question, and sometimes you use a square services versus toast, others, is the hardware business a good business to be in, the actual terminal itself? >> you know, we see the hardware as a seamless integration with our software we build it internally, which is unique what that means it creates speed and seamless integration with how the payments work, and how our software and services are enabled. it's also, as you note, a go to
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market feature for us. the simplicity and elegance of the design hardware is a relatively small part of our business, but one we think is critical and how we go to market, and millions of sellers around the world. >> i shouldn't call it square anymore, but it was the square that you would slide your credit card through t. am rita, we appreciate you being with us we hope to do it more on which. >> thank you so much. >> thank you so much. target's ceo brian cornell
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. let's get down to the new york stock exchange, jim, first of all, it's good to see you i feel like we haven't take in a couple weeks i was out last week. when you come back and look at interest rates, and you look at
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changes and expect aids for inflation, that's a pretty drastic change just over the course of the last week or so. people have been talking about a paradigm shift i how you are shifting your thinking with any of these big changes we've seen. >> at least we got a bounce where interest rates are down on that durable goods number, but i'm kind of with them in the sense that i think the market is trying to reprice the fact that the fed's not done the fed said it wasn't done. i don't know why the people felt the fed wasn't done. one of your guests said the ten-year is really wacky, not a good piece of paper, and i agree with that. i think it's a terrible piece of paper, because it's pricing that the fed reaches some level where it's happy, where we have a real slowdown, and that's going to be a good piece of paper. that's just fanciful i think we're going trying to undo that mistake of the yield
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curve. i know a lot of people think the yield curve can never be wrong i think it's wrong a lot, and it's really wrong right now. >> yield curve just in terms of the inversion being wrong? a >> what the hell is the ten-year down at 3.9% who feels compensated for ten years at 3.9%? you have to take issue with the fact that you could be at 5% in a year i know that inverted yield curve speaks loudly about a orecessio, but sometimes it's really wrong. it's really wrong right now. >> what do you seethat you lik out there? or let me ask, what do you think about retail earnings coming up? we got home depot and walmart last week. this week, we've got a lot more retailers on board including target and lowe's. macy's is out. >> i thought walmart was really good, and it gave up the ghost so, i think you have to be careful. the second time you look at these things, people don't like them target's come down a lot because
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of those amazon is now is forgotten story, and yet amazon is still so good, but it's hated because they haven't laid off enough people the long knives are out for best buy today just because everyone thinks they're going to miss walmart did say that was a very tough group, and lowe's is like home depot these were all derisked by home depot, so i find lowe's really interesting here i think that they're a good company, and target, i mean, i don't know if you get it at $160, i think that's a good idea >> okay. jim, thank you it's good to see you again, and we will be watching in just a few minutes. we'll be right back with what you need to watch and the opening bell on wall street. stick around
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♪ ♪ nice green this morning, but stocks are coming off their worst week of 2023 here with a check on the pulse of the retail investor, jj kin
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han, ceo of ig north america i'm looking at the cover of the "wall street journal," and the point is, it says -- the headline, "investors are getting ready for a jump in market volatility," and i guess, to put some meat on that, vicks calls, calls on volatilityrising. more of those calls changed hands in february than any month since march of 2020, which makes people think, you know, where the vicks is right now, if you're buying calls, you think there's going to be a sharp increase in volatility, and volatility usually means a downward move. have you noticed this happening? >> yeah, yes, joe, we have seen a bit more vicks being purchased, and i think part of it being, people just aren't sure what to do so it's a little bit of protection without necessarily having to get out of positions that they currently have, and again, you know, the fed has been such a crap shoot,
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i hate to use that word, for the last few weeks we all love the news the one day, we hate the news the next today. i think you're seeing two trends emerge because of that number one, vicks call by, number two, the zero date for expiration po expiration options that people are purchasing those are due to uncertainty you're seeing people investing more longer term, but they're using those two things very, very much, and then the other thing is, like, last week, we saw a real lack of buying in the names that are traditionally really popular with retail, such as microsoft, apple, tesla, particularly in fact, tesla, trading in general last week was down 30% compared to the week before. people didn't actually start buying some until the last hour of friday afternoon, so it's been interesting how the retail trader has reacted to this and looked for different opportunities and a little bit of this confusion.
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>> i think crapshoot is okay, jj that's an actual -- i mean, it's a las vegas game it's craps i don't think you need to -- >> it's actually the most fun las vegas game, i think. >> but it's not a toilet term when you use it that way, so you just relax there, big fella, it's fine. >> i appreciate that >> don't be quite so worried about that and it's cable anyway. there are a lot of other things that -- you're saying people want to stay long, which means, i guess, they just want to ride out this period but have some protection there are a lot of other things last week, though, in terms of underpinnings and technicals that didn't look great do you still think we're in a -- do you have anything, any evidence that says we're still in an uptrend, jj? >> well, we held the 200-day moving average on the s&p 500 yesterday, so i think that's a really big thing to build on, overall. and the fact is, joe, yes, the numbers have been worse in terms of going towards recession, you
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know, these -- some of the retail sales, et cetera, but what we're -- what we are seeing is it's not a fullout, this is definitely a terrible time, et cetera. historically, we still have lower rates. yes, we're seeing a slowdown, which does make sense, particularly in the housing market, but overall, things aren't terrible. my biggest concern, joe, is when we have had these layoffs over the last few months, particularly in the technology sector, my biggest concern is that some of these severance packages start to run out and we hit the summer, it's going to be very, very difficult on the economy overall because, you know, we've seen in the beginning, those people are getting jobs right away. now, according to what i read last week, only about 45% of those people are getting jobs within three months. at some point, that is going to catch up to the economy. >> okay. all right, jj, thanks. the cross currents are just so glaring wherever we look
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thank you. we're going get a final check on the markets now. we're solidly higher now, and in the green. we're either in a -- i mean, we're either in a really good economy because of the labor market, or we're ready to just sail off a cliff do you know? does anyone know >> it's such a good market that the fed's going to have to slow things down. >> it's -- that's been the thing the whole time >> lest all do this again tomorrow in the meantime. time for "squawk on the street." ♪ good nond monday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer. david faber has the week off lower yields help today as durables disappoint, dollar below 1.05 our road map is going to begin with stocks looking for this bounce after the worst weekly losses of the year buffett pushing back on buyback

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