tv Squawk Box CNBC January 20, 2016 6:00am-9:01am EST
to fix all of our problems. seems appropriate for some reason. it's wednesday, january 20th, 2016 and squawk box begins right now. >> live from davos switzerland and the world economic forum, this is squawk box. >> good morning, everyone. and welcome to squawk box here on cnbc. i'm becky quick with joe kernen and andrew ross sorkin. we're in switzerland. our line-up includes steve schwarzman. at&t chief randall stevenson and bank of america ceo. later this morning bridgewater,
north island chairman. plus the ceo of paypal and ebay and many more. of course the timing is perfect when you look at what's happening with the markets this morning. we have the perfect line-up to be talking about what's happening and exactly why. joe mentioned this already but check out the futures. if you're just waking up this is something that will make you sit up and pay attention. particularly with the losses we have already seen in the first two trading weeks of this year. the morning the dow futures are down 334 points below fair value. believe it or not we have been down by 400 points this morning. s&p futures are down by 36 points and the nasdaq is down by 84. overnight in japan, the nikkei dropping nearly 4%. entering bear market territory you can see that was a decline of 632 points for the nikkei. the latest survey out today shows japanese manufacturing moves slipped this month amid worries about the china slow down. european market which is are already open are sharply lower as well. check things out and you'll see
that right now it looks like we're facing declines of about 3% for the dax. a decline of 3.3% for the cac in france. the ftse off 3% and again bigger losses that you even see in italy. >> we should also tell you that a big issue here oil prices plunging this morning in a big way. wti crude dropping below $28 barrel. now the lowest level since september of 2003. brent also down hovering near a 12 year low. worth watching stock pile data from the american petroleum institute later today t. saudis are here. as are delegations from iran. >> all of them? >> not all of them but both groups are going to be here and there's a lot of talk. >> ten years below. it was below. >> i did see that and oil prices and andrew was just talking about it. >> i didn't see below 27. >> i didn't see that myself. if they say they did they did but i did see the s&p there's
something at 1862 wasn't there? >> 1867 was the level we were watching before. >> down 40 today. we're down so far below that. some people said next stop 1600. i don't know pessimism levels are at a level i have not seen. this is supposed to be this great place of optimism. people talk about what 2016 is supposed to be. you could say davos is supposed to be one of the great contra indicators. you look at the statements made here over the year and you would say the exact opposite. you wouldn't say that but that has happened. >> to me, honestly and i was just talking -- steve is going to be on in a second, what does the opposite of the wealth effect look like? the fed ingenders the wealth effect and supposedly -- it's not just making things look better, the economy catches up with these increased asset
prices. what if it doesn't? what if the global economy din catch up with the increased asset prices then you take away or even start taking away. >> at 7:00 he wants to put the punch bowl back. >> he wants qe and negative interest rates. >> he thinks it's not going to be about getting rid of qe but bringing it back. >> he also said he's not sure how effective it can be. >> there are fears that, you know, just global growth can't service the debt and there's going to be bankruptcies across the board and the banks ultimately hold debt from where ever, don't they? >> although most of them have written off the problems with oil even when they stress tested it. they say it's not that big of a deal. you did see additional reserves from the big banks in the last week putting additional reserves aside. >> even after the paris
agreement they're pessimistic over here, andrew? we're good there. >> pessimistic when it comes to the global economy. how about that? >> who cares about the economy if we're all fried? >> a developing story, every day there's another attack somewhere and it's pakistan. right now. gunmen storming a university in the northwest part of the country early this morning. shooting at least 80 people and killing 20. they scaled walls to get on to the campus and held students and faculty hostage. police and security forces moved in and a gun fight followed. we'll continue to bring you the latest developments. are we in the safest place? >> i have to tell you we were talking about on the show yesterday briefly when i did a tease, there's more security here than there's ever been.
there's surveillance towers, 5,000 swiss army troops are here. that's double what it was just a year ago. >> i noticed they also look you in the face to make sure that your badge matches who you are. >> joe biden is here and i came from a session with him and that may be one of the reasons why there's stepped up security. traditionally when either the president or the vice president is here there's more. but there's a larger issue in the world right now. >> i'd like to think some of it was for us. probably not but for -- we're part of the whole davos thing. it's for davos. >> sure. >> it's good that there's not that many roads that come in here. >> yes. >> you see about everyone -- unless you're the van trap family coming over the mountains it's hard to get in here. >> i would think so. >> hopefully. oh, sorry. the selling started in asia overnight. let's get to sri with a quick market update. >> heightened risk aversion and
what's disconcert as good that the volatility that you typically characterize and associate we merging markets is now spreading to the mature developed markets. japanese equities down by 4%. nikkei closing at the lowest level since late october 2014. hang seng, take a look at this. 750 point decline for hong kong equities. that's the lowest close in 3.5 years. many people blaming the weakness in the hong kong dollar. we saw it at the lowest level in more than 8 years. oil really seems to be the negative feedback loop here as does currency. remember we got a safety bid into the japanese yen. stronger japanese yen means weaker equities. elsewhere, shanghai market, chinese market, relatively well behaved. perhaps they're still hitching their wagon to policy you support. underlying sentiment out here
shot to pieces. back to you. >> thank you, sri. appreciate that. officials are predicting a tougher year ahead. china's economic health is front and center here at davos and here to take us inside is the chairman and ceo of black stone group. good morning to you. >> good morning to you. >> thank you for being here. let me start here, george soros who is here in davos said the period we're in now and what's happening with china reminds him of 2008. does that make sense to tt's ge far. china is slowing but not collapsing and i think there's an overreaction to what's going on there. they just reported 6.9% for the year. the imf is calling for 6.2 i think it is for next year.
it could be slower underneath that. their consumer economy is growing quite well. services are growing. they created 14.4 million jobs last year against their normal expectation of 10 when the economy was growing faster. >> do you believe these numbers, though? >> on the consumer side and service side we can see that. parts of their economy are doing very badly. the steel, the coal and i think you're going to end up seeing the government do some things that force reductions in supply in those areas. >> things like -- now you speak with officials in the government frequently. >> things like, wait and see. but i don't think those industries will just be in that kind of position. i think there will be things that happen in the residential area where they're overbuilding
that will also be reasonably thoughtful an some what traumatic. >> can you lay off people in state owned enterprises? >> i think in certain industries that those types of things are not illogical to happen and they can be made to happen. but parts of the economy that are doing pretty well are quite good and if china can settle down overtime to grow at a 5% rate, long-term, service economy, that would be a good thing. the disruption as you get there is really substantial. >> you know, we spoke with larry fink last week and he said that china's move to devalue the yen doesn't make sense to him in terms of their long-term plans and long-term goals. does it make sense to you? >> the problem just generally and the reason why there's so much negative perception in china is the management of the
stock market and the management of their currency. both of which looks some what erratic. lurching from filler to post to try to fix up the unfixupable. so that perception which dominates financial journalism and other media is not the whole of china. >> is china the problem or one of the issues? because it's looking increasingly to me like that's just another one, like we have about five things to worry about and that's one of them. to me it traces back to 7 or 8 years of bingeing on central bank money. i don't know if that's going to be what the verdict is. >> you have a lot of different things going on here. you have energy prices just collapsing by the day. >> is that china's fault or production's fault. >> that's too much production.
the consumption of oil keeps going up but the supply is like $2 million and a bit too much. so that perhaps a decline destabilizes because it's happening so quickly. change that happens quickly gets investors very unnerved. >> speak to the issue though of crude. you have a number of big energy projects and other things you made investments in. your long-term prognosis for where we are. >> we sold most of our oil an gas quite awhile ago so we had quite strong returns in that area and now, you know, what is one man's tragedy is another one's -- >> an you're waiting? you're lying in wait? >> this is getting into the zone
where you're going to start having a lot of troubled companies as a result of the price. you're going to need money to drill in certain areas so this is getting much more interesting. >> what about traditional private equity? so much of your business now has succeeded because of real estate and other pieces of it. you sold a lot of things. private equity industry does not seem to be a major player or as big of a player in the mergers and acquisitions landscape at the moment. >> and that's a great thing and the reason is is when prices are very high you don't want to be a big player. you want to buy when prices are lower. i know this doesn't sound very profound but that's why, you know, you've had this flip. now we just finished raising i guess the largest fund in the world for that and we're uninvested and this is going to be a very interesting time to be
doing things. one thing i think you should give some thought to when you're thinking about the markets is geopolitical risk and u.s. political risk. and there are so many strange things going on in the world that when you get uncertainty about china and you get issues about oil prices but then when you add on isis, you add on iran and saudi arabia, you add on syria, you add on immigrants coming into europe at an uncontrolled rate and i can go on and on on these factors and you follow it up with sort of an angry u.s. election whether it's on the republican side or the democratic side, everybody is like angry. and the rest of the world is watching this. it's not just a hometown
election. >> in your view we're not on the cusp of something that we look back and say i wish hi seen that coming. maybe just to be a doomsdayer. because we do have jim grant that comes on and others. let's say that because we didn't make a real bottom in 2007 and 2008, things didn't fail obviously and the system din clear. so we use up all of our bullets bringing us back and lessoning the pain for the u.s. and entire globe. what bullets do we have this time if we go into another slow down which by all indications oil and other things are saying global growth will be slower than we thought. do we have negative interest rates and more qe? are those actual tools that we have? or is it worrisome that we're really not prepared with any tools to try to save us. >> no, we used a lot of tools.
an we were still using them until lately and one of the other market fears is what the fed is going to do. are they going to raise interest rates for some theoretical reason and throw us into a recession as the u.s. has already evidenced. >> if we can't get out, that's the big worry. this unprecedented stuff we did we need to unwind it. is it going to be easy, neat, or clean? starting to look like we're not going to be able to get out. >> i can go there if you force me. >> i don't want to go there. >> you have two things, joe. you have fiscal stimulus and monetary stimulus. we used up a lot of our monetary although there are all kinds of things that you could still do but you're going from such a low base it's very difficult. we have not been able to utilize physical stimulus in large part
because of the relatively nonfunctional nature. >> we did a trillion dollars worth. >> you're asking for the next time. >> i'd like to do some supply side. >> i think that physical stimulus has been off the table for so long because congress couldn't pass anything of any type. >> what do you mean? infrastructure? >> i think if you get into that kind of like really doomsday scenario which makes good television but is not going to happen. >> but do you think the environment changes in washington and something like that? >> i think with any administration it will change and depends what the competition of the congress is. >> before we let you go, you been a long time republican, ted cruz, donald trump, if those are your choices? >> these are tough. you know, if those were my choic choices, i'd be trying to really
figure out where we go. if i had to do that one i would do donald. >> you would do donald? >> yeah. i would. but i think, you know, where we find ourselves as a country now is its almost like some kind of odd protest moment. the question is what is everybody protesting about. there's a lot of things that you could but what is needed actually is a cohesive healing presidency not one that's lurching either to the right or to the left. >> increasingly looking tough to get that. steve, thank you. appreciate you being here. >> my pleasure. >> thanks. >> okay. we're just getting started. i don't know if we have time left for anyone else at this point. what are we going to do though? earnings to talk about. netflix, ibm, both stocks moving in different directions plus the state of the european banking system and the economy with ubs ceo, sergio armani and then
at&t ceo. randall stevenson with an update on the directv acquisition and how that is paying off and the day after reporting results bank of america, b of a ceo. wtf, squawk box will be right back. thanks. ♪ [ male announcer ] fedex® has solutions to enable global commerce that can help your company grow steadily and quickly.
live from the world economic forum in davos. here now becky quick. >> welcome back to squawk box live from the world economic forum in davos switzerland. let's get a check on the markets this morning because things are looking just as volatile has they have been for the last two weeks of trading. you'll see that the futures right now, dow looking down 320 points below fair value. that's off the worst levels when we were down 400 points. s&p futures down by 34 and the nasdaq down by 76. also look at what's happening in europe in the early trading. you'll see that right now european markets are lower. in germany the dax was down 3%. now down by 2.8%. cac is off by 3%. the ftse down by close to 3% and in spain stocks are down 2.6%.
wti after closing down 3.3% yesterday is down another 3% this morning. we're talking about wti below $28 barrel at $27.63. the ten year note, let's see where that market is today. a 1.982%. so again, below 2% even as the fed raises rates. and if you want to look at what's been happening with the dollar you'll see right now the dollar is down against the euro at 10916. it's down again the yen. >> the main theme this year is the fourth industrial revolution keeping up with the rapid advances in technology. i just finished hosting a panel on the transformation of tomorrow. i was joined by the president of the republic of rowanda and the ceo of microsoft and the chairman as well as facebook's coo getting the world connected was a topic that she talked
about just this morning. >> connectivity, data access is too important to keep it only to the world's rich. there's 4 billion people in the world that don't have access and when they get access they're more lily educated. they have job opportunities. they have longer, healthier, more productive lives. >> and the internet without borders is one of the topics that we'll hit randall stephenson with in the next half an hour or so. >> concerns continue mounting and our next guest is resisting that rallying cry. instead he says he's bullish on the country's long-term future. here to tell us why he's doubling down on china is the group ceo at ubs. great to have you here. >> good morning. >> welcome. i saw estimates as low as 1% on actual gdp growth. we have trouble trying to figure out where it is right now. is it safe to say it's somewhere
between 1% and 6.9% in china? what do you think the real number is looking at concrete, services or whatever you can look at. what's the real number? >> i have a hard time to believe 1% growth. >> which is harder to believe. >> well, i would say probably on the upside of expectations but we do see around 6% or even if it's high five it's still a very good growth. in any case you have to put the base of the growth not the same as ten years ago. a growth of 5 to 6% now means billions and billions in the economy. >> one of the things that i don't know if you were able to hear steve but we're worried about whether global growth can
pay. there's bankruptcies that are going to happen and cash flows that aren't going to cover the nut that a lot of these state owned companies have and it's overbuilt. is the whole world on the cusp of something? do you think at ubs or no? >> right. i think that i would agree on that dynamic that i think that the real factor is a depreciation and that can add to the pressure of trying to go out with the dollar exposures. and that really makes it but china looks to open up the markets and this can help also to stabilize the currency. >> i know you said that china is looking at a year of adjustment for 2016.
we're only two weeks in and we've seen massive adjustment. do you think this kind of volatility, this kind of adjustment will continue over the rest of the year? >> i would say longer than a year the adjustment. i think the adjustment can take a couple of years to three years and we have to put china in context of what they did in the last 20 years and what they can do in the next 10 to 15 years. that's the reason why we're bullish on china. we think that's the time to think about how to start to invest. it's not a big bang. we're not going into china for the sake of going in but you need to wake up and there's millions that want to diversify their portfolios. >> while you're going to china the other thing the european banks have done is scale back their presence to a large degree in the united states. especially investment banking component. do you expect that the european banks will ever come back to the
u.s.? >> you haven't left. i shouldn't say you left. you know what i mean. >> we have 20,000 people and the u. s. is like a second home for us. it's not like we're going to disappear any time soon and it's true that the u.s. market is dominated by u. s. firms but if you -- we look at the u.s. as a very strong and strategic place in addition to asia and europe. and being strong in asia and europe and being a strong second tier behind the u.s. banks makes you a global player. >> when we come here five years from now will the euro zone be different? will members be missing? will boarders be different? there's so many things happening right now and you're the european ceo. >> i think it will and i hope it will. and i think it's time to move
forward. based on a currency union and forget about physical union and political union. i think that you see it also from a geo political standpoint of view. and international front is not there. and having the global debate. >> head long into it. >> so you want more physical coordinati coordination. >> the current model is not sustainable. >> will the u.k. be? >> at the end of the day, yes. >> really? >> the end of the day or the end of five years. >> the end of i don't know, july. >> sergio, thank you. >> thank you. >> take care of my account too. that swiss account that i have.
>> when we come back, internet without borders. at&t chairman and ceo randall stephenson discusses that challenge. plus the competition in wireless and television back in the states and brian moynihan will join us as his industry tries to keep up with rapid advances in banking. and check out the futures this morning. down sharply once again. down by 300 points below fair value. s&p futures off by 32. squawk box will be right back.
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welcome back to squawk box everyone. we are live at the world economic forum in davos switzerland and the markets around the globe are in a tail spin. u.s. if you tours have been under quite a bit of pressure this morning. this looks like the same story for much of the last two weeks. you can see that the dow futures are 304 points below fair value. s&p futures off by 33 and the nasdaq down by 75 points. in europe it's the same story. a lot of weakness in these markets already actively trading today. you can see that the dax is down by 2.9%. the cac in france is off by 3.2%. the ftse is down by 2.9%. a lot of it relates back to the price of oil. but wti in free fall once again today. it's down another 3% this morning. below $28 barrel at 27.63.
>> in 2015 proved to be a year of change for at&t with the acquisition of directv bringing mobile entertainment and broadband one run roof. another busy year for the largest telecom company. plans for an internet without borders is randall stephenson ceo of at&t and participating in a series of meetings in davos addressing the challenging. good morning. >> good morning. >> it's a big transformational deal that you wanted for a few years and you finally got it. as far as the way everything has worked out in terms of all of the cost savings and revenue that you wanted to bring about, are you ahead of plan at this point? >> early on. took 14 months to get the thing approved so we closed it last july so we're, what, six months into this? and being really early i'd tell you that we're more enthusiastic about it today than when we
first started it. as you recall we were trying to bring video and the mobility experience together and we launched something a week ago yesterday or a week ago monday which was combining the video with the internet experience. so if you're an at&t mobile subscriber and uverse or directv subscriber you're back to unlimit dade at a or video streaming on your mobile device. it's exciting what this provides us to do now. >> if you sign up that stays that way for as long as you're signed upright? a year from now people signing up may not get this deal, is that right? >> we haven't said what time frame we'll keep it open. you're going to see a number of new things coming to fruition as a result of putting these two together. one thing we did recognizing this day was coming. we started about three years ago accumulating the bandwidth and the capacity to do all of this.
put together a lot of different bands and you need to produce this over the wireless networks and we have a big block of spectrum that's empty and that's where we're putting all of it. so it will give us the opportunity to produce real things. >> what's the differential now that you're going to offer package where is people will be hopping on at any time? >> obviously satellite is the most efficient video technology known to man. fiber being next. wireless probably being the highest. but we're in a unique position by virtue of having the spectrum portfolio we have. it's a position we'll take advantage of. >> the other big change for at&t has been your moves in other markets like mexico. two major deals that you put together there. when you look at mexico and other places verses the united states from a regulatory environment. what do you think? where do you want to be doing business? >> we announced we were
acquiring directv it required us to sell our investment so we were out of mexico. i love the mexican market. the mexican regulators an even the administration there have put in place a frame work that is something that you love as an investor. it's very conducive to coming in and investing in the market and, in fact, we came in as you said and we acquired two companies to go back into that market and offer wire lesser vis less serv mexico. they're done in 30 days. but it's an environment very receptive to investment and the new regulatory environment gives us a lot of confidence. we're investing in a lte network early on and we already deployed it to 40 million people in mexico and we'll get to 100 million people in mexico with this. >> you start thinking about that
and at&t has been the company that spends more capital expenditures than in other company and has been in a lot of years. is it going to be in 2016? do you think it will be in five years? >> we guided we'd spend around $21 billion. that number by itself will be the largest in the united states. next year in the 15% of revenue kind of number. if you just do the arithmetic that tells you we'll once again be the largest investor in the united states. i don't see that change. >> i saw one analyst made comment that it was just what the doctor ordered directv because wireless growth has slowed so such an extent domestically. but i don't know what media is going to look like. >> nobody does, right. >> so you're pulling that off and you're going to run the internet of things and all the connectivity for everything? you have both of those things on your plate? at&t is going to lead in both of those areas.
you have to have a lot of really smart people. >> that's the main thing. the bet we made is tv everywhere is going to be very, very important and people have been pursuing tv everywhere for a long time. i don't think anybody has executed on it well. the company that executed on it the best is netflix. just a nice user interface and you can get their content on any device. this is what we're after. content agreements are the long pole and tent. we're getting it to market and getting it done quickly. you can watch this show right now. >> long-term, are you agnostic whether all of these providers are effectively ott, over the top, or you have contracts to be the provider in the middle? that's the big question, right? >> i don't think -- >> cable companies or satellite companies. >> it won't be one or the other. you'll have a managed video s service. so you're watching the super bowl. millions and millions of people watching it.
that's not a good experience over the top. it will be a long time before that's a good experience over the top. they'll be streamed ten years from now on a manage basis. over the top a lot of the content will be consumed over the top. that's why we have done our otter media deal. that's why we're doing deal with nbc to stream cnbc over the top. we want our customers to be agnostic. if they want to watch it on a mobile device, watch it. if you want a high quality stream content on a big screen on your television set at home. we want to be agnostic to that ourselves. >> at&t is going to be top three in internet of things, connecting everything in the world? you believe that? >> we're number one today. we have 25 million devices connected around the world. >> it's based on the cloud and
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world economic forum in davos switzerland. bank of america posting earnings that beat the street thanks to lower cost and rising revenue although we have seen a lot of chaos in the markets. collapsing crude oil prices and china slow down and that has plenty of investors wondering what is on the future for the banks. bri brian joins us now. great to have you here. >> great to be here again. >> earnings looked very good. looked like you made a lot of progress but the markets this morning the turmoil has plenty of people unnerved. what do you think as you watch through what's happening? >> you can't get out of the way of all the issues that you cited
and i'm sure you'll be talking about for the next few days but what is interesting if you look at the earning action we grew revenue year over year expenses were down and it's fine and if you see our customer base and investors and stuff on the personal side people are stable. >> you're talking about the american consumer. >> the american consumer plus the american investor hasn't moved a lot of money so the institutional world is moving around but the general population hasn't adjusted to this yet and we'll see what happens. >> so much is try to figure out how much of the volatility in the market is reflective of the economy. you have a very good idea of what's happening. you have one out of every two americans has some sort of business they do with you. what do you see on the credit card front or mortgage front? >> consumer spending grew at a faster rate verse ace quarter and 14 all the way through and the fourth quarters are the strongest of the four and i think the fourth quarter for 14 15 was the strongest three or four years of year to year growth. as you look in january consumers are spending at a higher rate of
growth over last january. it's almost up to 5 or 6% and that's over top of having a benefit from gasoline that's basically 1% of the spending growth so you have a little bit of tug of war that will play out here. and that will be a good anchor. >> do you credit the drop in oil for that spending? there's still a debate of where did that money go when you look at retail, et cetera. >> if you see -- if you look across the spending, it's up 4% and it would have been up 5%. and that advantage gets respent by a lot of people because a lot of money is coming out and gets spent. that clip is stronger than all the quarters in 15 and it's getting respent. it's good. consumer is confident.
unemployment is down. wages are growing. not as fast as people like but they're growing. we see that. that's the tug of war. it's going to be interesting as we play out the first quarter i think. >> we talked about low oil prices in the past. in fact, a year ago when we spoke with you mentioned that you had done all kinds of stress tests and you were looking at oil falling as low as $30 barrel and staying there for 18 months. this morning we're below $28. how does that change your stress test? >> we have two things. the reserves and portfolios based on asset based loans typically. especially in the areas everybody is talking about which are mid sized companies and those rachet down and there's a reevaluation ever so often and then we stress outside that for a different purpose which is to see along with all the stress testing that we do in the company to see what happens to different portfolios and that we take down to differ levels and it's not as linear as people think. you have gone through a lot of the pain, especially compared to
last year so next $10 has less of an impact. sort of relatively than the first, 30, 40, $50. >> we know that the big banks have been waiting for the fed to raise rates for a long time. it makes a big difference difference from the prof profitability perspective. how do you make sense of the markets? what do you think the fed does next? >> well, probably doesn't pay me to try to outguess the fed in a lot of things, but if you look at what they say they look at, unemployment is really almost at a record low level. new job claims continue to run at low levels begin how many people work relative to the 275,000 average. you look at others growing, but remember the oil impact to the american economy, which is $18 trillion in consumer spending is worth $20 million a day. >> wow. >> that they have to spend on something else back to app drew's point. they don't see inflation. i think this is -- they have been clear, it's going to be a
slow increase and the market has one to two bumps left. >> the ten year? >> this is a short rate. temperature year's really flight to quality, and, you know -- >> is that -- people fly to quality when they are afraid. >> exactly. >> so there's something there's a not 5% unemployment, something's not 18 billion in consumer's pockets, it's 1.95 on the ten-year trying to come out of a seven year emergency stimulus. something doesn't seem right. that worries me. you know what a flattening yield curve means, brian. does that have anything in it in. >> well, if you talk about the way you make money, short term rate is more important. >> what does it say? >> broader implication is basically, i think, well, we talked about it last year, can the u.s. -- the u.s. had to carry the world's growth rate now growing at, you know, 2.5%, the rest of the world slows down, can the u.s. keep going?
i think that's what you see in the current markets is people are worried the impact of china, impact of other economies, emerging economies, especially slowing down, and that's going to back its way finally in the u.s. look at the u.s. economy, it's a much different economy as is europe and other places so it's interesting to see it play out. >> their bond yields, we can have our economy? that's changed, hasn't it? so we have those low -- we have the yes reflecting slow global growth, but we shouldn't have the ten-year then. >> you may not in another day or two. this moves a lot. [ laughter ] >> it's weird. >> it's a rate that never moves and now moving like never before. >> i think it's just -- i think, you know, as we raise rates and currency strengthens, you know, the yield sets reflect the current mood of the market, which is, step back, look, at the money. >> we have to go, but one davos question. you guys do a lot of sustainable testing and products. is this good business or good marketing or both? >> it's good business. >> we hear people talk about it.
>> think about it as the energy -- you know, the energy sources of the future and investment around that. we do twice as much lending to new sources of energy than the old sources because that's where the capital's gone into a lot, so it is good business of why we do it, and so, you know, it -- it is all about, can we help make the transition we got to make and customers make and want to make it. >> thank you so much for coming in. great to see you. >> good to see you.
coming up next, head of the world's largest head fund of bridgewater associates. we are live from davos. just in a moment with more. flr we're the hottest young company around but if we want to keep the soda pop flowing we need fresh ideas! >>got it. we slow, we die. >>what about cashing out? no! i'm trying to build something here. >>how about using fedex ground for shipping? >>i don't need some kid telling me how to run a business! i've been doing this for 4 long months. >>fedex ground can help us save money and deliver fast to our customers. not bad, kid. you remind me of a younger me. >>aiden! the dog is eating your retainer again. let's take a short 5-minute recess. fedex ground is faster to more locations than ups ground.
what's going on here? i'm val, the orange money retirement squirrel from voya. we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? more of a spokes metaphor. get organized at voya.com. it's gotten squarer. over the years. brighter. bigger. it's gotten thinner. even curvier. but what's next?
speaking to the top business and market leaders. >> and is there a better place to be during this time of market volatility other than the world economic forum? we are speaking to the man who runs the world's largest hedge fund, and ray dalio joining us exclusively. china, geopolitics, market behavior front and center. breaking down wild market swings and what matters most to your investments as the second hour of "squawk box" begins right now. live from the swiss alps and horm of the world economic forum, this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with joe and andrew, and hold on to your
skis this morning. davos and world markets brace for a big swing in the markets today. check out the futures at this hour. they are down. the dow futures over 300 points below fair value. s&p futures down by 33. nasdaq down by 75, and, of course, this comes after two weeks of turmoil that we've already seen in the markets. oil at this point sitting near 12 year lows. wti overnight falls 3% at $27.58. the ten-year back below 2% as well. looks like the ten-year note is yielding 1.982%. >> between plunging crude, worries about china, and our own economic struggles, investors started 2016 in a foul mood. joining us now, chief investment officer, also with us, ia ian bremmer to talk geopolitical
and real world concerns other than financial concerns, although, obviously, you do both, but, scott, i mean, after this first two to three weeks of the year, what are you doing with clients? what are you telling clients and doing with money? >> you know, at this stage of the game, we've been flat equities in our macro accounts since the first day of january. we're basically telling people it's a good time to start looking for opportunities, joe. we've started to look at some bonds in the oil sector, and i think we're coming to the end game, you know, i originally wrote a piece a year and a half ago saying we can see $25 oil. we are close enough to think about it, and the other thing is that we basically are warning people to, you know, at this stage of the gaim, stay out of the stock market and begin where we are today on the futures, i think if we don't get above 1860
before the close, we are going to 1850. >> what do you mean flat equity? >> in the accounts. >> flat, out? >> we got out of the long positions. we own puts on the s&p. >> you are all cash in terms of -- >> no, no. we're accumulating -- >> equities. >> yeah, in equities. accumulating bank loans and -- >> waiting for what? what is the moment? >> i think it has to do with china. the reality is that we've discovered the markets cannot be artificially maintained for long periods of time. you know, clearly, the currency is overvalued, and something has to give, and my view is that with rates in hong kong up to 60% to deft currency, this is not sustainable, something will give. >> talking about inflated markets, are you talking about markets like china or markets where the federal reserve or other central banks are agtive?
>> i think the condition exists broadly, becky, but i think the police most vulnerable is china, and my view is that, you know, china is going to have to revalue. there is probably more downside in chinese stocks, and that's going to flow over into the rest of the markets and we'll see more turbulence. >> what -- 1% or 6.9% in china? which was it? which was it closer to? median? >> well, the question is whether you think it's 1 or 6, the government feels comfortable they can actually manage this. there's no threat to their own political stability. they wouldn't be meeting with the former taiwanese president or facilitating japan if they were concerned suddenly their economy was going to collapse. you can say they are all smoking something, but it's got to be pretty good. look, the chinese government has more ability not just to use their reserves, but also to use all of the money of the chinese companies that have made their
largest on the back of the chinese willingnd to allow them to. it's a state capitalist country. >> matters to oil and commodity marks and rest of the world whether it's 6, 9, or 1. >> i understand. what i say is the ability of the chinese government to continue to play the song, keep the music playing over the course of 2016 is high. >> you do? >> i really do. >> closing down factories, keep everyone employ, make concrete no one uses -- >> they have more capacity to do that. the market perspective, what i find interesting here, historically, the last ten years, if you see a risk, you bought it. when it was rattling around, the markets went down, they would be right back up. smart money went in. still true for north korea nuclear test that is not an h-bomb, but not true in the world tea. the stuff in the middle east, europe, the concerns about the agreement and structural long term unstainability of china.
they will take years to play through, so, unfortunately, one of the reasons we are here at davos today feeling a much more concerned and fearful environment than i've seen in the last -- at any point in ten years, even after the financial crisis, then you knew what to do. >> we used to have the fed to buy the dips. >> yeah. but people don't understand the dip here. they don't understand here. they don't -- where this is going to end i think whether it's europe, u.s., we don't know what it stands for, the nature of the alliance, and we don't know how china's going to get through this or how the saudis retain the regem. these are well beyond what the fed will do. >> just a complete trader's market and you are up, down, and backwar backwards? >> from an investors' standpoint, the trend is clear. we're -- >> trend being down? >> yeah. trend being down. >> you know, for traders, i think it's a really hard environment. i mean, when we had the selloff
on audi -- on thursday, and that should tell you to buy the stock market. well, the trade was good for 24 hours. here we are lower today. >> we just have brian tell us that retail investors are standing pat. they have not been moving out of the markets on this. is there a point, though, where the headline noise freaks them out too? >> well, you know, becky, that's the stuff that actually bothers me is the complacency and lack of panic in the market. i think that until we get some kind of volatility and panic, we don't have any indication of the bottom, but the one thing i would add to this is that if we can't get back up above 1860 today and we head down as i expect, then the fed is on hold in march, for a long time, and, joe, to your point earlier, you know, i wouldn't be surprised if things got bad enough they would reverse course. >> we have ray on in a couple
minutes believing they will reverse course before they do anything else. >> well, you know, ray's a smart man. i wouldn't bet against him. >> at least we got that quarter point. dry powder. >> put that in your pocket. >> could go negative? more qe? >> right. >> yeah, i mean, i wouldn't rule it out. >> what happens when this does not work? more negative? >> well, joe, the idea here is that ultimately i saw ken today, and in his book, this time, it's different, he points out that the end game is you default restructure or inflate your debt away. we'll get to the point where we print enough of the stuff that inflation takes off, and inflation will be less of a concern than maintaining the stability of the system, and we'll accept it. >> yeah. because we didn't do any of that -- -- that's the point we make, we didn't clear the system in 2008. could have been worse, deeper, and i wonder if we paid it forward. >> maybe this is the more politically paletteble version,
right? had you actually gone to the bottom, how quickly do you come back? >> it's, like, not handling the problems in the middle east for the last seven years, and now we have more guys down the road that perhaps are put into a war. >> look, it's a problem you need to have, but at least in a country like brazil, you can see your way out of it after a heck of a lot of pain. in the middle east, the betterage better a analogy, but climate change, you passed the tipping point. it gets worse. how much can you contain if? people come to the realization looking across the middle east. they have done well taking expensive stuff out of the ground. an accident for decades, but they never reformed the economies, never provided alternatives for the disenfranchised young men, millions, tens of millions of th them, and now they have to deal with unstain ability. >> north korea was invited here for the first time in 18 years,
earlier end of december, early january, and, of course, then, they test this, you described the h-bomb, and they were disinvited. side show or matters? >> it's funny. when they wanted to come, they showed up in person to the headquarters, north korean delegation said we want to show. it's -- it's not a side show because the north koreans, the fact they wanted to come here is because they actually do want to make some money. they are trying economically reform a little bit, and the fact that they didn't realize that testing a nuke would not play well with the people, they'll figure it out eventually. >> if we past the tipping point for climate change, none of this matters anyway, does it? >> it all matters. >> why? if we passed it, we're screwed anyway. >> resilience matters. >> what does it matter if we're dead? >> the western hemisphere is more attractive. >> all right. glad you're worrying about that for us. >> thank you. >> scott, ian, thanks. >> thanks, guys. a little bit of corporate
headlines this morning. a key earnings report in the next half hour when we get the latest numbers from goldman sachs. the firm expected to earn $3.53 a share, revenue under $7.1 billion. netflix buckling, moving higher this morning -- buckling? bucking the trend. they beat estimates, but the key metric boosting the stock is larger than expected increase in subscriber numbers. ibm numbers took a hit in premarket trading. i don't know if you saw the numbers. company beat forecasts on top and bottom lines for the fourth quarter, but weaker than expected 2016 forecast. when we come back, could oil prices below 30 end the stalemate conflict in ukraine? the mayor of kiev is next about that. next, ray dalio, founder and cio of bridgewater associates. he's the special guest at 7:30 eastern time.
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red. in the red in a big way. let's see what's going on. flip the board. there you have it. dow opening off about 332 points about now. tensions between ukraine and russia creating geopolitical and economic pressure in the country and russia cancelled a pact with ukraine and halting on ward transit to markets in asia. that's a disruption that could add up to a percent of 2016 gdp. joining us now with a pulse is the mayor of kiev, and thank you so much for being here. good to see you. >> you also. >> congratulations on re-election, winning by over 66%, a huge landslide from where we come from. what are your goals this year? >> thank you very much. ukraine has finished elections, and the authorities in all the ukraine for development and kiev and ukraine, we understand we
need fast and effective reform, and, actually, reform do not so well as if we wish, but anyway, we understand the main key have to be example for all crukraine and we try to use all modern technology for management of the city we implement. smart cd to the with western companies, e-budget, e-petition, which, actually, very popular, or income spend iing transparen is actually main key against corruption. everything is open. it's -- with that, we expect more investment in our country and in our city.
we try to use modern technology right now to implement and keep and in less than two years we became 1.7 billion in our budget. it's actually very good step. it's very important. it's very good signal for our city and our country. >> we watched oil prices this morning fall below $28 a barrel, and when that happens, i just wonder what that means for russia with oil so important to the economy. does that distract putin or put additional pressure for him to put points on the board in other arenas? what's it like dealing with -- >> the plunge of oil prices have very big effect on russia. instead to invest and modernize the economy and concentrate social direction, russian has the oil money for army, secret
services, and -- i'm more than sure right now with oil prices, russia have to focus on social issues inside the country, and will be definitely less aggressive in outside politics. >> because nothing happened last time we spoke. we were worried last time we spoke, last year or the year before -- >> exactly one year ago. >> one year ago. and if we had teold you then tht it stays status quo, you would have been pleased, but there was worries of encroachment at that point, wasn't there? maybe it did not happen, putin, because of oil prices? >> yes, i would agree with that. actually, everybody understands success of ukraine brings dangerous for other countries,
can be an example, ukraine, democratic country, we should take the democratic direction, have success. this is very important support for our friends, friends of ukraine, and, also, i want to say everybody understands. without propaganda war in ukraine, without money , suppor of parties, this never, ever happen, and that's why we say right now, russia has to have all agreements and move from the zone of conflict. >> mayor, thank you for joining us this year. always a pleasure to see you. >> thank you very much. all right, what's coming up? bridgewater, ray dalio, expecting the fed to return to qe.
speaking to him about a lot of thing, oil slide, fed, and expectations. later in the program, identity protection and top secret messaging is the job of wikr. the company's founder joining us and probably be wearing those glasses. >> she is. i just saw her. time now for today's aflac trivia question. in what year did the first iphone become available? the answer when cnbc's "squawk box" comets. c. ohh ah ah aflac! aaaaf-lac! ta-daa! he's not a very good magician. he paid my claim in just one day. one day?! shh! how does he do it? in just one day, we process, approve and pay. one day pay, only from aflac.
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oh hey allison. i'm val, the orange money retirement squirrel from voya. val from voya? yeah, val from voya. quick question, what are voya retirement squirrels doing in my house? we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? no, i'm more like a metaphor. okay, a spokes-metaphor. no, i'm... you're a spokes-metaphor. yeah. ok. see how voya can help you get organized at voya.com. they speak louder. we like that. not just because we're doers. because we're changing. big things. small things. spur of the moment things. changes you'll notice. wherever you are in the world. sheraton.
likes of hong kong and japan moving 4%. remember, these are not the shanghai and shezhen casino. japan with the most attention, in bear market territory, declining 21% since the high in june. bear in mind, so far year to date, bear markets are emerging markets on commodity exporters like brazil, canada, china, japan, and net energy importer, a developed markets, does that suggest that others like the u.s. might follow suit into bear market territory? we'll see. either way, european trade today similarly red, declines of 3% for most of the board, and most of the commodity names suffer significantly. ecb meeting tomorrow. now, we've seen risk out of trade in other asset buying off the u.s. bond. look at the ten-year now below 2% as you see. 1.984, and other asset classes with risk off moves. oil prices we mentioned. also, a look at currencies, we see the yen rally and the euro
rally as well, which is a trade, of course, we've seen significantly throughout the year. there you have it. what does this all mean for u.s. futures? as you can see, called lower by about 2% for all of the dow, expected to open down 300 points. when we return to davos, ray dalio on market swings and what to expect in 2016. "squawk box" will be right back. thanks. ♪ [ male announcer ] fedex® has solutions to enable global commerce that can help your company grow steadily and quickly. great job. (mandarin) ♪ cut it out. >>see you tomorrow. ♪
welcome back to "squawk box." look out below. stocks down sharply in asia overnight, the nikkei in bear market territory. u.s. following suit this morning. looking there at the futures indicating a sharply lower open. we have the dow likely opening off 317 points off, and oil now settling at a 12-year low. are you ready? factors forcing the fed to lower interest rates back to zero? the man behind the world's top hedge fund here, ray dalio, and only right here on "squawk bo.".
welcome back to "squawk box," live from the world economic forum in davos, here now, becky quick. folks, welcome back to "squawk box" this morning. this is cnbc, first in business worldwide. among the stories front and center today, key economic data coming up a half hour from now at 8:30 eastern time. the government reports both consumer price index and housing starts for december. mortgage applications rose 9% last week, and now home purchase applications fell, but refinancing activity jumped 19%. atlantic city new jersey mayor says the city may face
bankruptcy after governor chris christie vetoed legislation calling for casinos to make fixed payments in lieu of taxes. the next guest runs the world's largest hedge fund, advising the treasury department, white house, and accounts of the world bank among investors. joinings now in the cnbc exclusive, ray dalio, co-cio of bridgewater soergts with$155. two return ten, they have not had a losing year in 13 years. all weather down 7%. but we can talk about that. we are trying this morning to figure out what's beginning on, make sense of the markets and what's beginning on in china. you have an economic machine. help educate how you think about things right now? >> okay. let's talk about monetary policy and long term debt cycle.
there's a psych m we have for five years, and there's a long term debt cycle. the problems at the end of the long term debt cycle is it's for difficult for the federal reserve or central banks to ease monetary policy. when you hit zero, you can't lower interest rates anymore. when you have large spreads, in other words, higher expected returns of equities or bonds, and they do quantitative easing, the seller of the bonds receives cash, and they buy other financial assets, and that process purrs those financial asset prices up, and lowers their expected return. then there is not much spread, so, for example, you have about a 2% bond yield. cash being nothing. in europe, in japan, there is no spread. that means that monetary policy makes it more difficult to either have credit growth or monetary or monetary growth. that end of the long term debt cycle is the issue that means that the risks are asymmetric on
the downside because risks are comparatively high at the same time there's not an ability to ease. that ai symmetric risk exists all around the world so every country in the world needs an easier monetary policy. that's that. regards to china, china is also dealing with the debt issue. i mean, a basic notion is you can't increase debt faster than income for long. that means there's an adjustment process, which means slower growth. with slower growth, less inflation pressures so we're now in a situation globally where china plays an important role on the rest of the world, and the rest of the world plays a role on china, and that is negative. >> if i decipher this, you end negative. in a sentence, we're in bad shape here? >> again, i think the risks are a-sm symmetric on the downside.
it's towards quantitative easing, not a tightening. >> do you think it's effective? you point out there's not a lot we can do with monetary policy unless there's quantitative easing. >> i think it's going to be much more difficult this next time, and i think that there's going to push on a string. that term began in 1935. it's that challenge. that means there needs to be fiscal policy with monetary policy, a risky set of circumstances. politically, fiscal policy's controversial. do you tighten? do you ease? that's why talking about how the machine works is important because it's a-political. >> for an investor taking this in, now what do i do about it? if it's going the wrong direction, are you long equities? scott was out here before said he was flat in the inning of the year. >> i think that we don't talk
about positions in the market for obvious reasons. there's choices. what are your asset classes? cash? equities? so for the most of investors, it's important to have really a balanced portfolio. that's why when we constructed this all weather portfolio, it's a portfolio in which assets balance each other. the problem last year is that almost all assets in the world went down in value. that can't go on without depression. that means they ease monetary policy and do the qe. i think that, you know, the key for an invester is either you have to have an active investor who is able to move quickly, and that's a challenge. they can't play that game. >> right. >> you can't watch television and make those trades well, and professional managers who have done well and have time are pretty much closed. it's a difficulty. i think the best thing for the average peerson is to know how o
try to know how to create a well-diversified portfolio. tony robins did the layman's version of this. >> right. >> that might be helpful to people. >> let me ask you a little bit about one of the bets you got really right last year. in the beginning of 2015 bet against the euro's drop, against conventional wisdom. what made you think that then and what do you think now? >> there's a short squeeze for dollars. the dollar, because it's a world's reserve currency has a lot of dollar denominated debt, and because of that dollar denominate nation, there's a squeeze. emerging countries owe dollars. they have to buy dollars. similar to 1980-1987, really. that squeeze, once that squeeze is over it undermines the dollar longer term. i think we're going to come in a couple years from now in a point in which we're really thinking hard, whether is a good reserve currency? what is safe in investing?
is safe cash? in what currency? that notion, i think, will be strong temporarily, a squeeze, causes dollar to rise, bringing imported prices. the chinese situation with the currency is very important, very important. if there is significant weakness for the yuan, that means more important deflation. it'll make things more difficult. so i think what's happening in china with the currency, there's a balance of payments challenged. the nature of the flows are important. i believe there's capable policy, but it is a big force, nature of the flows, so, yeah, that creates a currency risk important for the rest of the world. >> when you talk about the imported -- lack of imported deflation, essentially, here in the united states, is that bad because you worry about stagnation? what are you worrying about
happening? >> sure. monetary policy can be affected by interest rates or currency. so the tightening of currency is a negative. also, there's a negative effect that we're seeing right now. because the markets are going down, that will have a negative wealth effect. when we start to look at growth in the future, there's a lower level of growth in six months from now than today. we guess that's 1.5%. not negative yet. there's a negative wealth effect. there's a negative currency effect. both are negatives on economic activity. >> copied the term negative wealth effect, sort of the opposite of all the feds' extraordinary measures would be when they start coming out, it's the on it of the wealth effect, but hoped the fundamentals from the wealth effect would rise up to meet the overvaluations. did that happen? >> i think what the fed is doing
that is, i think, mistaken, is that they are looking at the short term economic cycle. you know, the classic is if you're operating with a gdp gap, slack is -- gets tighter, unemployment rates get lower, that at that point in the cycle, it's appropriate to tighten monetary policy. that's very classic. that's a very short term business cycle perspective. there is such a thing as longer term debt cycle, and i don't think you're giving enough attention to the longer term debt cycle. >> what changed in the world where a bund rate is normal? what did i miss in the '80s and '90s when i thought it was never below 5%? >> you missed looking at history. i mean, like, what's happening now, very similar, like, we hit zero in 1932, and when we hit zero in 1932, there was quantitative easing
significantly, carrying us from 32 to 1936-37. there was a set of circumstances then. the asset prices were up because the quantitative easing a big bull market, and in 1935-36, pushed on a spring because of zero interest rates and asset prices higher. you can't squeeze more out of this. it's difficult. everybody is long. it's the nature of the system. the system is that asset classes have higher returns than cash. everything. buy a business, you're going to have a higher return on cash. positive spread. that causes everybody to make money from being long. they buy assets. leverage long positions is what the process is, everybody is long, and you squeeze a bit more. since 1981, every cyclical peek and drop in interest rates was lower than the one before it because of the secular downward pressure. when we hit zero, we couldn't do
that. that's why we had quantitative easing. there's a secular force that you can only squeeze so much debt growth and so much economic growth out of a cycle. >> well, none of this makes me optimistic, though. you're not pessimistic? everybody long for too long, we got to get out? >> i think, well, at the end of the day -- >> yes. >> central banks and monetary policy and economic policy have to create the demand, and the mechanism like in 1937 is such that through quantitative easing, fiscal policy, something or another, you know, it's all cycles, and we'll all pass through the cycles, and we all get done, and sometimes we, you know, have dealt restructuring. we work ourselves through that. so i think, and when i say pes miss tick, i'm clear that i think the risks are a-symmetric
on the downside, and it's important by central banks, and even miscall policymakers at this time. that's the main thing. i don't want to, you know, there's -- the moves can trap investors. >> right. >> what happens is they are too responsive. mutual funds will tend to sell in response to these things. i think that -- i don't want to prompt concern, but i want to prompt an analysis of the question of the decreased effectiveness of monetary policy in a decontraction. this will be a negative for the economy, the market movement, and that'll mean, as we look at that, that the fed should remain flexible. right? it shouldn't be so wedded to a path -- >> i think they are not? already heard that from the people -- >> well, what's a little bit -- what concerns me is the lack of these concerns six or 12 months ago because the force is behind that existed six or 12 months
ago, so i think, anyway, i hope you're right. >> we should tell you very quickly, goldman sachs is out with earnings. earnings just crossed. adjusted quarterly profit at 4.68 a share. a easy beat street's expectations of 3.53. revenue above estimates, and more details on goldman's report coming up. >> back to the conversation. >> bottom line is, ray, that the feds' arsenal is compromised at this point, and what's left is not going to be as effective as we would like. >> yes, i believe so. >> well, that's what the scary part of relying on so much fed activity to make things look better is that it's hard to unwind. it's not going to be -- >> well -- >> do they have a choice? >> i think the unwinding part is not the problem. i think the getting more out of it is the issue. >> so we should have done -- was
faber right about qe infinity? multiple rounds? >> i think monetary policy needed money, monetary policy excellent in easing, saved the world economy, and because when you have a certain amount of debt, you can't have it go forward with more debt. you have to put money in, and history repeated this. it's not just my view. these cycles have gone on forever. you know, go to the old testament, and they said the year of jubilee, every 50 years. debt cycles have gone on forever. there needed to be that movement, but there's still the limitation to that capacity with zero interest rates and negligent spreeds. the way i think it works out is probably as they are selloffs in asset prices bringing the expected return of markets up, so, in other words, right now, when we got to the pique, we expected return of equities is
3.5%, very low, a problem for funding assets, pension funds, and so on. as you're having the correction, the -- it raises the expected return of asset classes, and as then cash stays low, then that begins to attract in more investment. the problem is -- in the early stages is, negative wealth effect feedback loop because it causes psychology. i think a move to a quantitative easing would bolster psychology to some extent and bolster that, but we're squeezing the last bits out of the long term debt cycle. >> not inflating our way out of this? that's what everyone is worried about. the commercials, they are run on cnbc, the churning of central banks, buy gold. that's not how -- >> inflation is the total amount of money in credit spent divided by the quantity of goods sold, and if credit goes down and
money increases and the same amount is spent, it's not going to be more inflationary. think of it in terms of money. you can go into a store and you can buy with credit or you can buy with money. if credit contractions and you put more money to make up for that, the same amount spent. so you're getting -- you're negating deflationary factors. we can see that. there was a lot of controversy about that early on, but the facts speak for themselves. with all the quantitative easing that we've had, what we have is a risk of deflation. >> right. >> right. we have, so, we're having deflation their pressures, not inflation inflationary pressures. it's clear the putting of the money in did not cause an inflationary problem. we have to get back to basics. it's spending. how much spending is there? as long as there's not a monetary inflation. >> talking about the real economy. actually, just a question of the marke market seeing the route in the
futures. larry fink felt the stock market would fall, additional 10% to go. would that -- would you look at that 10% and go, okay, now we hit the bottom, up and going from here? >> well, you know, it's more dynamic than that. in other words, as the prices go down, i calculate what the future expected return is. i look at what the risk, what the risk premiums are, and look at the pass through through this negative effect, and then what the central bank does, so, yeah, you know, i don't think it's as easy as, you know, a 10%, and what we're dealing with is something that is bigger than -- i want to see the big issue. >> all right. ray, thank you. appreciate it. >> thank you. >> great to have you here. really appreciate it. >> my pleasure. >> thank you. >> absolutely. >> when we come back, wikr, sell on top secret messages and keeping identity safe, "squawk
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finish, and content shared self-destructs in seconds, giving users more control of their data as silicon valley faces increasing pressure to cooperate with surveillance legislation, a topic in davos that's front and center. talking about text roll and privacy is niko, cofounder and co-chair of wikr. i learned a lot preparing for this. there's really safe, of which wikr is one of a couple competitors, and down the list of what's not safe, and thrust into the floor recently with the paris attacks, and encryption, and you don't store anything, so there's nothing to unencrypt if you wanted to at this point. >> makes both dealing with law enforcement a lot easier because we don't have anything we could give them, and makes it easier to defend from hackers. the ma data you have, the more you have to protect.
>> what's interesting for me in reading that you -- you're going to split off and run a nonprofit part of wikr. >> co-chairman of wikr, for and non-profit. >> having an overwhelming view point of the world, this is an important issue that people don't understand and i didn't understand that i figured if i'm not doing anything wrong, i don't care if people see what i'm doing because i want them to see what bad people are doing, but it's not that simple. my private information is worth a lot, facebook, google, they get it for free, and that's worth something, and you -- actually say they will be looked as as the robber barrens in the future? i should want my personal information to be mine. it's not an edward snowden or simple privacy, nonprivacy issue? >> it's actually, i think it is simple. you don't have people in germany
say i have nothing to hide, our history's closer, and we remember what is used with the information. one of my favorite things that we do at defcon, running the social engineering contest, looking on facebook, first place to go to manipulate people. you think about how did you connect with your lover? you like the same books? you like the same movies? you know, these pieces of information are very valuable and need to be careful what you leave out there. >> a different question, though, which i interviewed last week, the prosecutor, and we were talking about encryption and what things you do, and apple is fully encrypting what they are doing, and there's a real worry that terrorists, criminals, are going to use this service, and there's no back door and no way for the government to be able to get it. do you not worry about that at all in. >> well, those people fighting terrorists use wikr every day, and i never want to put a hole in their system. i think it's a real mistake to say that privacy and security
are not on the same side. i'm also all about protecting us from terrorists and security. this is how we do it, by having secure communications. >> if terrorists know they can use encriminaypted services, we no way to get at it, it's a decent argument it's easier for the terrorists. >> easier for for the people fighting the terrorists than terrorists. look at the founding fathers, it was important to have a strong social society, because of strong social discourse. there's other ways to communicate. >> part-time get very, you know, just reading -- you know, terrorist use words too, so you want to ban words so that -- that's how -- -- >> that is. >> actually even in pop culture, in homeland, this exact -- you saw this dr. >> yes. >> you saw the zealous crusader
wanting to release information and saw what happened in germany. it's a difficult issue. i understand what you're saying. i also, i don't know, i don't know how we get around this. i'm not to say that maybe the law enforcement officials would be able to gain more than the terrorists, that doesn't feel right or feel like that's necessary. we want to know in advance. >> the better way to think about words is cell phones and the interpret. these things are used by terrorists every day, and it's clear the benefit to society is greater. >> i think that -- the distinction is, and i heard from prosecutors last week that kr criminals today tell members of the family who call each other or do things, get the 6 because it's encrypted. that can't be a good thing. >> well, there's lots of other ways that law enforcement can fight terrorism. it's really easy to track people, and not by trampling on basic human rights. >> it's bright out here, bright
lights, snow behind us which reflects, but that's not why you wear sunglasses today, right? >> so, so far, there's no pictures of my eyes on the internet. trying to keep it that way as long as possible. >> facial recognition. >> not for that, but human recognition. it's amazing, you know, people from high school won't recognize. if i take off the sunglasses and walk around, people don't recognize me, but it's how i think about it if i were you or the audience is that think about the digital foot print you leave online. try to minimize in ways for youed too. >> worries me when think about kids like that online. >> everything. i say that kids under 16 are not that way. now anonymous accounts are the norm. >> one other thing that you'd like to eventually -- it's very disruptive for facebook and others that sell all the private information right now. you want someday for welcome ikr to be bigger, and people can have their own social network.
>> i think the business model that will rule the next decade is one that is not made off big data. big data is hard to secure. >> i think hording it will cause more harm. >> okay. we got to go. thank you so much. flr no one speed... no one way of driving on each and every road. but there is one car that can conquer them all. the mercedes-benz c-class. five driving modes let you customize the steering, shift points, and suspension to fit the mood you're in... and the road you're on. the 2016 c-class. lease the c300 for $399 a month at your local mercedes-benz dealer. what's going on here? i'm val, the orange money retirement squirrel from voya. we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? more of a spokes metaphor. get organized at voya.com.
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. crude prices crushed, and stocks slammed. >> talking to the most powerful voices in business and invest. for their perspective. >> change that happens quickly gets investors very unnerved. >> the general population has not really adjust the this yet, and we'll see what happens. >> this hour, the paypal ceo, ebay chief, and workday boss. >> breaking economic news, key reads on housing and consumer inflation. >> live in davos, swaitzerland, and the third hour of "squawk box" begins right now. >> you're watching cnbc, first
in business worldwide. welcome back to "squawk box," everyone. this is cnbc, first in business worldwide, becky with andrew and joe, and anyone who is doubting us, yes, we are outside. check it out. think you missed that. we'll do it again in a sec. in a moment, glenn hutchins, but first, up to speed on global markets, futures this morning under a great amount of pressure. look what's happened this morning, and you'll see the blood letting continues with the dow futures down 300 points this morning, and s&p futures down by 33, and nasdaq down by 72. in europe, the markets already opened, it's been a very rough morning. right now, you see that the dax is down by 2%, down by over 3% earlier, and that's where we find the cac. ftse and london down by 3%. >> selloff started in asia overnight, but, you know, we were not open yesterday, and a lot of markets were, and, also,
oil, the nikkei drop into bear market territory, markets in shanghai back below 3,000 again. oil, though, the big driver. crude prices have been below 28, still are. >> okay. a few stocks to talk about this morning. they are on the move. goldman sachs' earnings and revenue top estimates led by upbeat investment bank results. ibm, those shares under pressure. the tech giant says it's full year earnings fall short of wall street estimates. the dollar is a part of the story as the company gets more than half the revenue from outside the united states. netflix boosted from the global expansion, 75 million describers end of december, and they forecast another six million or more by the end of the quarter. >> first news maker, glenn hutchins, director of at&t and
nasdaq, and, glenn, great to see you this morning. >> nathank you. >> people are nervous this morning. more blood in the streets, 300 down in the futures this morning. what's your perspective? >> you know, we've done this many years now, and every year i've been to davos, without fail, the consensus is wrong. so as a result of that, today, i'm october mystic. there is a list of horribles that are worth talking about, reciting this morning, talking about it a lot i imagine, return on volatility, the global markets, associated smooth commodity prices on energy company balance sheets, and a lot of concern about europe, the refugee crisis, and britain leaving europe. china, slow down in growth in china, debt levels there, and all that vicious cycle impact on energy companies and commodity prices. dysfunction in the middle east.
emerging markets, russian, brazil swooning not justify set by india, divergence in u.s. versus global monetary policy, impact on the dollar, what it means for u.s., emerging trust gap between mass populations and elites as seen by the rise of both donald trump and sanders, and then just bewildering change that the world -- the technological based change in the world we used to live in reached the pace that is bewildering. >> makes you optimistic? >> no, i understand why people are pessimistic, right? >> right. >> there's a lot of data and experience out there causing people to say, we're headed into something, a very difficult periodment one of the reasons to be optimistic or one of the more interesting questions to ask in the middle of this, really, right, i think the first one is, for your american viewers in particular, we're in switzerland, but talking to the united states, what is the impact of this on all the u.s. economy of all of this, right? i said, first is that, you know, first look to consumer spending,
70% of gdp. i wrote about the causes i think of the swoon in consumer spending, which is insecurity of income in american house holes, but offsetting that increasingly is excellent job growth. we had 200-plus thousand jobs created over the last year. american companies, while experiencing issues on the edges, still continue on the pace of job growth, and so i think if that continues, i understand there's impacts of what's going on in the on that. >> look at market volatility, the beginning of the year, watching the worth, beginning of the year, american ceos look at that and are nervous. they pull back on potentially their plans for spending their plans for hiring. >> true. >> that, in itself, just volatility could impact. >> feedback cycle, but as long as the companies buy themselves back into a relatively steady pace of growth. if there's not an underlying
weakness from that, this is momentary, okay? now, i'm not saying -- there's a very important impact. second thing is, last year, what is the impact of lower commodity prices on u.s. economic performance? last year, turns out to have been negative. i think that the data is showing that. turns out, for instance, that investment spending in the energy industry last year was 2% of gdp. at the peek in 2000, the whole internet spending was just half of that. >> you. >> right. so that came off so quickly last year, overwhelmed any positive consumer benefit to. that spirely possible this year we see the consumer benefit flowing through now, offsetting reduced investment spending and job losses going from reduced investment spending in the industry, now see the consumer benefit flow through. if there is a recession in the united states, feels to me more like something we experienced in 2000 rather than 2009 because it's not associated with debt levels, but equity levels having
gotten too high and correcting. if that happens, i don't think it will, but if it does, it's short, if it's of that nature because an equity correction has much less long term impact than a debt problem, and the other thing, there's a couple thing, one thing that i would be optimistic is the tech economy, bubbling around us here, right. you know what i mean? >> i do, but i worry it's bubbles and so bubbling that it's going to pop. >> there's issues with the unicorns thing, i get that. >> right. >> but if you, on the other hand, look at trend that were facing the next year or two, you have the continuing build out of the mobile economy, and that's not just, you know, virtual type of companies, but companies like at&t on the board, investing beings and billions of dollars in the network buying spectrum, all those things, but there's follow-up stuff with the -- it's not just going to be real. this is going to be the year of
voice recognition. i don't know if you got the amazon echo. extraordinary device. >> i've seen it. >> it's the latest thing. looks like a toy today, but that's the way you run your life in the future increasingly, you're going to have voice commands to manage things this your life. this virtual reality is a new platform in which you interact with the technology is really going to be very valuable. machine learning. goes with all of these things so that your devices learn from you what they want to do and react to what you ask them to do, and one of the things i'm most interested in, spend tern time here, is the explosive and powerful. >> we talked about that two years ago and thought it sort of fell apart. >> just when you are not paying attention is when it takes off. exactly. >> bitcoin or a technology like that, idea of a block change? >> this is a longer conversation, but, briefly, there's bitcopy as a currency, which i think too many people are focused on and don't
understand is less important than the bitcoin technology. >> okay. >> bitcoin technology has two important elements to it, one, people talk about, the block change, and other people talk less about, potentially explosive piece, a means to transfer value the way the internet transfers information today. >> glep, when you talk about being optimistic, are you from the market's perspective, howie live, from the market perspective. >> or because everybody else is pessimistic. >> i think we've gone too far pessimistic direction. really important issues to be understood, grappled with. for example, you talk about europe has a problem with the migration crisis, or also say, we have a real chance to deal with these problems. today, i would like to talk about is emerging collaborational host of global issues, and just like we did in the post world war i, time weird, we have the chance to come together, form institutions, and just -- i
think three or four important things right in and out, which solve -- not solve, but contain a lot of the problems. one is, there's, i think, an e emerging cold war between saudi arabia and iran, and how we manage that so thats it is not hot war. russia, we're not the allies one hoped at the end of the cold war, integrating them in the world system so they are not an unconstructive actor. that's something we can do together. reassert u.s. global power without going to war, something president obama was grappling for and the next president has to figure out how he or she does that, hopefully she, and then linking china into all this in a constructive matter. that presents all sorts of problems. you can say, we have a path towards the opportunities to solve those problem problems. >> glenn, leaving it on the
optimistic note because you're the first we heard today, but appreciate you joining us, and i didn't realize you have been to the brooklyn arena. >> happy to be here. >> it's great. great. >> obviously, that's -- >> let's hope you're right. when we come back, time to throw october the wallet. joined by the ceo of a company whose goal is to get you to do that, dan schulman next. ceo of ebay on set, how he plans to fight off competition from amazon. "squawk box" returns in a moment.
welcome back to "squawk box" live from the world economic forum in davos, switzerland. people say they don't believe we're outside. >> we are. >> can you imagine if we were inside with, like, gloves? check out -- >> really. >> that is a good conspiracy theory. it's freezing, freezing. the u.s. equity futures down on the dow, mostly over 300 for the
whole premarket session, still down 307, maybe more disturbing is that 33 points dropping in the s&p, putting it well below 1867 supposed support levels where the guys we have on say next stop is 1600 or 1650, you there's no -- great thing about technical analysis, it's good looking back at charts. >> yes. >> very little about the future, but i can explain them real well and show reverse flags and all that stuff. >> feel smart. >> dicey. we get a 27 point rebound yesterday after being up more than 100 points throughout the session, and you think, well, it's stabilizing, and we come in the next day, and it's 300 points down day with europe, just awful, and in oil, down -- >> china. >> china and oil down every day, and people saying now maybe 20 is not safe. that two handle. >> 20 for oil right now, just below 28? >> below -- >> the --
>> i saw some saying it's 18. >> wow. >> which is hard to imagine. >> okay. next guest running one of the world's largest internet at the same time companies here to weigh in on global spending trends, and his vision for the future, dan joinings now, the president and ceo of paypal, and, dan, thank you for being here today. >> my pleasure, thank you for having me. >> i want to talk about life after ebay, as an independent company, i imagine it's got to be freeing in a lot of ways to do the things you want, but there was an interview from the cio who said, look, it was great to be able to kind of step aside, but we had this massive i.t. build we had to come up with in half of the time we needed. how are things now? >> went well, surprisingly, because we took a project that takes typically 18 months, condensed in nine months, set up completely new corporate network, moves thousands of servers into our own data centers, so it was a massive technological split to do, but it went well.
went well right now. >> how are things looking in terms of what consumers are doing now and how much they are spending on line. >> yeah. there's a tremendous secular tail wind now towards digital payments and hit a tipping point this holiday season. interestingly, for the first time ever on black friday, more people shopped online than they did in store. and that, to me, talking friends at retailers, woke them up to the fact that mobile payments especially because that's what most people did their shopping on, mobile, is here to stay, and it is growing dramatically. we're seeing that across the world right now. growth rates, europe, asia, u.s., all accelerating. >> go ahead. >> go ahead. >> i was going to say, do you look at the biggest competitor being the credit card companies, look at it being amazon? saying amazon, amazon is doing payments and other people doing electronic payments? who is the competitive set for you? >> yeah. well, there's an announcement
every week on a new competitor coming in, whether it be walmart pay or target pay or android pay. it's actually getting a little confusing for the consumer right now, a very fragmented market. >> it's been confusing. >> has been confusing, getting more confusing, and people turn to what they know and trust like paypal, but the biggest competitor that i see, really, is cash. 85% of the world's transactions are still in cash today, and cash is an incredibly inefficient form of currency, so the secular tail winds towards digital mobile payments, the big enemy is going after cash and seeing that move towards digital payment, but with the world moving towards mobile phones, you have all the power of a bank branch in the palm of your hand right now, and i think it's just sort of a matter of time before we start to crack that element of cash, which is a very
stubborn piece of the monetary system. >> does that mean as the pie is bigger and bigger, you don't grow as quickly as the pie in order to meet all your own expectations and internal growth statistics? >> well, certainly, it's a rising tide lifting a lot of ships right now, but i think for us, we're in the middle of a transformation and financial services, i think we're going to see more change in the next five years than we've seen in the last 30. money is digitizing. there's proliferation of mobile phones, predominantly smart phones. look at the millennial generation right now, they are really using their smart phones to manage and move money, and that's a look into the future, and so i think you're going to see a tremendous amount of growth and, really, a reimagining of what financial services could be in a world dominated by mobile and software. >> so i happen to use apple pay with american express, your former employer. >> yes. >> but i'm told, or at least the numbers suggest that it's not
taken off the way people thought. what has to happen for that to take place, and what does that mean for you? >> yeah. so i think what a lot of companies have focused on is digital payments at the point of sale. point of sale right now is a field of different technologies. there's communication, beacons, a number of different ones, and many companies have bet on one form of technology to the point of sale, and there's just not enough penetration right now, so people are going into the store, finding they can't use that form of payment, and then they are just abandoning it. what we're really trying to do is focus first on online and inapp payments because that is naturally moving to the in-store environment, and i think mobile payments is not going to be a form factor change. it's not going to be tapping
your phone instead of swiping your card. it's really weather there's a value proposition change where you as a consumer order ahead, skip the line, pay with the mobile phone, get rewards instantaneo instantaneously. when that happens and that's the direction we move, that's when you start to see mobile payments in store start to take off. >> dan, thank you so much. >> thank you. >> great to see you. >> thank you. >> dressed appropriately. >> thanks. how the interpret of things is changing the future. we're going to hear from microsoft's ceo, doing that right after the break. the future belongs to the fast.
shot. at one point, down 400 points, but now they are down 290 points, sam walton down by 31, and nasdaq down by 71 because of what's happening with oil price, and look, things fell below 28 a barrel. wti, down 3.25. >> the main theme is the fourth industrial revolution, keeping up with rapid advances in technology. i hosted a panel hours ago joined by the chairman of the microsoft ceo, and facebook's coo, and the president of the republic of rwanda, speaking of the internet of all things, and weighing in on how it is transforming tomorrow. >> if you talk about internet of things, the price where internet of things has the most profound imfacts is the oldest of all industries, agriculture itself, but there's not a crop that is not being sensed so that you can make sure that the resources
that really allow you to get the most productivity are increasing. >> and commented on the importance of connectivity and data access on education, jobs, and living a more productive life. >> all right, coming up, is that fun? you got up early. >> what did you say? i thought we had more video. that's why i was looking in the screen in the reel. >> earnestly. >> i thought we were going to video. >> i thought so too. >> man, you know how to pose. you was just like that. it was good. no video. >> no video. >> you got up early to do that? >> up early, it was fun, good. >> okay, good, breaking economic news coming up, not going to leg nekt that, trying to fix it. housing starts and cpi next. hackers have gone phishiing. >> fishing. >> oh, phishing. how the company plans to up its
welcome back to "squawk box." rick santelli live on the floor of the cme group, about eight seconds away from important december data, whether it's cpi or housing starts and permits all for the month of december. against the backdrop of global weakness and equity slide. here we go. on starts, we're down 2.5% to 1 .149 million. basically a little shy of 1.5 million. subtle revision last time. down 3.9% on permits to 1.232 million. that follows an also slight revision to last month. let's get to the cpi data, shall we? on the inflation side, down .10. we expected no change. strip out food and energy,
slight different from .20. last time we settled was october 14, but the last time we truly spent any serious time under 2% was really last april. so we want to continue to monitor this, of course, preopening equities are down a boat load, close to 300, dow futures, not incoming fair value, but maybe it's better to watch as we all have been merging markets, china, watch how hair equities are moving, i'm not sure believes it, but one thing i tell you what everybody believes is that it's weeker than that. joe, back to you. >> i know, rick. we got a lot of excuses, but it's about a quarter point, isn't it? the quarter point that shook the world. that may have been it, who knows. national retail federation reports holiday sales up 3% year over year. a big boost, david wenig,
president and ceo of ebay. good to have you here. >> good to be here, thank you. >> 25 degrees and windy, and you call eed us soft, didn't you? showing our weakness. >> the hearty californians. >> the 45 ones in california. so how is it going? took over? >> seven months since we spun pay pall out, it's been good. repositioning the business, and ebay without paypal is a different company and concluded early on we had to be different. the ebay brand needs to stand for something different. that's what we're doing. >> what is the central distinction? >> people shop differently. they do not buy the same things in the same way, and ebay is an emotional brand, buying things functional, but emotionally, buying collectibles, cars they are passionate about. the e-bay brand lives there in a
much more resident way. so, for us, positioning us is having unique inventory, incredible deals, not being a functional player is functional to the brand. >> is that a euphemism for amazon, the funkal player? >> no. there's a thousand e-commerce companies, big ones that are obvious that you mentioned, but there's been -- >> can't bring yourself to say it out loud. there's okay. there there's plen that that started in the last couple years, and this is a business with 160 million shoppers selling $190 billion in goods last year. we're good at giving people incredible unique item or deal. >> if i'm looking for something in a utilitarian matter, wanted in two days, i go to amazon. something hard to find, i go to ebay. is that right? >> i think it is. both are huge opportunities. there's no distinction between the digital and the offline world anymore. we're talking about $14 trillion
of commerce. not everybody is going to shop the same way. and for us, it's exactly what you said. the majority of the 160 million shoppers think the same way, so, for us, we don't want to compete in logistics. we're not a logistics company. never going to be good at that, and i don't want to be almost as good as fill in the blank. i want to be a better ebay, and that's a huge market opportunity. >> i'm going to fill in the blank for a second and back to amazon -- >> feel free. >> they have done a remarkable job on logistics and made the argument repeatedly, and other companies now are trying to do this as well, try to get you the product just there physically faster. >> sure. >> it matters. the other thing is a market place of sellers who have some form of unique inventory, and different types of businesses. how much is that worry you long term? >> a lot of things worry me, but to be clear, you have to be fast enough, not everybody needs everything instantly, particularly a unique high temperature.
when i look at the holiday season, two-thirds of the hundreds of millions of items we sold over the holiday arrived in three days. that's fast enough for most. typically if they got the best deal they can get anywhere or a unique item. now, there's some that need something in an hour, and that's a segment, that's not the core competency. we don't have to compete in every segment. >> does it matter people have the perception it's an online auction site? >> it matters. that brand gap is something we have to solve as repositioning. reality is, 80% of the everything we sell is new. 80 is fixed price. it's an end to end immerse business than people think. >> is that a marketing job you need to do? spend money trying to get the message out? what has to happen? >> it's a brand, clarity of the brand, and then a marketing job, for sure. we're changing our, particularly mobile experiences rapidly.
that happens first. once that fills in, we'll talk more sharply and more loudly about what the ebay brand stands for. that's part of the transformation. >> go ahead. >> i think of ebay as the first. when you are the first, you have rest on your laurels, you have your business, you don't think of it as a growth company anymore necessarily. you want to maintain what you have, and is it possible to get it back on, you know, to be, woe wow, yeah, e bay. >> growth is part of that, but it's innovation, doing new things, and surprising people which matters to me. we've been -- i've been in seven months, doing a lot of product innovation, and invin tore innovation, and i think you'll see more of that, but it absolutely matters. the one thing i would say is that in kmecommerce in particul it's hard to have a growth conversation without a profit conversation. you grow at any rate you want depending on how big the balance sheet is.
>> amazon again. >> talking about anybody. [ laughter ] and, for us, we've run a more disciplined business. it's a great business, very profitable, high cash flows, and we want to maintain that. we can grow and maintain. >> another name at you, jack ma is here. >> i've heard of jack, yes. >> he has yet to really get into the u.s. space in a meaningful way, but for certain products, google, and land on the pages. the pages do not look right to me yet. they have not figured it out. but do you worry they could be a challenger to you? >> absolutely. i think jack worries we'll be a challenger to him in china, and our pages don't look right in china either, but i can almost assure you that there will be a healthy and growing amazon alibaba and e bay market opportunity. >> your growth, market place business up 6% last year, great growth, but looking at the global e-commerce business, up 22%. matter if you have a smaller and smaller market share? >> it does matter: what i care
about is we're clear about oh segment, that wii number one in that segment, and that we run a disciplined business where we keep high levels of margin and profitability while growing the right amount. i care about that. i think the -- the overall number sometimes mask both our segment and our profitability. i think we can grow faster, and i'd like to grow faster. >> all right. great. thank you. >> thank you. >> thank you. >> appreciate it. >> good to see you. >> hope to see you in new york next time. where it's warmer, inside the glass studio. when we come back, protecting the cloud, how cyber security is protecting workday, joined by the company's ceo after the break, and, tomorrow on "squawk box," three u.s. cabinet members on set. jack lew, and secretary of state john kerry. first, though, as we head to break, look at oil this morning at this hour. "squawk box" returns live from
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is something to behold. dow futures down 278 points below fair value, even after all the losses we accumulated over the last two weeks, you can see the s&p futures down by 30, and nasdaq off by 67. oil prices, big culprit for this. look right now, see that oil prices are down another 2.5% below $28. >> okay. we are continuing coverage live here from davos, switzerland live on the site of the world economic forum. next guest is the ceo of workday, his cloud is a cloud based provider of software allowing companies to automate hr functions. it's one of the cool companies in the world. tell me this, are you competing today against oracle and your former company, which you sold, oracle? competing against sales force now to some agree? who is your competitive set? >> yeah, no, sales force is aed good partner. mark is a very good friend.
two main competitors are sap and oracle. that's been the case since starting the company and continues to be the case today. >> one of the big themes today here is the fourth industrial revolution, cloud computing, microsoft is going to allow people to use the cloud, and ngos to use the cloud, a billion dollars over three years. however, the cloud also raises privacy issues. we're here in europe, the e.u. had legal issues that changed your business and everyone's business as i imagine as to data is held. how did it affect you guys? >> the e.u. safe harbor act repealed. for us -- >> trying to keep people from the phrase, but that's okay. >> it's okay. for us, it was actually an opportunity. we happen to have two data centers in europe, and we have a large development staff in dublin, so for european customers, we committed to run all of their systems and only have european personnel be
around the data. >> right. >> it was very warmly received by both customers and prospects. >> we had a lot of guests on who is. very pessimistic about the global economy, and you are to some degree a bell weather, a technology company doing new things and continuing to grow. do you see, though, little pockets of softness? >> i don't. i would say with the caveat we don't have a lot of exposure to asia and little exposure to china, but europe is going gang busters for us and the u.s. is strong. >> neil, you're on intel's board, and, obviously, they had exposure to asia, and, really, just freaked the markets out a little bit when they said what they were seeing there. when you look at that experience, your experience as a venture capitalist, too, how do you add up all the information you have? >> well, i think it's in some cases i'm not a stock market expert, but i do think that at least to the private markets, the valuations were way ahead of themselves. people had forgotten about things like profitability and cash flow.
the public markets have been more sane, and, you know, this is clearly a global economic issue as opposed to a u.s. issue. our business is 95% u.s. and europe. we're just not seeing that impact. saw the impact of china on in l intel, no question about it. >> when you talk about private market out in the valley, and people talk about coming down, do you see is really come down yet? are people really marking stuff down? >> i'm not an active partner. >> right. >> but i still have quite a few friends in the venture business. absolutely. you don't read about it because people don't want to tell the stories, but there are down rounds, companies are having a hard time raising money. i think it's all healthy. it's better to get back to a rationale world in silicon valley to keep it moving forward. >> you are a publicly traded company, and there was an argument made until last year when the down rounds came where people said, oh, it's a much better life to be private?
that make sense in other friends say, actually, you need the discipline of the public market? >> i argue both ways. [ laughter ] i'd like to continue to take the long term view as we build out the bids, and my cofounder and i when he started workday ten years ago, we wanted a long term view to bring customer service back to the enterprise software industry, and that's at odds with what analystsment, but i think it brings not just a discipline. for us, it also brings viability. we compete against two giants in sap and oracle, frankly, dinosaurs at this point, but they've been around a long time and well-known in the public market, so workday being public, continuing to grow, having over $2 billion in cash, takes away customers' concerns that as a private company they might still have with us. >> how concerned should we be about security? you hold a lot of data. you hold data on how much?
lots of people make, what they sal raaries are, social securit. how do we think about this? >> it's the thing i worry about most and thing we invest in the most, security. workday is a data processor. we don't own the data. we don't look at the data. we don't touch the data. it comes through us. it's important we secure the data on behalf of the customers, to as we look at cloud vendors, there's a misnomer. we look at breaches. almost all breaches have been on-premise technology. the reason is much of the technology was built before the web and internet was not meant to be exposed on the internet. when mark started sales force and we started workday, we knew we would be exposed to threats, and we built security at the core, and that means all the true cloud vendors like amazon, google, sales force, and the others slapping on security is an afterthought.
>> okay. leaving the conversation there. thank you. >> thank you. >> great to see you. california, no coat, no anything. unbelievable. >> people think we're inside. >> people think there's glass or a green screen. >> maybe it's fanning and stuff. >> do you need cold medicine? >> seriously, i mean, i -- i have a case. [ laughter ] >> all right, tmi. moving on. >> things are fine now, just all depends. >> jim cramer is taking on goldman's results, the drop in oil, and much more, and then later this morning, don't miss our conversation with jpmorgan's ceo, jamie dimon, taking over "squawk on the street" at 10:30 eastern for a real show. as we head to break, check out the futures right now. we're the hottest young company around but if we want to keep the soda pop flowing we need fresh ideas! >>got it. we slow, we die. >>what about cashing out? no! i'm trying to build something here. >>how about using fedex ground for shipping?
>>i don't need some kid telling me how to run a business! i've been doing this for 4 long months. >>fedex ground can help us save money and deliver fast to our customers. not bad, kid. you remind me of a younger me. >>aiden! the dog is eating your retainer again. let's take a short 5-minute recess. fedex ground is faster to more locations than ups ground. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
as long as oil goes down, we'll go down. we may think that is wrong, but that doesn't matter. that's what gods of the futures are saying, that's what will happen. to try to see through that is wrong. it doesn't matter how good our bad the quarter is. it is only looking through the prism of major oil is bad, and major companies will default. europe does incredibly well, they don't even have oil there. >> you know, jim, i guess i knew this, but i had not thought of it. i was thinking we call this the negative wealth effect, i was talking about what happens when the fed goes the other way, you don't have assets marked up, maybe they come down. just the same way when people make money they feel better, the overall economy does better, i me mean, if it goes this way this could put a damper on the 2% we got.
the negative wealth effect of feeling less secure about your investments that can harm the overall economy. >> you have never been more right than what you just said. you guys have good relationships with the auto nations, the carmaxes, those stocks are signaling whatever you thought would happen in the auto cycle, it's over. the housing, when we get towards 1.4 million, we're not getting there. housing peaked. autos peaked. these are important. a lot of it is the wealth effect, the value of things are going down. i'm listening to you guys, i'm thinking where are those people who came on our air and said a rate hike would be good for the economy. where are they? where did they go? >> i'm still here. >> did they go to jellystone national park? >> i'm here. >> in davos. >> i'm here. >> where are they? i can't find them. i don't know where they went! >> maybe a year ago it should have been done.
then we would be at 2%, we can come down from two. we have go negative now. >> it's a soeshing time. i look at stocks like verizon and at&t, i say those are where to hide because they have is a good yield versus the ten-year. you're ged righdead right. the gloom. i have cfos calling me saying what i did do wrong? i say stop looking at your stock price. oil has go to 20 and then we can stop selling s&p's. >> that's a good point. we just had a guest, said things are great, we're doing great here. you look at the stock, it's 65 down from 95. >> yeah. it was a high multiple stock. >> down 33%. >> he called s&p and oracle dinosaurs. i think we'll have to go paleozoic and find out if they agree with that.
i'm going to "jurassic park" and finding out if he thinks that way. >> all right. i envy you. looks warm there. but it's beautiful here, jim. >> it's good. i wish i were there. >> a little chilly. >> i'm thinking about eli manning and peyton manning, and what would have happened if eli -- do we blame -- this is what ceos are saying, is it my fault? it's not your fault. it's the fault of the stop blaming yourself. >> chip kelly, never talked to you about that. >> thanks, jim. when we come back, our exclusive interview with jamie dimon, his strategy for the year ahead. he will join us live at 10:30 eastern time. you have to wait about an hour and a half. you don't want to miss it. stay tuned, "squawk box" returns in a minute.
the problem last year is that almost all assets went down in value. that can't go on too long without producing a depression. >> can the u.s. keep going with all that around it? that's what you see in the current markets, people worried that the impact of china, the impact of other emerging economies slowing down, that's going to back its way into the u.s. >> that rapid decline de-stabilizes people. it's happening so quickly. change that happens quickly gets investors very unnerved. >> as you can see, we had a great morning of newsmakers on "squawk box." if you think today was fun, check out tomorrow's lineup. we'll be joined by michaeg whit john kerry, jack lew and many, many more guests. a lot of market experts have
given us their take on what's happening. >> mostly negative. >> mostly negative. we're witnessing it. it's not by coincidence. people are shaking in the final market. you got a different outfit tomorrow? >> different outfits for every day. >> i do, too. will it be warmer? about the same. >> i think so. >> i don't know. >> that's a thing to watch for. >> we have go. everybody stick with us later, because we have jamie dimon at 10:30. >> stay with "squawk on the street," that starts right now. great stuff from davos. good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. pre-market under pressure as oil prices refuse to relent. heading lower. we look to open below august's flash crash low of 18.67.