tv Squawk on the Street CNBC February 3, 2016 9:00am-11:01am EST
i tried to tweet out something, and i thought it was going to the next person, no, it's going out to everybody in the world. >> i don't know how to do it. i don't do it. i just read stuff. >> it's been fabulous having you here today. thanks for inviting me. >> join us tomorrow. "squawk on the street" is next. good morning, welcome to "squawk on the street," i'm david faber along with kelly evans live from the new york stock exchange. jim cramer is at one market in san francisco, carl quintanilla has the day off. always well earned. in just moments from now, we'll have a live and a first on cnbc interview with marissa mayer, looking forward to speaking with her. let's look at futures. a few minutes before that interview. you can see we are set up for what appears to be a higher open
after a poor day, if you were at least long the equity markets yesterday. how is europe faring? we'll show you. >> not so well. >> no. though, off the lows and certainly not as bad as it was yesterday, of course much of the market action following the movement of oil and you can see that oil today is at least hanging in there a bit above 30 bucks, and the yield on the ten-year note which is stunning. >> plenty of people look at that oil and say it's moving higher, why was the ten-year down to 182 overnight, why was the nikkei down 3% and the yen stronger? some of the stresses have morphed a bit and a broader. >> as for those broader markets, of course, keeping a close eye on those.
kelly, futures, as you saw, up a bit. >> here's another thing to consider. rising to their highs this morning on comments by bill dudley. saying financial conditions have tightened considerably in the weeks since cfmc raised rates in december, monetary policymakers will have to take that into consideration. we had data from adp saying private sector payrolls up 205,000 last month, that was above consensus estimates. we have the ism services gauge at 10:00 a.m. and bill miller says the market is a gift right now. listen to what he said earlier. >> i think my mom must have dropped me on my head when i was six months old. i like lower prices. lower prices tell me i have higher future rates of return. when prices are high, it makes me nervous. when prices are low, i feel good about this.
>> he also said he likes twitter here. he said larry somers isn't going to be on instagram. >> this is something i talked about with twitter, how you can let all this revenue be on the table. they have a venture capital mindset. if we don't give the thing away, others will come in. fast mover is not working. they should be trying to monetize so they can buy other companies, try to become more relevant. there's very little growth in people who want to tweet. it's too hard. moments might be good. seems like a bust now. the revolving door continues there. i thought bill miller had a lot of other stocks that seemed to make a lot more sense than twitte twitter. >> what about the market more broadly, he's been whacked by this like everybody else. still, i like these low prices, it's a better buy. >> what's happened is if you go back to when this selloff began,
other than the spike last week with oil going to 34, it had do with bill dudley. bill dudley was sanguine, to used word many people are using, everything is great, we don't know what you're talking about. if you go back and look at the timeline of these people, we have people -- stanley fischer, he basically said wait a second, that wasn't necessarily the case. we had a lot of turmoil. if dudley reverses, you have the key guy who seemed to be most happy about the rate hike saying wait a second. >> dudley is a guy who was mentioning that the fed has a responsibility over the u.s. dollar, and people are realizing the dollar may be the way to transmit a global credit -- i don't want to use the word crunch, but it has that effect sometimes. >> a lot of people were taken
away by royal caribbean. one of about 15 stocks hitting all-time highs last year, give up the ghost on a mention of the dollar. people looking at these banks. deutsche bank is a good institution. you should not look at common stock, as david faber would tell you, it's the other side of the ledger that's almost as bad as i've seen in 2011. that's freaking people out. >> yes, it is. let's move on to yahoo! announcing last night they were explore strategic alternatives that will cut 15% of its work force. all of that while the company still proceeding with a plan to spin off its core business. and the strategic alternatives include looking at potential buyer force that core bs include looking at potential buyer force that core b for tha.
marissa mayer joins us to discuss all of that. nice to have you very early this morning, ms. mayer. thanks for joining us. >> good morning. thanks for having me. >> people could be forgiven for being confused given all the things i mentioned, you're pursuing a strategic plan somewhat different from the one in the past, proceeding ahead with the spain jinoff, and considering a strategic alternative. what is your focus? >> on the strategic plan that we laid out yesterday. how can we make yahoo! the very best that it can, that's the digital information guide we've always been, discovery and thinking through how can we inform, connect and entertain users. it's much of the same focus we've had in the past but even more concentrated into particular areas, mail, search,
tumblr as global platforms, news, sports, finance, lifestyle as verticals we will off ner particular geographic areas. and making yahoo! the best version of itself that we can for users will benefit shareholders the most. >> youy have been try doing that since you took over as ceo in 2012. you were quoted in the "wall street journal," i think you spoke to them last night, saying i probably understand now more of what the necessary steps and ingredients are and have a bit more realism in terms of how quickly they can be at companies as large as yahoo!. what does that mean? >> there's some very basic prerequisites that we needed to get in place when i got here. we weren't in mobile at all.
today we have 600 million monthly mobile users. we have gotten some precursors in place. i understand how long it's taken douse that and do it well, also how we can move forward and really propel ourselves from here we feel good about our man, are confident in that plan, but it makes sense to have a more reasoned perspective. and we're now coming from a position of strength, which is a better place to be operating from. >> why is it a position of strength you're coming from? >> because of what we achieved in mobile and relativity quickly. 600 million monthly mobile users, more than $1 billion in mobile advertising. we have our new forms of advertising, mobile, video, native and social.
totalling totals 1.6 revenues of gaap avenue last year. those did not exist with the company three, four years ago. when i arrived at yahoo! we had all of the lines of business in deline in terms of revenue. the only way to get a turnaround is to get revenue growing again, so we had to add new business lines that could grow quickly and become substantial to our $5 billion of revenue in a short period of time. we did that well. i would compare it to tectonic plate shifts, where the shifts -- the plate shift beneath your feet, the composition of our revenue, we stay at roughly the same elevation. that's the strategy on our turnaround, to hold revenues flat, understanding they may be flat to down, but work on establishing new lines of business that can carry the company forward.
i think we've done that well. >> one thing that is also been going down, ms. mayer, is ebita. i look back at your 2014 earnings call, management then said ebita levels were at a low point and you expect to see improvements in 2015. that didn't take place. the when you said that, 1.4 billion, '15, 1.4 billion, and now we're talking about expected ebita of 2016 of 700 million, 800 million. investors i've spoken to say that doesn't give me confidence that management will pursue a plan that will return some growth. >> we had planned in 2015 to see revenue grow, and we did not. that's one of the things that hurt ebita. as we look the into 2016 we felt it important to acknowledge that revenue would be down in 2016,
largely driven by the expiration of our tiplow with alibaba, and other headwinds. ebita will be down largely driven by revenue will be done. we wanted to spend time improving the profitability of our business. we have a plan that has our margin improving over the course of the year. >> my understanding is that mavens, which has been a key part of your growth orientation, the growth part of yahoo! grew 44% year over year in '15, but you're seeing a significant deceleration of that in '16? in part because of mobile search? >> that's right. we're seeing at some point when it becomes a large number, you're going to see some trailing off in terms of percentages of growth. that said, we do see growth here that we're proud of. we'll try to grow faster than that. a large part of our mobile
revenue is driven by mobile search, and our mobile search product is more mature than some of the other products in the mavens mix. >> why do you feel shareholders will have confidence in this new plan? >> i think when i look at the plan, i see a focused product portfolio. three core global platforms, mail, search, tumblr and four vertic verticals. on the advertising side it comes down to yahoo! gemini and bright rule. that's a much more concentrated sense of products that we can work to achieve excellence in. when like at the overall product suite that drives engagement and engagement drives our business. if we can build excellent products and continue to grow
engageme engagement, i'm confident we can also grow revenue and balance expenses. >> jam jam him cramer has a quer you, jim? >> i read everything this morning, i read every bit of research. i have to tell you, half the people say, you know what? this company, if you get the mavens going, it can have some leverage. i'm not sure if that will happen. half the people say core assets are for sale. maybe you're running an active process. i have never seen the journalists and analysts more split. is there a sale of core? is there a bid would take? are you running a process with an investment banker that will produce a result that may be billions of dollars for shareholders? >> the expiration of alternatlo
our board. the alibaba stake is the direct path we have to maximum valuation. there's a number of ways that can be achieved. the reverse spin is one of them. various strategic alternatives is another way of achieving that. that dovetails well n my view, with the strategic plan around mavens. the way we can maximize the whole sum of the parts is to achieve the alibaba stake and maximize the potential we see in the core assets. >> let me follow up on that. i think if you mentioned some of the parts, if you look at yahoo! finance, if you look at yahoo! sports, you had those as a company, they are worth more than zero. when you back out the parts that you are talking about, you get less than zero.
that's inconceivable to me. can you maybe explain the disconnect between those two divisions, just picking on those two, not going mavens, how they could be worth nothing to the marketplace when a lot of companies including verizon, microsoft would want those divisions in order to bulk up their entries in those cases. >> i can't pretend to understand some of the models different folks do in terms of discounts. we don't think they're worth zero. we think they're valuable properties, our users and advertisers think so, too. our goal is to show that value to the market and recognize your market. >> your expectation in terms of inquiries of interest in the core business, will you find a potential buyer who is willing to give you or present to the
board a significant premium to what yahoo!'s core business is worth? >> i can't speculate, as we stated yesterday, we won't be commenting on the exploration of strategic alternatives until and unless we reach an option that we agreed on. on the whole our focus here is to maximize the tremendous potential we see at yahoo!. a billion users a month. 600 million mobile monthly actives, building the best product suite we can with some terrific people and some terrific vertical spaces and assets overall in the business. >> well, we are out of time. appreciate you joining us this morning. marissa mayer, ceo of yao hugh, thank you. >> thanks. coming up, a lot more to get to. we're talking about chipotle, we're talking about gm and
market data, anything you can say in general from that discussion? >> i think shareholders don't have a great deal of patience for this company. i think 3 1/2 years in, that's the key question. when you are mari ririssa mayer presenting another idea and plan what are you met with by shareholder the in terms of their willingness to get behind you? she has confidence, but it's unclear to me, how many of her share holders share that. >> jim, she really didn't answer your question with regard to the sale. if anything, it sounds like she is saying the independent board put us up for sale. >> i think you can't do that. you either are for sale and your core assets are for sale orb they're not. there cannot be a splilt between a board who is a passive board and the ceo is who is not.
>> it's the other way around. it's going the other way. the board is leading the sale process. and unfortunately because we're getting a hard wrap from them we couldn't follow up with that. >> board can't. >> they are. >> would be a strange process, right? >> there's a reason that the chairman was quote in the press release, not the ceo. the board is leading the process. she said it. >> how unusual is that? you want everybody on the board. she said she's a member of the board. it's interesting. >> stick around. >> great interview, david. >> that was great stuff. >> we have more coming up. we will get to the earnings, we have an exclusive interview with irene rosenfeld. we are up less than 100 points
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worse than it does right now. futures are near the highs, with the dow up 111 points. we'll see how much comments from the new york fed president bill dudley may be playing into this as we keep an eye on how markets broadly are responding with oil up on the session. a lot of eniarnings, too. jim will give you the lowdown on chipotle next. . great job. (mandarin) ♪ cut it out. >>see you tomorrow. ♪
anything for people who want to own the stock. last quarter not good. these guys have more cash than they know what to do with. they're buying hundreds of millions of dollars of stock. they'll still open a lot of stores. five months from now we'll look back and say this is the safest place to eat at. i'm going back. this is, i think, within 10% of a bottom if not there. the justice department investigation, don't make too much of it. people get scared about a justice department investigation, they'll look back and say when did that end? chipotle, i'm saying this is roughly the end of the bottom. people will come back and stock will go higher. in the interim, chipotle will buy, i think a billion dollars worth of stock during this period. >> i think you said it all.
>> i'm going go there. >> you nerve stopped going there. >> will someone get me a burrito? this cleanse is making it so i only eat the lettuce. just the lettuce! >> enough with the cleanse. you're withering away. >> it's only lunch time now. >> all right. >> i have a neck down to size 31. the pants are horrible. wh you can never be too rich or too thin. >> we have to go. we have to get to the opening bell.
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you're watching "squawk on the street," the opening bell in about 40 seconds. we'll talk about stocks, but bonds still interesting. >> we have to talk ten-year, that's the gauge for knowing what kind of rally it is, is it a rally on central banks after bill dudley's comments. the spread from the ten-year to the two-year is the flattest,
and the treasury just said th that -- >> what does that mean? recession? what is that saying? classically, a slow down, then you get the adp jobs report, better than expected. so much will ride on the ism jobs number. >> that's in about 30 minutes from now. we do look like we'll have a bit of a rally in the open here. we'll see how the rest of the day goes. at the big board, boy scouts of america, greater new york council celebrating the organization's 106th anniversary. at the nasdaq, pacira pharmaceuticals. there you have it, yesterday was a poor day. oil is one of the key reasons why. jim, i keep trying to pay
attention to those dead men drilling, as i like to call them. i think we'll start to see action when it comes to the restructuring side of things, it's getting closer from everything i hear, but we may not be there completely. you have a very good feel on this overall marketplace, whether it's the commodity or most importantly the debt side of the balance seats. what are your thoughts? >> we're not going to take out enough capacity fast enough through these organizations to please the saudis. the saudis want to destroy the business. if they see a certain number of bankruptcies that cut production, you've not seen that, they will take their foot off the jugular of the american indust industry. if you see that decline, we're about $200,00 200,000 barrels d last year, then the saudis have
not done their work. they want to destroy the industry. we've seen more pumping in natural gas. so, we can think whatever we want. oil has to basically head lower just to be -- because we can't find a place to put it. it should decouple, but it's not decoupling. at 2:00 a.m., oil was up three cents. i said could be a good day. how ridiculous is this what we do for a living? trying to make sense of stupid linkage that does not exist. >> it does seem to exist in a lot of the algorithmic trading going on. those are quantitative strategies are doing well this year, the broader market has been down. what those linkages are, i can't tell you. that's why we're doing what we're doing, isn't it?
>> totally. you listen to gm, you know the numbers are up for the gas guzzlers, but none of that works. in 1987, when the market was out of sync with the economy, the futures guys were in charge. right now the oil futures guys are in charge. in the end that market will have a floor, but the floor will come when you read north dakota is no longer producing oil. that's what you need to see. when that happens, the north dakota wells are almost too expensive, then the saudis say let's take it up. they are saying right now futures not down as much as i think. the work from rbm is neutral, rusty brazil, there's oil everywhere. there's too many drops to drink
of light, sweet crude. >> by the way, this very issue seems to be morphing from the energy space to the banking sector. financials the worst performing sector of the year. european names getting whacked again. you mentioned earlier deutsche ba bank, what is happening with the final financials, does it depend on the yield curve? i think it's yield curve and etfs, the banks that have exposure to the oil companies are doing better than banks with no exposure. people will say i think it's the oil exposure, the banks, that's just lunacy. this market has to deal with one thing, no one is in it or than the fought chorutures traders. the individual stocks, it is
just anti-deluvean to talk about the companies. you have apple and facebook that will break out of the gravity of the futures. we are just trading red and black. double zero is the earnings of company, it doesn't come up much in the conversation. google stavrojan, you'll know what i'm talking about. >> to the point of the financials, to kelly's point, they continue to have poor performance. bank of america down another 1%. at what point do you say maybe there's some value, whether it's bank of america down 20%, citigroup down 22%, or jpmorgan down 14% since the year began.
>> my travel trust owns bank of america. that is dumb as wood. there's a scrubbed book value and nobody cares. if the federal reserve tomorrow said we will let bank of america buy all the stock it wants, bank of america would be at 18. michael corvat has built that tangible book value. unless the banks can defend themselves and let net interest market go up, they are sitting ducks. what was said when bank of boston was going under, right now it's like shooting fish in a barrel. >> you're taking me way back there. i like it. >> i have that. remember standard pacific, i had a checking account there. what the heck?
i had the checks. they're like rip-ups of the other horses that lost to american pharoh. i can remember all those days. my first beat was carrying banking in 1987. the japanese banks were dominant, sumitomo, mitsui, bank of japan. >> oh, my. glenn fed and cal fed they were selling one-third of book. book turned out to be questionable. what a gentleman i am. right now banks are irrelevant to the banking business. if you call jamie dimon and say buy back every share, or brian moynihan, he would say if the fed would let me do what i want to do it's additive every time i buy a share. bank of america is a target of the etfs which are going down. >> i wanted to look at yahoo!
down almost 3%. the company after the bell reporting earnings not particularly strong, also a new restructuring, cutting 15% of the work force. the board, maynard webb, the chairman, talking about they're looking at strategic alternatives. while they have gotten inquiries about potential purchase of the core business by a number of st companies and private equities, they will now engage. that will not be done by ms. mayer, but by the board and goldman sachs. you have that going on and the pursuit of the core business, which is where their moving, spinning that core business, dealing wi dealing with yahoo! japan, and the key is leaving behind the
alibaba stake, which will be considered an investment company. we asked marissa mayer earlier, given all that, where is her focus. >> my focus is on the strategic plan we laid out yesterday. how do we make yahoo! the very best version of itself that we can. that's focus on discovery, being t the digital and information guide we always have been, and how can we entertain our users. being the same as in the past but being more concentrated. making yahoo! the best for our users and advertisers will mahe our shareholders the best. >> that was her take. >> then there was a question about what does that mean, these
strategic alternatives, is the business for sale? it's the front page of the "wall street journal," they list four, five potential suitors, jim asked her point blank about it, and it feels like we still don't have an answer. >> what i have learned from people familiar with the situation, they will be engaging and see where a key value of the company lies, and where it trades on its own. they are talking about a run rate of 1 billion of ebita, they're talking six or seven times, you will want a number that exceeds that. there's a complexity doing a deal. there's a lot of different things that come along with figuring out how to separate out, if it's going to be sold.
by the way, tax not an issue. tax bases in that business are high. but they're trying to figure that out. that's not where she is focused. >> what happens, david f you're tim armstrong, lowell mcadam of verizon, you listen to that and you scall marissa mayer and you say i want two of the mavens, i want yahoo! sports, she says that's not up to me. if you're in the twidivision, h do you stay there? >> yeah. i don't believe they'll go down a road that involves splitting outdifferent parts of the business. if you want to buy yahoo!'s core business, you have to buy it all, and it has to be in excess of what their advisers are
telling them. where those conversations go is unclear. >> you studied these things over and over again. a company is either for sale or it's not. what i'm confused on is i listened and basically heard core is not for sale. where do the stories emanate which say core is for sale? >> you have a quote from the chairman in the press release saying we're going to consider it. i can tell you as well that the people they've hired are going to actually engage with what would have been the expression of interest that they've been registering and see if there's anything there. it is a weird process. i grant you that. if that's the case, the company should be -- stock should be bought, because clearly therefore the assets are worth something. cash will be coming in for core assets. it's one of the great
conundrums. if you look at the core business away from mavens, even sothen i like a wasting asset if it's on the market, it's worth considerably more than what it's selling for. this is a dichotomy most people can't get their heads around. >> that's a fair point, jim. let's get to the broader market and catch up with bob pisani here and see what else is moving. we have a lot moving. >> we do at 8:30 the adp report came out, better than expected. dudley coming out making dovish comments saying a rate hike would weigh on the fmoc. helps that oil is up. energy leading right now. some of the other sectors moving. consumer discretionary, technology. consumer discretionary just went negative. defensive names are lagging. big focus is on the european banks. the big names for the most part
on the down side. society generale, bnp paribas and deutsche bank, close to a 30% decline there for them. a lot of people have been wondering what's going on with european banks. i can highlight a few general concerns, just the general valuation issue. secondly, in the case of many banks, restructuring and litigation charges are continuing to weigh on them. a generic concern about slower european growth. and these bank s over there hav seen no trading at all being done, as was commented on yesterday, that weighs on them. and a broader concern that maybe the heart of the big drop we're seeing, that's book value issues. there are concerns out there about asset write-downs that might cause the book values to decline. some investors seem not to belief the book values now.
in the u.s., regional banks were on the up side, just turned negative. speaking of europe, high-end consumer not bad, lvmh had a 12% rise in fourth quarter, leather strong, champagne, cognac. that chart held up well. swatch didn't. this is why it's confusing. swatch did not report good numbers, that stock has had a tough time of it. i watched eaton, they beat good numbers, but aerospace strong, but reported weakness elsewhere around the world. this is a typical chart for the big global industrials. we have an ipo, but editas medicine did price last night, the price talk was 16 to 18, this is that bei gene technology, there are some
questions about patents, but this is the first ipo since the middle of december. bei gene is another one. >> i'm glad we timely got an ipo. it's been six weeks since we had one. frigid start to the year in the markets. thank you. let's head over to the bond pits and check in with rick santelli. rick? >> good morning, kelly. the first place to start is a lot of the action we've seen in treasuries of late correlates with what's going on in ekties and the value or appetite for risks. there's other variables. the bank of japan put a penalty rate of minus 10 basis points. the fallout has been dropping yields. an action that was canceled. i'm not sure precisely the reason, does it matter? auction canceled, close to zero
rates on ten-year jdbs there must have been certain details not thought through. that's what i want you the viewer to think about. what state of mind is the world -- look at the behavior of china and the behavior of the japanese, what they're trying to do claims of success and think about what i just pointsed out. let's look at the october 28th start of last year to this year. tens, everybody is talking about it. the comps are really yesterday. on the ten-year, yesterday's yield pushed this to a comp around february of 2015. let's look at bunds, two-day bunds, flirting with that 29 level two days in a row. one-year chart down to 4 basis points, around the neighborhood that the bunds had their lowest.
euro versus dollar, breaking through the top of that range, current currency short covering night cap the dollar. dollar/yen, this is switching it around. the dollar trying make a pass to the upside yesterday, but too many variables in japan may give ride to the short covering on the yen side. david, back to you. >> speaking of currency, coming up, the china effect, kyle bass will make his case for why he's shorting the yuan. he will join me live on "squawk on the street." e*trade is all about seizing opportunity. so i'm going to take this opportunity to go off script. so if i wanna go to jersey and check out shotsy tuccerelli's portfolio, what's it to you? or i'm a scottish mason whose assets are made of stone like me heart.
>> if you listened to lloyd blankfe blankfein, he said the markets to him look undervalued. jim, we are almost at half the point we we point -- 61 points higher, you heard lloyd blankfein, what are you thinking when you look at the action today? >> love lloyd, i think that longer term he could be right. we get an oil inventory number, if there's a continued build in oil, then the market goes down. maybe hard. there's very little volume. i don't see companies in there buying their own stock back. the market will continue to be irrational. lloyd is rationale. bill miller is rationale. they are not stuck with the screen in front of them. they're building long-term value. the discussion about goldman sachs and book value was almost
surre surreal. to get a december count is to prevum the tangible book value is wrong or they're hamstrung. >> all right, we'll keep an eye on it. the dow is up less than 50 points at the moment after yesterday's tough session. the transports up 6 points. up next, stop trading with jim. ♪ ♪ it was always just a hobby. something you did for fun.
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trading, trading in their pajamas taking down a great american company. companies should look at 3m and say we can control our destiny, not the future, not the chicago future pits. if they can't do that, i would like to see another ceo. >> what's coming up on "mad" tonight the. >> we have fitbit, we have intel, these guys are movers. we have sales force, 52-week low. p paypal, putting it in it the ranks with visa and mastercard. is that reasonable? frnlg>> what happened to gronk? i'm going to have gronk on, richard sherman, why? they love the show, too. >> enough bragging. enough bragging.
>> welcome back to "squawk on the street." we start with some important breaking news on ism services. rick santelli, take it away. >> well, we were expecting a number that was going to most likely be around the 55, 54 1/2. we ended up with 53.5. which is a 23-month low. you have to go back to february of 2014 to find a lower number. there was a revision last month from 55.3 to 55.8. but that doesn't matter at this point, especially from a sequential perspective. new orders deteriorated to 56.5 versus 58.9. employment moved down about four points from 356.3 to 52.1. of course we're all monitoring yields the dow now in negative territory. it's not where the ride takes
you, it's where you get on and off the roller coaster that counts. >> just to understand this, the big question for many people is whether these services, the bigger part of the economy, would begin to decelerate to better represent what's happening in manufacturing. whether the gap where close between the two series. that is what we're seeing, correct? >> yes. whenever you point out that 12% of the economy is represented by manufacturing in a reization maybe, the comeback is always the same, the bigger swath of the u.s. economy is the services sector. a 23-month low with regard to that metric is showing you that there are many times correlations where manufacturings into the slowdown first, doesn't always happen that way, and i'm not saying the service sect every is going into recession. when you have a 1.4 gdp as it currently stands for 2015, any
growth you lose, any momentum you lose is crucial. >> rick santelli, thank you very much. let's look at the markets, on the back of that data. dow now in negative territory. down about 18 points. s&p is negative, down 0.3. nasdaq down 0.6. this comes after yesterday's move, where stocks had the worst selloff in about two weeks, and the fact that crude oil is still green. the dollar is getting pounded. euro just went above 110. want to show you former drug executive, martin shkreli arriving earlier at the brooklyn federal courthouse. he's in court today this is his first appearance since criminal charges were unveiled december. he is represented by ben
brackman. we will bring you any headlines from court and from that hearing. we want to talk about the markets back in negative territory. let's bring in jeff rosenberg from blackrock. yes, the economic data is important. perhaps more important is what the market is telling us about what it sees for the economy. does it see recession? what message are you getting? >> the message from the bond market is increasing the odds of recession. with the data point, you just talked about, sort of in line with that view. the bond markets have been signaling this much since the end of the year, the whole month of january and continuing on here as we begin february. the message is clear, lower interest rates and pricing out expectations for fed fighttight is the message from the bond markets. >> stocks are still going negative, what do we need to see to see a bottom in stocks? oil? credit?
something else. >> we need to address what the overhang is, not just from oil but all the commodity related investments. that's one of the big features of what's going on in the credit markets. what you have in the credit market is a bifurcated credit market where default risks are centered around commodity related issuers. we need signs of stability so we can get stability into the broader credit markets. we're not seeing that at all. we're seeing it spread away from the commodity sensitive sectors into the broader market. that's clearly a tightening of financial conditions. that was a phrase bill dudley used this morning in a report saying financial market conditions have tightened since the fed moved. the strong dollar is having a significant impact. strong statements, but is it important to hear the federal reserve acknowledging it and admitting it? >> it is. that's driving bond market the
way it is. the difficulty is then what happens? if tightening spills over into actual recession, the question is what can the fed do about that? and at this point, with having delayed normalization for so long, the cupboard is a bit more bare when it comes to what kind of accommodation they could provide. we're so busy talking about normalization, we're on the precipice of turning that conversation from normalization to accommodation, but the market may lack the same confidence this go-around because we're starting at such low levels. >> you're coming from an asset class that may be the only one winsi winning on that pessimistic view. the fact that rates are so low, it's more a function of other central banks around the world driving their rates to veer o.
or less than zero, money flooding into the treasury market here, bidding those prices up. >> you bring up a good point that the global environment is a part of low interest rates, but the global environmentrecession. low global revels of interest rates is about low overall rates of growth and about the threat of global deflation or falling prices. so, yes, that's part of low interest rates, the change in those interest rates, the further movement towards lower interest rates is certainly around the change on expectations. >> what happens friday if we get a strong payrolls number that
pressures the fed to say we're there now on one of our key man dates. they might turn around and say why would we keep interest rates so cllow? let's continue the normalization so we don't stoke imbalances in the system. that is an argue. they may come up with. >> absolutely. we had strong labor markets. a continuation of that, going into friday the market expectation is clearly to see a sl slowdown in the headline payrolls number. when it comes to inflation, the market is concerned about wages, and acceleration in wages that part of the labor market picture would headline more than the payroll report that would push on. to the extent we continue to lack seeing wage inflation, i don't think we'll see the
pressure from the fed. >> one place we are seeing pressure is the financials, leading the s&p 500 lower this is becoming a global phenomenon and banks are taking the place of energy firms on bottom. >> depends on the specific banks. some have specific credit issues, some are a reflection of exposure to emerging markets. the broad macro picture around banks is that banks were expected to benefit as the fed normalizes interest rates. you're reducing thaving that we macro perspective on bank stocks. >> jeff, thank you. we covered a lot of ground there. jeff rosenberg from blackrock.
>> thank you. >> yahoo!'s ceo marissa mayer joined us earlier talking about new targets that she says will lead to eventual growth at a company that has not seen growth. i asked her what she may have learned over the last few years that will help her put in place the new strategic plan. >> were some basic prerequisites that we had to get in place when i got her. we weren't in mobile at all. today we have 600 mobile monthly users. more than $1 billion in mobile advertising. we have some of those precursors in place. we feel good about our plan,
we're confident in that plan. i do think it makes sense for us to have a more reasoned perspective in terms of how quickly we can move it. >> ms. mayer has been the ceo for 3 1/2 years, clearly admitting her anticipation of bringing significant change very quickly was not necessarily correct. >> nonetheless, isn't it in the interest of share holders she comes out and taksays we hear i a position of strength given it's a position they want to sell. >> yes. it's not been done often in the last couple of years, but it's a confusing situation for many share holders who are looking at a company that is trying to remake itself and continue on this -- well, this certainly choppy journey in doing that at the same time pursuing a spinoff of its core business and/or also
having its board actively engage with potential buyers of that core business as well. >> okay. chipotle is hit again on news that same-store sales for january are down 36%. plus an escalation in costs will wipe out profits for this quarter and it's now the source of a federal investigation about what the team knew about the restaurants. karen, you say the situation sun precedented. no concept has ever been so loved and so abandoned making previous scenarios irrelevant. if you believe that where does that leave shareholders? >> i this i a lot of shareholders hold out hope for this concept because it has been so loved this is unprecedented. though people were surprised by the trajectory going into 2017, before today's earnings you were buying the stock on what 2017
earnings would like like, and your expectations came down after last night's results. you have to see that adjustment, we're seeing that adjustment in the stock today, reflecting what 2017 will look like, but people hold out hope this company can return to the glory days. >> wells fargo moved it to an outperform rating on the stock because they say share price recoveries cl >> the issue is no concept has had comps down 36%. you definitely had situations, tack wo bell for example, sglooifrnlgts taco bell was done, and then recovered. there's never been a history of
what was happening to mcdonald's, but mcdonald's got out to a rally on smaller problems than this. >> the company's quote is 60% of their customers are less likely to come back. 63% of their customers know about the issue, and of those customers, 60% are likely to come back less. that's a big problem and a big hurdle to get over. the company is confident this will never happen again. that's a really big problem from a communication perspective, because if it happens again, you know, who knows what would happen. or worse, the federal national investigation turns up some nasties. we have to leave it there. thank you for your time. >> thank you. up next, kyle bass will join us live here at post nine. he, of course, is making a big bet against china and their ability to keep the yuan up. it is the center of many peoples arguments, one reason why the
me now. hi. >> hi. how are you? >> i'm doing all right. why are you devoting so much of your fund, as i understand it, to this one basic trade. >> well, i think when you study the imbalances globally, one thing that we see in the financial press and from wall street is we talk about the symptoms of what's going on. there's capital flight from china. china's currency is under pressure, but very few people have looked at what the cause of the problem is. i believe the cause of the problem is, number one, the real effective exchange rate since 2005 has appreciated, and they let their banking system grow 1,00 1,000%. >> put that in some perspective for me. it's just a number to many people. why is that of any great importance? >> well, so many people look at the nominal pile of money they
have, 3.3 trillion, we'll see another number on february 7th t will probably be down, but you look at that and you say they have $3 trillion they can do whatever they want. why it's relevant, it's 3 1/2 times of their gdp. they have not had a loss cycle. if they lose 3% -- s&p wrote a bank report on friday that said chinese banks special loans are 3% of assets. that's a trillion. we had a trillion of equity and 16 trillion in our banks, they have 34.5 trillion in their banks and 10 trillion gdp.
wi h we had one times, they have 3.5 times. >> you have to explain why this will result in them depleting their foreign exchange reserves. >> it's a multi variable equation. there's not a mute cal exclusive sglooifrnlgtsd sglooifrnlgts thy need $2.7 trillion just to operate their import/export reserves from payments, they'll hit that number in the next five months. those that think they can burn it to zero, they only have a few months ahead of them before they get into danger territory. when they lose money in the banks, they have to recap. they have to expand the balance sheet by trillions. >> why wouldn't the banks do what we do here, sell a lot of equity? there was t.a.r.p. but also many equity offerings that saved the system, including the stress
tests. >> throughout our financial crisis, 882 billion, what did the fed's balance sheet have to do to induce people to buy equity, taxpayers bought equity in citigroup. when you look at whole equation, 882 billion went in. we had a trillion, we had to recap our whole system. china will recap their system, and they will. they have to expand their balance sheet. >> the dollar got stronger not weakening. >> the imbalance is so large in china, no one is focused on the banking system. people start paying more attention to it. >> but you don't see a collapse of any kind then? >> no. >> you are devoting much of your fund to this trade, correct? >> correct. are you taking too much risk here? are you in a trade that seems to
be widely viewed as a popular one by many hedge funds? >> i love this question. you remember back during the global financial crisis, everybody said the subprime trade is getting crowded. wait a minute. there's 400 million in cash, 250 billion in synthetic, 40 billion short, where is the crowd? where is the crowd? 34.5 trillion long and a few billion short. that's crazy. >> you don't worry about that at all? >> no. >> fighting the chinese government can be a difficult thing. >> it's not fighting the government. >> these countries, we've seen it time and again -- we've talked about the european crisis. you believed the euro would not exist because of the balance sheet. >> over time. >> we sat here and talked about japan in the past. you launched a fund made a lot
of munn shorting the yen, but you also believed interest rates would skyrocket. that didn't happen. >> there were two aspects of japan. you knew they had to weaken their currency to try to achieve some sort of inflation target. they had to go to a massive qe program. that's what i'm saying, massive qe to recap their banks. what did that do to the yen? yen appreciated more than 50%. it went from high 70s to 125. is japan better off or worse off? arguably better off. the market will start thinking chinese devaluation of 10% is a pipe dream. when you look at the size of the imbalance, the size of their economy, it will go 30%, 40% yen, aye yuan. the growth of chinese banking assets, they grew at 50% of gdp
almost six years in a row. >> what gives you the confidence that they are not going to -- the lack of transparency in that country is well known. you have an incredibly controlling central government it seems you're fighting against something that has an awful lot of levers that can be pulled. >> you're mischaracterizing. i'm not fighting anything. >> you can't see it as a fight. you probably can't go to china anymore. >> that's okay with me. the fact there's such a hypersensitivity around the subject leads me to believe we're right there. if some fund manager in texas is saying your currency is overvalued, you shouldn't care if you run a 10 trillion economy with 34 trillion in the banks, and i have a billion. it should be so small, it's irrelevant. somehow it's really relevant. if 4% of the population in china took out their $50,000 limit, the 3.3 trillion is gone.
we lose ourselves in the large number. 3.3 trillion is a large number, 34 trillion is one of the worst in the world. >> what is your ability to find things that others miss. >> everyone i meet with opining on china, including here at cnbc and those who have dedicated china funds, they say it's a red herring, it's just companies playing the dollar trade, when they unwind, things will be fine. industrial production is as low as it was in the financial crisis and in the '90s. the migrant population had a net migration out of urban areas back to rural. that was 5.6 million people in 2015. that's the first time that happened in 30 years. the gdp print in the third quarter was the lowest in four years, 5.8% this is not an
aberration. this is not a speed bump. this is china's excess misallocation of capital coming home to roost. you can't grow your banking system 1,000 percent in ten years and not have a loss cycle. your currency continue stay strong when you go to rectify that imbalance. it's simple. it's simple macro economics, it's not a fight. >> are you risk adjusting this huge bed you're making for your fund? >> we can't talk about things like that on the air. my macro view is they'll have a significant de-val. we shouldn't own risk assets. we will have fits and starts, rallies like in 2008, but it shouldn't be bought until they rectify this imbalance. >> kyle, as always, appreciate you coming on. thank you. >> thank you. >> kyle bass. sara? >> all right. i enjoyed that. thank you. just want to show you what's happening intraday with the dow
at session lows. dow down about 90 points. banks getting hit hard. we turned lower. treasury yields lower. dollar is weaker after services showed some weakness in terms of momentum. still expanding but at the time of the hour we did see that slow down. when we come back, a look at the dow reversal. breaking news on crude oil inventories. see if crude can hold its gains. at ally bank, no branches equals great rates. it's a fact. kind of like bill splitting equals nitpicking. but i only had a salad.
welcome back to "squawk on the street," i'm jackie deangelis reporting from the nymex. the department of energy out with its weekly petroleum status report. a build in crude inventories, 7.8 million barrels. a build in gasoline of 5.9 million barrels. this beat out most estimates, and it turned prices negative and took us under $30 a barrel. we have to dig inside this report, what happened in cushing, and where we see production standing. after six straight weeks of increases in production, last week, we saw a tiny drop, but still at 9.2 million barrels per day. some of the reason we were up a bit earlier this morning, "wall street journal" headline from
the ecuadorian president saying an emergency special opec meeting was probably going to occur this month, but this number enough to wipe out all of those gains. crude oil trading at $30.10, now pushing positive again. sara eisen, back to you. let's get over to meg terrell with some news on the martin shkreli hearing. >> that's right. the shkreli appearance in court just ending. it was largely procedural, just setting dates. his new attorney saying given the complexity of the trial and the fact he just took over the case, they're waiving their right to a speedy trial. so the next court appearance will be made 3rd. the other interesting thing that happened, he's out on a $5 million bond. they were basically holding a lean on his e-trade account which they said had held $45 million in assets. the government saying that most of the stock in that e-trade account was of a very small
biotech stock that shkreli had bought into, became ceo of last year. because of everything that happened with shkreli, the stock of that company plummeting quite a bit. the government saying yesterday it was trading at $2.05. so he the value of that account has gone under $5 million. there's some discussion between the government and shkreli's counsel about whether any additional money will be needed for his bond. and the last thing is shkreli has been subpoenaed to appear in washington, d.c. tomorrow for a hearing on drug prices. his lawyers say we should hear more about that later today. >> thank you very much, the latest from brooklyn. straight ahead, yahoo! falling today. the stock down 40% over the last year. of course, on cnbc this morning, marissa mayer laying out her new plan. we'll look at the banks taking a hit today as well.
. good morning, i'm sue herera. the world health organization voicing concern today that the zika virus has been sexually transmitted here in the united states. it called for further investigation and also said european countries should start preparing now to protect their populations against the virus. rand paul has dropped out of
the republican presidential race. he said he will continue to carry the torch for limited government, criminal justice reform and a reasonable foreign policy. goldman sachs chairman and ceo lloyd blankfein was a guest on "squawk box" this morning and he said the u.s. outlook is getting better. >> things are improving, not at the trajectory people wanted. the sentiment is bad, the politics are bad, everybody hates everybody now, i think it's just adding to a general malaise. but it frankly, i think this negative sentiment is not necessarily justified. >> pga golfer sue ward cink sunk a 90-foot putt last night at a yellow jackets game. he won a $25,000 scholarship for a fifth year grad student. that's great. that's the news update this hour. let's go back downtown, david, over to you.
>> thank you very much. we had marissa mayer on the show this morning. a new plan to restructure the company which will result in losing 15% of its work force, and also, according to the company's chairman, maynard webb, will be reviewing strategic alternatives, namely engaging with potential buyers of the core business. those potential buyers have been at least making their interests known, but up until now yahoo! has been registering that information and not engaming with them in any way. that apparently is going to change. that according to people familiar with the situation. in a press release yesterday mr. webb saying they would, in fact, consider those alternatives. the main alternative is a spin of the core business which would
leave alibaba and the huge stake there, 15%, in an investment company under the 40 act. unclear what will happen with yahoo! japan. earlier when we suppose with ms. mayer, we talked about the fundamentals of the company and the fact that revenue growth had not been what she had originally planned. we had planned in 2015 to see revenue grow and we did not. that's one of the things that hurt ebita. as we looked into 2016 in our strategic plan, we felt it was very important for us to acknowledge revenue would be down in 2016, largely driven by the expiration of our tiplow with alibaba and other legacy head winds. ebita will also be down largely driven by the fact that revenues are down. we wanted to spend time improving the profitability of
our business. >> shares of yahoo! are taking it hard this morning. the strategic side of things was addressed by ms. mayer, though she is not clearly leading the charge on that front. >> the exploration of strategic alternatives is led by the board. i'm a member of the board, but something that would be led by the independent directors. but i would say overall we view these as very complimentary. everyone is aware of our large stake in alibaba. the separation of that alibaba stake is the most direct path we have to value maximumization. there's a number of ways that can be achieved. reverse spin is one of them. various strategic alternatives is another way. >> if the business is sold, it's not exactly clear who would be running it for whatever company that actually stepped up and bought it.
>> yahoo! is down, but so is the broader market. it's looking ugly with the dow down about 140 points. there is the intraday chart of the s&p 500, down 1.3%, after yesterday's drubbing, the worst for the s&p in two weeks. a lot of losers here are the banks, who are getting hit hard, the buying of treasuries, yields go further down. the ten-year note yield 181. over in europe, a lot of buying of the german bond. the two-year note yield goes further into negative territory. >> it was about financials, it was about financials overnight. the market continues to push out or push away the expectations that there will be interest rate rises. i think we're pricing them one rise during the course of the year. dudley's comments during the course of the day today, ahead
of the new york stead, suggesting that credit conditions are tightening, so less likely that we will raise interest rates. >> this is not a day when energy is leading the market down, the dow down 148 points. >> jpmorgan is the biggest weight on the dow. still ahead, an interview with the ceo of mondelez, irene rosenfeld. we'll be right back.
wells fargo, all down 3% to 4% as the ten-year yield on treasury notes falls to a one-year low. keep an eye on major european banks like barclays, deutsche bank, credit suisse. they are at or sitting near 52-week lows. the breaking news of this hour is that we had a deceleration of growth in this country. let's get over to rick santelli for more on a big market day. >> i get to my special guest, i want viewers and listeners to look or hear about the next chart. that's a two-year eurozone note. wanted to point that out. jay timmons, it's a pleasure, president of national
association of manufacturers. you're on a tour of the country, talking towards the state of manufacturing, what may be wrong with it, how future political administrations may help it. what i'm interested in is what exactly is wrong with manufacturing that needs help. >> look, we have challenges but also opportunities. right here in this country, we have public policies that need to be fixed, whether it's taxes, regulation, infrastructure, trade agreements, all those things can be fixed in washington, our next president and congress needs to get it done. >> above and beyond the domestic side of this, is there a global manufacturing impact? >> absolutely. economies are slowing down. we know that our challenge is when those headwinds become tailwinds, we need to be in a situation where we can attract investment and jobs to our shores here in the united states. >> what's important to me here, it's great to have you, manufacturing in my opinion is a
canary in the coal mine for the broader economy. >> absolutely. we just had a 23-month low in the service side. when i hear you talk about the issues in one, maybe that shot as detrimental or the global issues as detrimental to the service sector. if i want my washing machine fixed, it will be fixed no matter the exchange rate. if the macro view of what you're talking about is general weakness, that's going to affect the service sector. >> absolutely. we're in a global economy. what happens overseas matters to this country. 20, 30 years ago that would have been less so. it does matter today. >> when i think of different policies to get this jump started, i can't help but think we had a major ceo of one of the world's world class financial institutions, he said that traders need to stop micro managing what the fed does. do you think the markets are adequately reflecting the dire
notion of if manufacturing is in recession, 30%, 40% chance of the broader economy, are markets really in tune with this dynamic? >> access to capital is important. so, everything that the fed does impacts manufacturing investment in this country. you see central banks all across the world recognizing the slow down and the softness. we need to see how the fed reacts to it in this country. we have some fundamental issues to deal with. we need to deal with them today so we can make sure investment and jobs are ours in the future. >> jay, been a pleasure. thanks for visiting us at the cme group. sara, back to you. >> thank you very much. more on this market turnaround it was up 101, now negative. >> we are off the lows. >> the nasdaq hit the hardest, down 1.1%. we will talk about the ceo of
>> our own jane wells is live with broncos ceo. jane, take it away. >> joe, thanks for joining us. >> thanks for having me this morning. >> are you getting any sleep this week? >> absolutely. it's been a fun week. great to be here in the bay area. everybody's hospitality has been tremendous. looking forward to sunday. let's talk business. if the broncos win what does that do to the value of the team? can you raise ticket prices? >> you can. you could. i wouldn't say much to the bottom line because whatever happens on the revenue side expenses go up because players become more expensive. you want to keep the core of your team together and that's pricey when you have a lot of good players which we do but the perceived value and asset value, the success we had under john elway, our owner. five afc west championships in a row. two conference championships in the last five years and here we are in our second super bowl. people look at the asset value
and say that's a valuable -- that's a valuable team. >> is this peyton's last rodeo? >> he'll have to answer that. tremendous quarterback for us. i wish we had him for longer than four years so far. i've seen him around and he's taking it all in. he'll have to answer that for himself. >> took a pay cut this year. $4 million pay cut. of course he earned half of that back so far with bonuses. >> we're hoping he earns the next half back. >> if he does retire that frees up some money for you and this is a curveball. johnny manziel. you could get him on the cheap. would you ever consider him? >> john elway would answer that. i doubt he would. when certain players leave the pie only is -- remains the same in terms of dollar allocation with a salary cap system so we have some people coming up that
are free agents and we have to make some decisions. i'd like to keep everybody and pay everybody but the system doesn't allow for that necessarily when you have a salary cap. we'll see what john wants to do. he has been very good about putting a winning roster together and i expect that to tonight. >> my first super bowl i covered was broncos packers, super bowl xxxii. amazing game for john elway. what's been the most surprising thing watching an athlete transition to management? >> he rolled up his sleeves and went all in right from the beginning and that doesn't necessarily happen with ex-players that take over management roles but john was eager to do it. we offered him the opportunity to put his foot in the water an test it and see if he wanted to get involved. he said no, i want to jump in full force. he has done that. he has great business acumen. his father was a coach and great player and understands from the most important position on the
field, quarterback. so he brings a lot to the table. done a great job for us. >> i know how important it is to win this. how do you beat the panthers? >> well, the way it's going to happen is we're going to have to play the best we can. they have a great player. mvp player at quarterback. really good defense. great front seven. but we have been in every game this year and fought and scratched and clawed. a lot of resolve in this team. we believe in ourselves. we look forward to sunday. i don't know what the outcome will be but we'll show up and play well. i believe that. >> thanks for joining us. back to you. >> jane wells a woman that knows her football. thank you very much. sunday approaches. let's send it over and have a look at what's coming up on squawk alley. >> good morning. we're going to dig into yahoo! further. marissa mayer was on squawk on the street. we'll look at what she said. also the markets dropped suddenly especially the nasdaq down 1.5%.
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good morning, it's 8:00 a.m. at yahoo! headquaters in california. 11:00 a.m. here on wall street where we have a volatile session on our hands. squawk alley is live. ♪ with me as always. off and joining me this morning. former ceo of the daily mail in north carolina. a ton of volatility this morning. dovish comments by new york fed president bill dudly and weeker than expected economic data are