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tv   Squawk Box  CNBC  May 7, 2014 6:00am-9:01am EDT

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sullivan. joe is out today. our top story this morning, chinese e-commerce giant alibaba filing for an initial public offering in what could be one of the largest debuts in history. alibaba holding group which controls 80% of all online commerce in china could raise as much as $16 billion. that would top facebook's ipo back in 2012. the biggest winner in the ipo will be yahoo!. yahoo! bought a 40% stake in alibaba in 2005 for $1 billion. it currently holds a 22.6% stake. some are value be alibaba overall market capitalization as high as $150 billion. here are some of the eye-popping statistics that come with this company. 231 million annual active buyers. 8 million annual active sellers. 49 average orders per active buyer. 11.3 billion annual orders. 5 billion packages generated on china retail marketplaces, 3.6 million transactions a minute processing capability.
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190 plus countries where buyers are located. there is still no word on what the ticker will be or which exchange is getting the listing. the underwriters include swecre suisse, jpmorgan, deutsche bank, goldman sachs, morgan stanley and citigroup. as you heard at the top of the show, the major driving force behind the earnings for disney was the blockbuster hit "frozen." studio income quadrupled to $74 million. bob iger says the company is increasing the presence of the characters at their theme park. iger by the way will be appearing on "squawk on the street" later on this morning, 10:00 eastern time. disney shares marching higher once again. we'll speak with an analyst about those results and if disney is a good buy for your money in just a few moments. >> are you a "frozen" family?
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>> huge. >> elsa, hans, kristoff. >> he likes the snowman. >> olof. we should get a video of olof. >> we were at the pa, in february. it is amazing. if you ever went to epcot, the norway thing, they have all these characters there. it's been so popular that the theme parks themselves are paying for it, keeping the characters around. >> when i go to orlando i prefer to go to universal. >> that's where i'm headed in june. >> you'll love harry potter. >> i have to say, though, it's the rides at universal are spectacular. >> they have the new harry potter stuff coming out in june. >> i hadn't been on a roller coaster in 21 years when i went to universal last year. true story. i can't believe the technology improvements. i had a blast. i was -- at one point i yelled out yay, apparently, actually
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said yay! whenever i do something, my kid goes, daddy, yay. thanks. that's nice. we have a couple stocks to watch this morning. maybe some people will say yay about some things. whole foods taking a hit, second quarter earnings per share of 38 cents on $3.32 billion in revenue. both items missing expectations that company also cut its 2014 same-store earnings forecast. i want you to check out shares of gruppou groupon. they tally a first quarter earnings per share loss of 1 cent. how could you lose 1 cent on 7 $757.6 million in revenue? also, video gamemaker activision blizzard and electronic arts both moving higher. activision reported profits of
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19 cents on 772 million in revenue. both numbers blowing away estimates while electronic arts reports a profit of 48 cents on revenue of $914 million, which also topped expectations. is that a large part of the new xboxes and the new play stations that have come out? is that what's driving this video game activity? there was a lot of pentup demand, people were holding back on buying games. >> before the new consoles came out. >> are you a video game guy? >> i'm not, not anymore. i'm wondering if the games for the consoles are 49 bucks, 59 bucks. you can get ea apps for the ipad or android for 10 bucks. you wonder if the volume, throwaway games, play them for two months. >> activision, electronic arts, they make money on the ipad.
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that's not the big part of it. i did read it could be a function of the legalization of pot in colorado that -- >> are you serious? >> somebody said that. it was kind of funny. >> you're stretching that. >> those benefit the slower moving games, i would imagine, those real high-speed, sort of -- >> the driving games not so much. >> hey, dude, we're going 5 miles an hour, slow down. >> let's take a look at the broader markets this morning. yesterday we did see some weakness in the markets. people have been talking about how tuesday, the last seven tuesdays in a row it had been a winning streak for the s&p 500. that was not the case yesterday. the dow down by 129 points. we'll get a double dose of fed speak this week. fed chair janet yellen will be testifying today and tomorrow. before the senate budget committee, she'll be doing that. ahead of all that, after the declines yesterday, things are indicated a little bit higher for the dow and the s&p. dow futures up by 20 points
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above fair value, s&p up by 1.5. nasdaq indicated lower again, down by just over 4 points. take a look at the u.s. treasury. this is a big deal. the ten-year is yielding below 2.6% once again, right now, it's at 2.582%, this is about the lowest level we've seen in three months. a lot of concerns about what is doing this, why the ten-year is at those levels at this point. that has been driving just about every other market over the last couple of sessions. you'll see right now the dollar indicated slightly higher against the euro, which is trading at 139.21. yesterday the dollar index ended at sessions -- the session at the lowest level since october of 2012. take a look at oil prices this morning. you'll see they're slightly higher. wti up by 92 cents to just over $100 a barrel. at $100.42. gold prices are indicated -- they're trading up by $2.60. $1,311.10 an ounce.
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time now. ross westgate standing by in london. how are things looking today? >> you can see decliners outpacing advancers on the dow jones stock 600. the ftse was down 23 points about a third of 1%. the xetra dax, the cac current in france and germany, fairly flat. the ftse mib is currently down nearly a percent. fiat down heavily. yesterday, sergio marchionne laid out his five-year plan, concentrating on alpfa romeo an
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fiat. the firm's ceo, patrick kron saying we are open to some kind of deal with ge. but he's not that interested in the firm's rail signaling activity, speaking exclusively to cnbc, he also said that ge's other freight business was too niche and u.s. focus to bring any synergies. kron said ge hasn't brought in the last few days anything new to the table. >> i have the offer which is on the table. the board is studying it. it has established a committee of independent directors. again, if there are new elements in these proposals, should it be an alternative offer or precisions or improvements of existing ones? the board will consider. >> it's a short while ago,
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siemens up 1.6%. the ceo saying they may not be interested in making an offer for some of alstom's energy business either. now, we've been hearing from bank stocks as well today. hsbc, saw its first quarter profit drop by 20%. revenue down at its investment banking unit, the stock off about a percent this morning. said it continued to experience muted customer activity in the month of april. but it has cut operating costs by around 2% in the quarter. it's going to continue to close businesses. and socgen down 1.45% today. the french bank, it's booked a more than 500 million dollar write. the ukraine situation having an impact on socgen's earnings. ross westgate, thank you. disney reporting after the
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bell, easily beating second quarter earnings expectations. johning us right now is david bank, managing director at rbc capital markets and david, we've been talking about "frozen" this morning. obviously those numbers were a blowout. what can you tell us about the rest of the quarter? >> i think the quarter itself, the studio was the blow away. results at espn were solid. results at the parks were solid. results were solid across the board. what really stood out, you know, what we say to investors is, what you want to avoid in media is content risk. right? >> right. >> you don't want to take the risk, buy something, they have to do good con ten. what was staggering -- actually less and less as time goes on. these businesses are cable companies. they're cable channel companies, driven by affiliate fees. the studio is the one part of the content risk. what stood out was just the pipeline for the next several years. you know, you've got "star wars"
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coming. you've got the next avengers, age of altron, captain america all of a sudden is a franchise. the quarter itself was outstanding in almost every respect. it was the outlook for that pipeline that was crazy good. >> two things that i've read in just sort of the synopsis of their quarter that concerns investors. number one, valuation, stocks 22.5 times trailing earnings. it's averaged over ten years. also, you mentioned espn. good results but they'll probably have to pay up continually for sports rights. can you address those concerns? >> the first is on paying up for the sports rights, again, what are you worried about? you'd be worried about a mismatch between what you have to pay and what you're going to earn. this is a business with a tremendous amount of visibility where you've locked in those affiliate fees. you know where you're going to get paid for the next five to ten years. >> you know what you're going to spend? >> and you know what you're going to spend. we have decent visibility into the operating leverage and the
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business that as the mlb steps up, as the nfl steps up, so do the affiliate fees. the question is more on the advertising side to a lesser extent but there's good visibility. i think on the valuation question, given it's historical valuation -- >> it's high right now. >> i will say that right now we're probably at the point in the capex cycle for this company where we tend to look at earnings but on a free cash flow basis, their free cash flow growth should accelerate because they're just sat the point where they're starting to spend less money on a lot of these projects that are starting to pay off. i think your point is a good one. the valuation is -- >> what's your target for the stock? >> we're 90 bucks, 91 bucks, i think this morning. >> this is so much excitement about "frozen." >> it's going to broadway. >> nine of the ten best selling items at the disney stores last quarter related to this princess
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musical. it's still the best-selling album in the u.s. this is all great news but we're talking about in terms of chasing content. does that concern you at all? >> it would if we were chasing "frozen." i think you'd be dead on on a bare thesis. "star wars" hasn't even -- i mean, "star wars." that's just in the back pocket, "star wars." that could be one of the biggest pieces of the disney franchise. >> right. >> so i think -- i think the multiple being stretched, right, is probably the biggest concern but the reality is, diversified global general portfolio managers will pay that multiple for the certainty to play in this space. >> you think it's a gain of 12% over the next 12 months? >> that's right. >> when you think about this frozen franchise, do you think the numbers could double and triple over the next several years? because most of these kids,
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yesterday, i'm with five 3 1/2-year-olds and everybody turns themselves into elsa, kristoff and hans. everywhere be it's an all day, every day thing. >> any one movie wouldn't get me that excited, even if it were a fantastic franchise. the reality is, "frozen" skews more female. on the marvel side they skew more male. i look at the earnings power of the studio overall. recent bottom, this was a studio that could earn $600 million in ebit, maybe four years ago. that number could be 1.2 billion, a swing of double the earnings power because of all these different pieces of the portfolio. "frozen" is an incredible franchise that came out of nowhere. what's most interesting to me is the disney studio hadn't been lighting it up. it was a pixar movie, a marvel movie. now, you know, wow, they're
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making good movies at disney again. i think that "frozen" goes a long way to saying the disney label itself is pretty powerful. >> i think there could be a "frozen 2." kristoff never really gets married at the end to -- >> spoiler. >> to elsa, right? >> that is true. >> i think there's an opportunity. >> a week and a half ago i interviewed bob iger in l.a. >> did you talk about that potential? >> he's not going to say, you know what, brian, you asked me so i'm not going to tell you. he talked about the viability of the franchise. >> he said it's one of the top franchises. >> not elsa. i think it's anna. >> i have not seen the movie. >> you can spin something out of the "frozen" universe in all seriousness. there are ways to -- they highlighted the maker studios acquisition. which not really making any
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money right now. that could be a billion dollar acquisition in an entirely new space for disney. >> you know what we never talk about, ever, is the online presence. every other company, what are they doing online? i asked iger about that. he hadn't seen the article. it apparently came out an hour before -- my producer yelled in my ear, buzz feed, 1 billion. we didn't get anywhere on that. do you think that was true and if was, do we care? >> they bought maker. it was a billion dollar acquisition for a youtube channel universe. and when i asked on the call last night, you do everything so well. you're arguably the best content creator on the planet, what do you need to buy anything for? they said what this -- there are two compliments, the first is short-form video. the world is moving toward short
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form on tablets. most interesting to me was the data and the algorithms. disney, they're thinking about the algorithms and viewership on youtube. that was forward-thinking of management. >> very quickly, they're wrapping us up on this, is this your favorite stock in the area or is there another one you like better? >> truthfully, i think we like another one better. cbs, our top bet. >> thank you, david. >> they should merge, a new show "how i met my maker." >> you should be the head of a studio. >> yeah, right. >> thank you. target, the interim ceo says he's not interested in taking the top job. that story coming up in the
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"executive edge." i am the interim ceo and i'm not doing anything more. that's a tease. tesla will be another stock to watch. that company will roll out quarterly results after the bell. we'll want to see what mr. musk says about his numbers. "squawk box" back in just a moment. before we couldn't really allow the consumer to customize their preferred chocolate. we needed the scalable cloud solution allowing them to see all 800 products and select what they are looking for. now there is endless opportunity to indulge.
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topping today's executive edge, target interim ceo john
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mulligan says he is not interested in becoming the company's permanent chief executive. he made those comments in an interview with reuters the day after the board announced the departure of gregg steinhafel. mulligan also said that investigators have determined that the data theft was limited to what company officials had already disclosed. some 40 million payment card numbers and other data from about 70 million customers. the company had previously warned the probe might reveal the breach was more extensive than understood at the time. >> what do you think is going on here? he knows he's not the guy and he's just saying i'm not the guy. >> that would be my guess. the board has been fairly clear, you're our cfo, we need you to step in and take this over for a time but they have actively hired a head hunting consulting team. >> now why do you think they wouldn't have tried to keep him around longer while they were
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trying to find another ceo? >> that i'm not sure about. normally if you know there's going to be a move, you come up with a plan rather than come up with an interim situation. >> remember the ceo of jcpenney, who was supposed to be the interim ceo -- >> michael hunt. >> he was supposed to be interim, he turned into the permane permanent. >> this is a different time for target to be looking outside and trying to find somebody to bring in. >> right. >> the company has a lot on its hands. the data breach pushed customer traffic down by 5.5% last year. the big deal is the move into canada. they overpaid for it. it's been a tricky transition. over a billion dollars. >> if you're a shareholder, should you be furious with the board because of the prices at the company, the larger issue, i
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think a board has one responsibility in life, actually have a successor ready to go. if you don't have a successor, you kind of failed at your job. >> you've been doing this a long time. does something smell funny here? you don't just can a ceo like that without a full successorship and plan. this is a multibillion dollar corporation. they probably said, listen, man, you screwed up with the data breach, fix it. six months later all of a sudden without warning, he's out. >> you're speculating that there's something else -- >> i'll say this. whenever a ceo is blamed for a company's problems and that ceo is canned or steps down, the stock tends to react positively, right? okay. he's gone or she's gone. but the stock tonights to drop. >> because there wasn't a backup plan. it's really weird to see somebody stepping aside when you don't have a plan for what you're doing next. >> i tell you, this guy mulligan, he needs to take one. you have to change your comment. no third base coach is like, actually i don't want to manage.
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i'm just happy waving runners home from the corner hoop here. if somebody says do you want the top job? he says, yes, i do. if you don't get it, you don't get it. >> if it's not on offer, you can't walk around saying you never want it. >> i think becky's right, that he was told that. you also have to put your hand up, by the way, any other retailers looking for a ceo? >> i'll take the other side of that argument. you could scare somebody off. if i was a ceo somewhere else or thought i'd be hired for this job and i knew there was an interim guy desperate for the job and he had an inside track because he knew all these people and i didn't -- >> you potentially want him staying around. >> that would throw me for a loop. i'm not sure i would put my hand up so quick. >> we've all been there. you have the best looking girl in the school. somebody says why don't you ask her out.
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you know she's going to say no. you don't say i don't want to go out with her because you're too embarrassed to ask her and get rejected. i guess that's what you're saying. >> i'm not sure target is the best looking girl at the school. >> i think being the ceo of any corporation that size wouldn't be too bad of a gig. i'll run a company into the ground for a lot less than that. >> what i do think it's odd that they'll have steinhafel step down without having a backup plan in place. >> it doesn't quite pass the full smell test. >> this is a situation where -- this is different for target. they've not looked outside ever before. >> you have the music on this show when they want you to shut up. you need the big hook like they used to have in vaudeville. when we come back, we'll put the markets front and center. getting to know alibaba. if you haven't heard about the chinese e-commerce giant yet you will soon. a live report from beijing in the next half hour. and tapping into the cloud. ceo of endurance international
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welcome back to "squawk box," right here on cnbc. i'm andrew ross sorkin along with becky quick this morning. brian sullivan is here. joe has the day off. but he will be back tomorrow. we have headlines this morning. the big one being that alibaba has filed for what could be the largest technology ipo in history. the chinese e-commerce site could potentially raise more than $16 billion which would top the amount that facebook raised back in 2012. yahoo! will be getting a huge chunk of the proceeds. it currently owns a 22.6% stake in alibaba. we have much more on that filing in just a couple minutes. it's going to be the story, i think, for the next, i don't know, you may get sick of the story by the time it's over. catching up with some of this morning's earnings report, humana reported $2.35 per share, beating estimates of 1.94. it raised its forecast for membership growth in its medicare and individual commercial insurance lines. also, a multibillion dollar energy industry deal announced
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just this morning as well. canadian natural gas producer encana is buying assets in the the eagle shale basin. this may be his last appearance on cnbc after his esteemed career. we loved having you on for so many years. fred, good to see you. i hope this is not the last time but if it is, you've had a hell of a career. >> we've been a "squawk box" faithful watcher and participate and the for a long time. >> from the west coast. >> from the west coast. i was recently in china. i had a lot of comments from a lot of orientals that were watching you at 9:00 at night, including my wife and myself. >> knowing you were coming on, fred, we've interviewed over the
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years as well. we could treat you well, we could pound you into the ground. i decided to go with the previous one. you are going out on an optimistic tone, you're still bullish on stocks, think they could run higher for the next couple of years. why? >> we have the economy at this point, picking up speed and momentum. the fed is our friend. i go back an say we have eight huge economic drivers that don't get a lot of attention. let's just start with water, food, cybertechnology, energy technology. massive things going on in the midwest that has really lifted the country at this point and spilling out into a lot of jobs. we have health care technologies that are huge, infrastructure. our dna in this country is what we're seeing coming through on the ipos and the mergers. little companies will be big companies. i think we can get excited about that. that has a long way to go if we have the right climate.
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particularly a favorable regulatory climate. >> so jeremy, do you share that optimistic view? because there's so many people out there, both pundits, bloggers, a few high profile ones. you probably know who they are, who have doubted this market for so many years and they've been wrong. >> one correction. it's not affinity advisers. there's been a change. >> i made up affinity. i'm going to start changing my company names. my apologies. >> no problem. >> they've been trying to parallel park in tight space of expectations. geopolitical risk, there could be a mistake made by the fed. we have large global macro risks overhanging the market. it is a yin and yang right now.
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i'm not sure it drives stocks forward, absent much better cyclical data. >> so many very smart people have been so wrong about calling for the fed-led implosion. >> well, i think that is a parlor game, right? i think it continues for a very long time. but when you do have a change in leadership at the fed, when you do have a rates environment that is something completely out of a science experiment, we could see some volatility going forward and certainly just after chair yellen's last snafu which was the six-month comment, we have seen the front end of the rates curve, certainly hiccup, if not burp. i think that continues to be a risk. >> fred, do you worry about that? there is some time to go before we get through this, the market could get thrown off guard. what do you think? >> i think there are a few storm clouds on the horizon, fed action and expectations are one of them. we're keeping our eye on what's
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going on in eastern europe. the russian incursion to crimea, whether they're going to move into odessa, into those eastern cities in a more visible way is going to be on the minds of investors. every market has its storm clouds, at the same time, its long-term fundamentals that drive expectations and at this point in time, as we look at a whole variety of indicators, yes, there are two or three that are bothering us. merger activity skyrocketed at this point. that says we have a market that's bubbling up with expectations. if you have a bad ipo somewhere along the way or a merger that's a big surprise, that maybe doesn't work out quite so well, that can dampen the enthusiasm. it really is the fed that drives things. we'll be watching to see what dr. yellen has to say in her testimony today and tomorrow to congress. >> all right, jeremy, i'll end on a negative note, per your note at blackheath companies, try to get the name right, historical ten-year average on earnings, companies beat on the
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revenue side. it's hard to mess with the top line unless you're stuffing the channel. we've seen 52% of companies beat on revenue, 6% less than the ten-year average. worrisome? >> it is worrisome. this earnings season is all about guidance going forward. i think we're seeing that weaker than we'd like. i'm not sure that translates into a weaker stock market over the course of the year because, remember, the one thing the consensus is sure on is we'll have better u.s. growth in h2. >> we like it. jeremy, thank you. >> fred, thank you. >> we hope to see you again. congratulations on what has been a spectacular career. >> thank you very much. >> bring us some voodoo doughnuts from portland. >> we'll think about that. >> the cough syrup. when we come back, alibaba 101. the chinese e-commerce site filing to go public on wall street. what's made alibaba so successful? we head to beijing for some answers. "squawk box" will be right back.
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welcome back to "squawk box," everybody. we've been watching the u.s. equity futures this morning. after a down day yesterday for the mark hes you'll see that at least for the s&p 500 and the dow, the futures are indicated slightly higher. dow futures up by 21 points above fair value. nasdaq down by close to 4 points. chinese e-commerce giant alibaba filing for what could be one of the largest ipos in
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history. eunice yoon joins from us beijing with more on this big story. eunice, hello, great to see you. >> hey, it's great to see you, too. yes, it's a huge, huge company. alibaba is like amazon, ebay, paypal, groupon all wrapped into one. it has massive reach, $248 billion, it's like a quarter trillion dollars worth of goods that moves across its site. one of sites that's most popular is a shopping site called taobao. joe lee is a self-described addict of china's online shopping site taobao. >> reporter: joe lee is a self-described addict of china's
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online shopping site tao bow. he's purchasing furniture, his guitar and today, food for his cats. >> i can use it to access shopping anytime i want from laptop mobile. >> reporter: taobao is a national obsession in china. in a country where consumers still mainly save, when they do shop, many logon and browse here. on taobao, which means search for treasures, you can buy an outfit, try it on and hand it right back to the delivery man to have it returned. you can also buy something worth pennies and have it delivered right to your door. millions of these packages are shipped out across the country. >> it's nothing impossible on taobao. so it's easy to find some stuff, pretty hard to get from your local supermarket or local shoppers. >> reporter: today lee's cat food is coming from a warehouse across town in beijing. this retailer, one of taobao's 7 million used to have a proper pet food store but switched to sales online. "we have more customers with our online shop. they're all over china, not just
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limited to beijing," he says. "it's good for business." lee got his cat food in less than a day. after paying through alipay, alibaba's version of ebay's paypal. the payment system is one of china's most trusted, though buyers and sellers say they hope alibaba builds faith in its sites even further by cracking down on the sale of fakes. even so, lee is using taobao for all his needs, well, almost. >> never buy on taobao, relationship. >> and alibaba is hugely profitable. the company, unlike amazon, doesn't have to worry about stocking inventory. it makes most of its money off of transactions. it has very little expenses. but it's also a secretive company. that's the problem investors have had, people are wary about it because the structure hasn't
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allowed them to feel more comfortable that they're getting enough information flow from the managers. >> eunice, it seems like that would change with an ipo in the u.s. there would be disclosure they'd have to step up to, right? >> well, yes, they would but one of the things that was interesting about this whole ipo, a lot of people thought alibaba was going to list in hong kong but they started to face some regulatory issues there where the regulators wouldn't allow them to keep the partnership structure that they were hoping to have, where you would see the founders of the company retain full control. now they're going to new york. any have this f-1 listing and people are saying now maybe they'll be able to retain the structure that they want. that raises a lot of questions for investors. will investors and shareholders get the innunes thfluence they want with this company as they see the company grow and grow. >> eunice, by the way, do you
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use any of these sites yourself? >> yes. all of our -- everybody in this office uses taobao. in fact, when i was telling that story about the dresses, the reason why i know that, one of the producers had -- i walked in and i saw a producer trying on multiple dresses. i said what are you doing? she said i'm just trying on all these dresses and then afterwards if i don't like them, i'm going to return them on taobao. it's amazing the kind of service you get for taobao. you would be able to do so many things here with the site that you wouldn't be able to do in the united states. >> all right. eunice, thank you very much. eunice yoon in beijing. we'll be talking with her again soon. great to see you. there's a lot of debate about alibaba. we should have that debate on the set in the next hour. in the meantime, "forbes" calls him one of the most powerful ceos under 40 years old. he's from endurance international. he sees a vast market of small
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businesses in need of online help. we'll talk to him when we return. i always say be the man with the plan but with less energy, moodiness, and a low sex drive, i had to do something. i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer, worsening prostate symptoms, decreased sperm count, ankle, feet or body swelling, enlarged or painful breasts,
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welcome back to "squawk box." worldwide spending on cloud-base services could see $100 billion by 2017. they're growing five times the rate of the industry overall. your next guest is looking to harness some of that growth by offering it to small and midsize
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businesses. he's the founder and ceo of endurance international. we found out during the commercial break you are from your own -- >> similar hometown in virginia. >> winchester, virginia, which is just shocking because nobody is from is from winchester, virginia except for us, patsy kline and the company treks. the only publicly traded company there. >> let's talk about in terms of what you are doing for the viewers that don't foe what you particularly, we talk about the cloud, but there is sort of many flavors of what's going on, what exactly is it that you do? >> what we provide, first of all, medium size businesses a solution set that lets them get online, websites, e-mail, domanes, marketing tools to get started on the web once they start engaging with us over 250i8, they buy more products, service itself, more solutions to help them grow their
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businesses on. so probably go daddy would be our biggest competitor. they're a private company and is a public company good out there as well. >> is it your own cloud or are you living off amazons? >> we built this. i started this 17 years ago, there was no real cloud back then i guess. so we built it from the ground up. we leveraged external technologies, for the most part, it's a proprietary bill. >> to theic tent you are in the business sector, where do you see the right now? >> we see a lot of adoption and move from internal services to outsource i.t. service itself and a lot more small businesses say, well, if i have to go higher than and it it person, keep a staff in-house, it's not worth it. there is so much stuff just off the shelf. we see a lot moving towards the cloud. a lot of them looking out as technology solutions saying this
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is ubiquetous and take the headache away. >> what do you think of security issues as well? >> at the end of the day, this is not the definition of what the cloud has morphed into is more recent. but people have been using outsourced i.t. services and contact services for a long period of time. if it's well architected, it will put it together the right way, i don't think they have to worry about that. we don't get that quite as much in the u.s. european customers in asia, that's a lot of questions people ask, how do you think about security? >> in the u.s. nobody cares? >> they care about it. they're more used to it. they're accustomed it's okay to go get some tech following and data services from a third party and as long as it's a reputable company. >> does your stuff ever get hacked? >> we have not to date. >> have you been attacked? >> every day. >> every day you are attacked? >> every day. >> how many people do you have? >> probably at this point about 25, 30, 35 people across
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enterprise, but, you know, denial of service attacks trying to get into, get credit card number, people kind of get whatever data you've got out there. it happens pretty frequently where people are attempting that. >> see if i was a security systems guy, we keep getting attacked, boss, you need to keep me on another couple years. is that devious? >> yes. >> move on. >> so shocked from winchester, great to see a local guy made good. this is fantastic. one thing about cloud is pricing. what we heard is it's becoming not i i'm not going to say come commoditized. margins are coming down. >> the race to zero they're calling it now is over time. >> they're offering free like
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lots of free storage online. >> i think typical revenue is about 14 bucks a month. $14.18. at the end of the day, some portions of the solutions stuff is commoditized. the price of the server goes down, people charge less and less to customers. but the supports a peck i think we find is a huge element for small businesses where they say, hey, look, i don't know what a lot of this stuff s. it's kind of ease to use. >> do they call you up and say i have problems? >> we have 24/7, 2500 agents across the u.s. picking up the phone. we fend about a million calls a month. >> if i'm a small business and i use google apps for example to run my business, google business. they charge $4 in the month? >> they start a little in subscription. there are pieces available for free. then if you want to pick up the phone and call goggle. it's a hard proposition. if you want to call somebody in
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an ad advisor capacity, we probably spend tens of millions of dollars for google. it took us a long time to find a rep that would work with us. your small business spending $4 bucks. >> that's what you offer differently is the 24 hour hours? >> it's ease of use of solutions much more catered towards marketing and helping businesses grow it's a little different. >> thank you for coming in. >> fantastic. >> great to see you. >> when we come back, we will talk deal making, the economy and a much different read on the nation's employment picture. plus, much more on the ali baba ipo filing that has wall street buzzing. and aol quarterly results. tim armstrong will talk to us ab the quarterly numbers. "squawk box" will be right back. .
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what is this place? where are we? this is where we bring together reliably fast internet and the best in entertainment. we call it the x1 entertainment operating system. it looks like the future! we must have encountered a temporal vortex. further analytics are necessary. beam us up. ♪ that's my phone. hey. [ female announcer ] the x1 entertainment operating system. only from xfinity. tv and internet together like never before.
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ali baba is going public. filing the paper to bring the ipo to the marks. should investors believe the hype? >> aolent to turn in its quarterly report card. tim armstrong will talk to us first on cnbc. disney's profits are fueled by "frozen." ♪ let it go ♪ let it go ♪ i am one with the wind and sky ♪ >> medium tech analyst rich greenfield will give us his review. second hour of "squawk box" begins right now. [ music playing ] ♪ whistle when you work
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♪ ♪. >> all right. we all whistle to work here. good morning, everybody, welcome back to "squawk box" here on cn cnbc our guest host is jay jordan, chairman of the jordan company we have a lot to talk about with him. it's great to have you here today. >> thank you, becky. it's good to be back. a quick look at the futures. the dow futures and s&p futures are indicated slightly higher dow is up 30 points, s&p close to three points. nasdaq is down fractionally. the ten year note will be the key, though. watch tack yield yesterday, bouncing around 2.6%. that was driving all the markets, it is a lower yield. we do have the fed talking. >> that will give people things to talk about too. disney shares could give the dow a boost by the animated hit
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"frozen." disney earned $1.11 per share. revenue beat analysts forecasts. we'll have much more on disney later in the hour. >> that stock is up by about 1%. shares of the top two video makers. electronic arts beat estimates with their latest earnings, helped not by the success of their games, but by better tan expected sales of the videogame consols. not such a bullish morning for whole foods. it posted second fiscal profit of 38 cents per share. whole foods cutting its full year forecast. whole foods is having a tougher time against grow competition. that stock is down by more than 16% this morning. >> the big story of the morning the day, of the next month or two. chinese ecommerce giant ali baba jones us now with more to help
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drill down some details. >> andrew, i think it will be the biggest story. when they filed this prospectus last night, it showed how many corners the chinese commerce touches. it touches the sale or purchase of $238 billion if goods, processed $519 in payments. amazon and pay pal combined. ali baba cob takens, microblogging, money market funds. ref few grew 62% at the end of 2013 and the 15-year-old marketplace says the fair value of its shares could reach $50 this month. that would give the company a valuation of $116 billion at a premium for rapid growth rate. analysts believe it's worth $152 billion. yahoo stands the gain the most, even though it's the sec largest shareholder because it is
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contracttually required to telesell at least a third of its current stake, purchased a billion dollar stake in 2005 for 40% of the company. it's been selling that down slightly over the past couple years. but it could see a windfall of over $13 billion according to people i'm talking to. details about the actual offering were scant. dithey did 2409 list a ticker. it did name six underwriters with credit suisse and morroccan stanley an citigroup working on this deal. it has been a long time coming. it won't pay a big fee because of how competitive the process list selects them. it notably is the prestige of working on a deal leak this, notably the largest on a keenese company if not the largest tech ipo in the u.s. markets ever. >> so here's my one question for you. go imp the profits that this company has and the profit mar
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jen on a relative basis to amazon which has as we all know a profit margin of next to nothing, why is this thing not going to be worth, you know, three times that? >> well, i think the question, andrew is, with the margins, depending on what estimate 1445 and 60%, that's huge especially whencoming to amazon, people will scratch their heads and say why isn't ali baba worth more, they will say how profit it is given how thin the margins are, how long they have gotten away with that. when you look at actually how much in transactions ali baba is processing, it's at least two times of what amazon is doing and it owns all these other businesses. so i think people will be questioning amazon's valuation more than ali baba's at this point. >> it's interesting, this issue about taxes and the fact that
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they don't pay that much at the moment. it's technically based in the cayman islands. they don't pay a huge number in china. what is that about and what could that look like? >> i don't know what that is about. people have been asking, why is this company that owns 80% of the ecommerce market based in the cayman islands? one is we have been talking a lot about potentially how much visits ali baba does if counterfeit goods. they take pains in the prospectus to talk about efforts under way to stem some of that activity. they say they have a name and shame policy, where if you are caught selling counterfeit goorksdz they'll call you out for it. they try to crack down on this. people are a little bit skeptical about how successful some of those efforts could be. there are some issues about what it means to be a company based if cone. they have 16 risk factors that they risk, where they talk about doing bes in chosen, if they weaken the currency. if they raise tacks, do all
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these types of economic policy, then that could hurt ali baba's business. a lot of stuff to chew through here. >> thanks. let's bring in our guest host today jay jordan, the chairman and managing partner at private equity firm jordan company. when you hear water happening with this in particular, ipo, what do you think about it? >> the marks are so ro bust, even in the private sector, liquidity globally. it's a little scary to me. i tend to be a bit of a bear right now, thing are going too well. you' at the banking sector if financing the private equity firms are doing the same thing they did in the mid-2000s. this is coming to light, we're starting to see that again. i'm thinking, don't these folks ever learn? you can make an architect for a
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bubble building in the markets again, it won't be as difficult the markets are leveraged. >> you may be right. meaning, where are we in the game, right? that's always the problem. >> too bad they settle to the firp, which went through a chapter and verse of what i thought was going to happen. unfortunately, it was like a year or 14 months early. but it happened. i don't know, i had this uneasy feeling. >> you have a memo right now? >> in my head, i am. i haven't articulated as well as i probably should have. but the things are very, very good and across the globe, even though china has its issues and the emerging mark itself are having some trouble because of what the fed is doing, the liquidity is still there. you look at corporeal liquidity, a trillion-and-a-half dollars of cash. you will see a lot of corporate americaners. i think the public corporate mergers are up about 20% year
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over year in the first quarter, of '13 and first quarter of '14. so our activity is quite robust. we're seeing a lot of the transactions. prices are still pretty high, but there is plenty of liquidity in the banking sectors. >> that's what i was going to ask, you are still doing deals, even though you worry prices are getting high. >> we don't tend to use a lot of leverage, we over equitize leverage. some are up six an seven times, that's scary. >> i was going to say your initial comment was things are too good, i'm getting nervous. >> that's always the case. >> when do you become positive when things are so negative? you are truly a countercyclical human being? >> emotionally i am. i went through five cycles, '74
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and '75, which is rough. we have the cycles. so you tend to anticipate these things. ever since we went off the gold medal standard in the early '70s, we've had a cycle of some magnitude about every six to seven, eight years. so what has it been since 2008, 29, we are closing in on the fifth, sixth year. >> jay, you want company valuations to be down, right? you will get a better bargain longer term, if your friend, a nephew, a family member came and said, hey, should i buy u.s. stocks? what would you say? you buy companies. >> i went flat about six months ago on u.s. stocks. i was nervous globally. >> what do you mean flat? >> sold all them, my portfolio stocks. yes, we are in the private sector. >> i don't call that flat. i call that effectively negative. >> okay. negative. i missed a big upturn.
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i reinvested in the businesses. our corporate sector, if you look back at the sfie crises since world war ii globally, it's the safest sector in an allocation model to put your money, not necessarily in stocks, but in private companies, stocks you have the market rick. you have not a lot of market risc. will is a huge market risk. >> private equity took a beating within they had to deal with the last crisis with the last crash. you couldn't roll them back out to the public. if are you worried they are getting potentially into tubl bubble territory. does that mean you are trying to cash out with the companies you had? >> now irrespective of my views, now is the great time to sell, regardless of what i think and one of the problems is it's all about leverage. it's not about businesses. it's about leverage because you
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have good or even sometimes great businesses that have terrible crall structures. that's what happened in 2008 everybody was overleveraged. we don't play that game necessarily. we are more value add. we aren't over leveraged. that's why we were able get to the next cycle without serious hiccups. i can feel it coming on. i think it will happen overnight. we all remember in '87 an even. >> water the trigger if. >> nobody know, really. i think a lot has to do with the financial oppression we are operating under now, where the interferes manipulates the price of anything on currencys. right now, it's interest rates. when voelker did it in 1981, he did it it for good reason. he drove asset prices down and interest rates up. two things happened when you have a financial oppression. there is huge misallocation of capital and a huge mispricing of assets. so when voelker did it to break
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the back of inflation, he drove asset prices down when he pulled it off. we had a 30 year bull market in bonds. bernanything in has driven up asset prices an driven down interest rates. so i don't know what's financial to happen when ahave to unwind this fed balance sheet. nobody has the experience of a $3.5 trillion balance sheet. i don't think anybody knows. you see it start to happen in the emerging markets. they even talk about tapering, money flows out, their gdp gets hit. their currencys gets hit. their trade deficits. so. >> and they complain rather loudly. jay, we will continue this conversation. jay will be with us the rest of the morning. we will get much more including his view of the job market. >> aol rolling out more. we will talk about what's ahead for armstrong an later, median
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tech analyst rich green feel will give us his breakdown for disney, "squawk box" is the happiest place on earth appetizing we're coming back with the rest of this very happy how far in just a moment. .
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♪ what is this place? where are we? this is where we bring together reliably fast internet and the best in entertainment. we call it the x1 entertainment operating system. it looks like the future! we must have encountered a temporal vortex. further analytics are necessary. beam us up. ♪ that's my phone. hey. [ female announcer ] the x1 entertainment operating system. only from xfinity. tv and internet together like never before. >> right. welcome back. here on the east coast, let's check shares of mongolese
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international, beating estimates by 4 vents, quarterly profits or 39 cents per share. it announced it will combine its coffee business with master blernsd. they get a 49% interest in the new company. they announced a $3.5 restructureing program it says will save about $1 billion annually by 2018. aol out with first quarter earnings. they earned 48 cents per share, 11 cents below estimates. revenue came in above street consensus. a number of one-time factors were significant. joining us from new york is tim armstrong the chairman and ceo of aol. tim, it's good to see you. let's talk about these numbers, run them down for us. the expectation was a little higher. so what happened? >> expectations aside. we had a bunch of one-time charges that happened in the quarter, but the bigger trend
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line, andrew, that's important is fifth consecutive growth quarter for revenue for profits and consumer, it's the seventh quarter in a row. it's the 11th quarter in a row of advertising growth. it grew at 16%. so for our long-term strategy, we are on track and continueing executing the charges we took this quarter related to businesses we were writing off that we had invested in overall, we are happy with the quarter, aol has consistently grown. we are continuing to consistently grow. i think we are on track for 2014. >> over your left shoulder, the right side of the screen for those of us watching, there is a company you bought for nearly $100 million what is that about? >> we are in the process of just like the car industry moving from horses to automobiles, we're moving from non-mechanized worlds to a mechanized worlds in advertising. the first phase of the internet
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has been about recognizeing marking basically on the last click basis the last add you saw is what gets distributed to the value t. advertiseing, the future of the internet will be something call exposure to conversion, which is taking into account all the advertising you saw leading up to conversion. we think convertrol has the best company recognize how you put exposures out in the world. how that leads to conversion. i would mark told as a real big day for the future of measuring advertising to the about the content, the internet is at a point it will turn into measurement everywhere. aol is lead tack charge. >> one big competitor is yahoo. given the steak it has in ali baba, how closely are you watching that? >> i mean, marissa will be our
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tech krunp. in new york city, we have a couple thousand people coming. so i think the world that we live in and that yahoo lives in, goggle lives in, amazon lives in, it is becoming more and more important. ily the ali baba ppo puts a spotlight, a lot of things as easy as ecommerce is to do online, a lot of our other industries will get converted to an ecommerce type policity model. i think clearly, we are one of the leaders in the because it shows the potential of how big these marks are. >> by the way, tim, brian sullivan, that intervow will be 2:30 eastern time. will you hear from michaelerington an melissa myers. how has that deal worked out for you? do they ultimately pay off?
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>> i think we have been very fortunate to really get a tremendous game changing talent with our acquisitions. as you notice, most of the talent has stayed with us. ent entrepreneurs we bought into this company we have empowered, our corporate entity has to be the real dirt that flowers grow out of. we have a number of flowers growing, tech clun crunch is an asset. crunch base has been an incredible asset if you are into the private marketplace, probably the most important asset in that marketplace, you covered tech funds yesterday. you see what's happening. it's not just business, it's also the cultural hub. >> tim, i want to get you on two issues, online video. you hear about yahoo trying to
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step it up, bogey samberg, spending a million dollars an episode. do you think that that model can work given the advertising climate? and is it something you think you will be getting into? >> we are top three both in video views and ads overall. we were tear earliest investor in video in the syndicated market. our video strategy. >> you are not spending on original programing yet? >> we have 16 shows. we launched four renewables. we sold out more shows in our up front. before the up front started tan we sold all of last 84. so we are investoring content. we have scripps, discovery, we have adapt tv which is the best product in the video marketplace on the consumer side, it's gone from four to five hours, headed to six video. we have our announcement with
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nielsen measuring online video and tv video the same. so the wall just came down between tv and internet video. we're in a very strong position and we were early in this market three years ago as investors is there weigh in on this, net neutrality and in particular the time cable transaction. are you a supporter, somebody like reed hasteings who may come out at some point. and say are you not happy about this? where are you? >> we are long-term bullish on both the investments going into content, which are sizable investments going into drift bulgs, really the u.s. government's role of what they've proven overtime to keep access opened for people. so we believe that ob access and high band width pipes with lots of grey content, there is an ecosystem there. it's not about one set of assets or companies on that neutrality or not. all the investments have to be taken into account. so if it were up to us, we love
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net neutrality. with rea big video investor, is remember. are you a band of consolidation or not? >> i'm a finance of making sure the right companies have models that are profitable and allow distribution to grow. this country has a lot of room to grow in terms of the infrastructure to speed up the networks. so i would say that's up for the government to decide. but worry big fans of net neutrality. >> struggling to pin you down, we appreciate it. we hope to see you again very soon. >> topping, andrew. coming up, former state department official will give us his threat assessment over the ukraine. will it be another bullish summer for the markets? jeremy siegel gives us his forecast at 8:00 a.m. eastern time. i have a feeling i know what he might say. stick around.
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. when we return, should investors believe the hype surrounding ali baba? an ipo watcher will give us
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early review. vice chairman takes on the crisis in ukraine, sanctions and using financial weapons against pos cow. "squawk box" will be right back.
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honestly, the off-season isn't really off for me. i've got a lot to do. that's why i got my surface. it's great for watching game film and drawing up plays. it's got onenote, so i can stay on top of my to-do list, which has been absolutely absurd since the big game. with skype, it's just really easy to stay in touch with the kids i work with. alright, russell you are good to go! alright, fellas. alright, russ. back to work!
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what is this place? where are we? this is where we bring together reliably fast internet and the best in entertainment. we call it the x1 entertainment operating system. it looks like the future! we must have encountered a temporal vortex. further analytics are necessary. beam us up. ♪ that's my phone. hey. [ female announcer ] the x1 entertainment operating system. only from xfinity. tv and internet together like never before.
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welcome back, everybody, good morning. mortgage applications rising 5.3% last week. that rebounded from december of 2000. they say applications for new home purchases an refis rose. groupon posted a first quarter loss, two penneys smaller than analysts expected. the company also boosted, yes, groupon boosted its four-year outlook. meantime, trip adviser reported a first quarter profit of 54 cents per share. one penney below forecast. they were 9% above the year earlier. it generated more referrals to
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booking sites. >> always use trip adviser. i love trip adviser. do you use it? >> you do? >> i won't go to a hotel without going to trip adviser bmpl if i don't comment myself. >> it's family taking photos. you got kid, can you take a photo an post it. rather than the professional photos of the lobby and how spotless it looks, you get there. there is a lizard walking across the floor. >> i like lizards. >> they're delicious. tensions remain high in ukraine between proactivists in the military, joining us is bob hor s.a. vath and with all those titles the interview is all over him we have for the time him bob, welcome, everybody that i spoke with on air an off the record on background at the milkin conference an recently believe to a person that violence will escalate in ukraine either between the west and russia or between russia and ukraine,
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specifically because putin and this is their opinion, putin knows president obama's powerless because he can not risk the democrats losing the mid-terms by starting at conflict or the 2016 presidential election. would you agree with some of that, none of that, all of that? >> i would put nit a different context. >> that is the situation when you crane, itself, seals to be spinning out of control. i think you've got partisans on both sides, loyalists to the kiev government, pro-russian forces in the east and the south. they're now in a situation where there is more and more violence killings, this burnling of people in the trade unions building a couple days ago. all these things are getting worse. it may well be beyond the control of either side to stop a brewing civil war or at least a lot of violence within that country. >> listen, obviously, i was if sochi for the olympics, guys. that was before this really heated up. but there was something that
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struck me as odd. i couldn't figure out how to read it. it was raining one day and as i was leaving my home lobby, the woman i was working at the desk, i saw her every day. i said, good morning, how are you doing? i said something like bad weather. she looks around me, maybe mr. putin can make it stop raining. i thought it was sarcasm. i am looking back, how do they feel about him? >> he is very popular. one has to remember most russians consider ukraine if not a part of russia a very, very close traditional friend of russia and for a period of time a part of the soviet union. kiev was really the first roos. there is very close connections, they feel it almost a part of tear country. so for thechg, this is popular, particularly crimea and other
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parts of the you crane where other russians live. >> ferdz, you don't think it's enough? >> i don't think he necessarily feels he has to send troops in there. i think what is happening, russian partisans in ukraine, not just in odessa now, we are seeing it in the northeastern cities are beginning to take over and the problem is the ukrainian forces are not strong enough to evict them. there is very little prospect, if any, that nato troops will move in there regardless of. we will put this in an american context. s very hard to image american troops or nato troops moving into ukraine anyway, the russians have preponderance of force there. not just the russian army, also pro-russians in parts of you crane. already some geopolitical situations. violence may have gotten too far out of control.
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russia doesn't want the strategying border of the west to be on the eastern border of ukraine 300 miles from moscow. the west certainly doesn't want the strategyic border of russia's influence to be on the polish-ukraine border. so somewhere in the middle there has to be some arrangement worked out involving the american russians in you kra into try to figure some solution out. it may be no one can control it now. it's very, very dangerous and could get a lot worse. the economy is deteriorateing as this occurs. it will have an impact on the might havery pro li proliferrie ukraine. >> i don't know where it ranks in terms of the top ten. it's right there. obviously, we have a destabilizeing influence on the capital markets and the investment markets and
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particularly our business, the oil business. the banking systems would not shut down but certainly take -- >> the russian bank is dependent on the interaction with the market as you know. russia is the sixth biggest country in the world, it's big largely because the energy sector is important. it's very significant. >> we have a lot of experience in russia. we built the largest cable tv network in russia federation. we dan in 1977 and sold out in 2006 to control the kane. so we understand a little about what goes on in russia and it's very, very corrupt. >> can you truly play out what you think is the real downside to the market? rate now, everyone says the market is jittery, we've gone sideways, what have you. but it's unclear to me, is there a lot more to go? what happens in the truly worst case scenario?
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and therefore from your perspective, you are a bear on everything right now. itrying to understand where this goes. >> it damages the russian economy. >> and handicap that for a second. >> it's hard to handicap. it's growing. the ukrainians can't control the violence. i'm not sure the russians can control their pro russian forces. in the end they probably can. the problem is russia is fairly dependent, they have a lot of reserves. but they could bore rea lot of money. >> there is another way of thinking i heard specifically from guggenheim partners, if the conflict heats up, the u.s. though we may not be involved, could be forced to remilitarize adding to gdp and boosting our equity marks because we have forced to re-inrest in this new
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slash old greater let? >> i think first of all it will take a long time for the u.s. to up its defense budget. >> it's a multithought. >> i think nato, the u.s. being the largest supporter of the nato in terms of troops and in terms of money, is probably going to have to make a stronger show of force all along that area, in the battleics and elsewhere and certainly in poland and demonstrate to all these countries that american forces are there to back them up. if there is a threat to nato countries. the danger with the nato countries is that the russians i don't think will move in. the danger is pro-russian forces in some of these cases could cause a lot of instability. i think nato demonstrateing its resolve is going to be extremely important. >> andrew, you asked early on, what can trip the seven, this is
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one on the list that can trip an immediate problem. >> this could. this is certainly, we have to demonstrate through trade negotiation, support for nato, a whole lot more support for uniform t. europeans think the tapering has not just been at the fed, theically the there has been a tapering on the american focus for quite some time. they want that to continue. they, themself, particularly in the energy area the european, themself, some have opted out of nuclear, others have opted out of frackings, they, themselves, have to make important changes, particularly because the lever the russians have over them is energy. the other thing we have to do, we shouldn't go around villifying putin. this is a much more strategic issue, which will ultimately require some degree of cooperation with him. >> bob. thank you. we present it very much. coming up, a magical report on the mouse house. find out if disney can deep
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investors and visitors coming through the gates. "squawk box" will be right back.
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. >> they say disney is the happiest place on earth. at least for shear olders this morning. >> they are trying to drive him draez. >> i love this song. >>t this is the greatest. >> you destroy me with this music. >> come on. >> we can do "it's a small world." look at olav. >> obesity epidemic. all my favorites t. theme park company that is dis fithey're earning 15 cents above estimates. thanks to the animated "frozen." you can tell i'm a fan at this table. becky is, too, brian clearly not. with us to break down the numbers is rich greenfield, we will make him sing "let it go" before this segment is over. >> it is awfully cold in here i must say. >> you and olav can hang out together then.
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help us to understand that's going on here, specifically this issue. the valuation of this company now has gone through the roof and i just wander whether they can keep it up, given how successful "frozen" has been, but whether that looks like a one off. >> i think you really have to look at the earnings power of disney, this is a stock that we looked at this stock a year ago and got excited by the content cycle. we thought as you move into fiscal september 2015 to the they had the ability to earn up warfronts of $5,000. we said given that power of all the content, it could get closer to $5. i think ba you are seeing is disney is at the point they are on the upswing of content. that's what's driving this stock. when you look back across the media universe, the real power of content has been a key driver of success. i this i what is unique about "frozen," i think what you had
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playing, the sopping, is a really important indicator. if you think back over animated movies, mot just from disney, also from dreamworks, also from fox, also from nbc universal, what was the last time everybody was walking around sinking the songs, wearing the outfits? there is something about this much larger than a single movie. i think that answers your question of, is this a one up? no, this is an entire franchise for disney that's going to last for a long time but also manifest itself in many other business lines. this is not just having a one off hit in the film entertainment line which people don't pay for. >> what kind of target do you put on this company? >> it was at $64-ish dollars, it's closing in on $85. i think a year has passed. the earnings trajectory is getting better. >> hey, i hear what you are saying. i am sure the movie is great. it's one movie.
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this is a $45 billion revenue xaevenl it's trading out more than 22 times earnings, about five points hire than the ten point average. how much does this matter to a stock that has already had a heck of a run? >> well the life blood of this company is it's an mated franchise. that's what it pipes through the tv networks. think about the disney can em and em its global foot present. think of the stores, nine of the top ten items sold at the disney store was "frozen" merchandise, try to have your kids, try to find for one of your kids a "frozen" do. it's essentially tough to find. for disney, when they get an animated blockbuster, you think back years ago to "lion king," "little mermaid." they haven't had it in a time. >> the question becomes, how much replicatable is this. the business is espn.
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>> cable is $3.16 billion almost twice as much as the studio. why are we talking so much about "frozen?" >> i think you are looking alt this happening for the first first time in a long time, to marvel lukas and marvel, the ability to have content to fuel all of the non-espn parts. espn is a solid business investors feel comfortable at. we feel comfortable about the growth profile and lack of exposure. people are kiping content, including why we are watching right now. the reality is espn has something different if live sports content you have to see live. >> that makes it unique t. question is the rest of disney doesn't have the content to drive the theme parks, the disney can el to drive all of the other assets. that's why this is such an important data point is they haven't had something this big if a very long time.
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looking fore, they have "finding dori," the "avengeers" sequel and "star wars." a year ago, we weren't forecasting "frozen" to be anything. now you have added if "frozen," that's where the big opportunity is. >> why have you not rayed your target then? >> hay, rich, quickly, on espn. we know what the driver is. have you fox sports1, cbs made more of a national push. is there any sign these other networks are eat nook espn's model? >> there are $65 billion of advertiseing spent on sight, sound, motion advertising on television sports is probably 15, maybe 20 billion of that $65 billion. maybe not even. i think the reality is the crest
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of what are you doing at nbc. what fox is theing is fox sports1 makes tons of sense. the real risk is to the broadcast networks. that's how the ad dollars shift away from places where consumers are not watching advertising to sports which is, you know, you need to watch live. you want to watch live. we know you are going to watch the advertiseing. i think the reality is, these are great tupts for everyone that's doing these sports networks. the funny thing is, the real risk investors need to be thinking about is the general entertainment networks, how does abc get hurt by this? >> we got to let it go here. mr. greenfield, we appreciature time this morning. we just wanted to play the song. thank you. can you make sure to stay tuned. >> anything elsa to talk about? >> ha ha. "squawkon the street," mr. faber has an exclusive interview
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coming up on "squawk on the street" street later today. we are coming right back, tow, if just a moment. let it go. [ music playing ] . you on your toes. you wouldn't have it any other way. but your erectile dysfunction - .
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. welcome back. ali baba, we are still in the commercial break, not really, which is going to be seeing the largest chinese firm list in new york t. question now, though is how much will the ecommerce
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giant start trading? here to talk about it is kathleen smith, principal at renaissance capital. you looked through the prospectus last night. we didn't get a real sense of water going on, remarkable profitable company afternoon interesting point earlier, i said does this mean amazon is worthlet less or more? she thinks that amazon is going to move down as a result of all of this, given the margin that ali baba has. what do you make of that? >> well, i'm not sure i would look at it that way. it's not profit margin here. i think you have to look at the two earnings. ali baba's earnings are about $3.5 billion. amazon's earnings are less than a billion. so we're talking about a larger company when it comes to earnings. i think ultimately for investors, earnings matter. whether amazon is a --
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>> it's crazy, you have to put in a crazy multiple on ali baba if you were to put it on a relative basis to amazon. >> on earnings, we would think that ali baba's earnings could be capitalized something like in 2015, we looked at it and said if the company is growing maybe 35 to 40% it could be a 15 billion in revenue company. if their net margin for ali baba is about 40%, we could have $6 billion in earnings. if you capitalize that, it may be 25 tiles, with i is far less than any high growth -- face book for example is at 35 times. you get 150 billion in market value for ali baba. that makes some sense to us. given the earnings, not the margin per se but the earnings. >> let me ask you a different question. i may get in trouble for this. should there be a cone discount
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on the company, meaning, do you believe the numbers the company is based in the cayman islands, there has been questions for years about chinese companies and the accounting. i may get in trouble for this question, is there any sense when i look at a prospectus like this, do you look at it any differently than a prospectus for an american company even though they are listed here? >> there is some china discount because we have the issue of the government that is going to get and is already worried about ali pay the payment mechanism for ali baba. the fact when you have such a large factor in ecommerce it is the world's largest ecommerce company and the dominant chinese commerce growing very rapidly, that means a lot of currency can move in and out of goods and services, but the government is looking at and needs to have involvement with it. >> do you understand the packs
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purposes? nobody seems to know or understand. >> well, the taksim politics they are referring to is the variable. the vie is a way to have to offshore theenty to get around some of the government's control of the internet transactions. so those are not positive things. those deserve some discounts, but i think in the case of ali baba, investors will probably go with some strong discount some of that. >> do you care about the governance very? it's not a dual class structure, but it's close in that they've created this other mechanism which effectively gives them control forever. >> we care about the government structure. face book had the same issues, goggle has the same issues, so, yes, would we like one vote per each sare? we certainly would. so there is, there are issues when it comes to that. again, i think because of the size and profitability and
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growth of this company, it will be a juggernaut that will be in almost every investment portfolio. >> thank you for coming out. coming up, just how much should investors be focusing on janet yellin today? we will be talking about it. also, we will be covering all of that an more as "squawk" market master jeremy siegel will join us at the top of the hour, later, portfolio member john rodgers, "squawk box" comes back with the big hour at 12k3w4r506r789s.
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ali baba willing to go public. will investors buy whatter that selling. >> yellin on the hill, what investors should be focused on when she speaks later this morning. >> can western union wire to your portfolio? we have the final hour of "squawk box" begins right now. ♪ let it go ♪ let it go ♪ let it go ♪ let it go ♪ >> god, i wake up early to come
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in on this show. >> we tease you. >> this is what i get. it's bad enough growing up with the ear, dumbo thing, disney haunts me. >> we these you because we love you. >> i love you guys, too. now i have to see the movie. >> never tell us something you hate when you don't want, it gives us way too much of and in. >> what a nice attitude. don't believe the hype, perk. that's as quebec as a dark side. >> don't tell me, that itself the other thing. you are lucky we are not playing "it's a small world," that will get stuck in your head for much longer. welcome back, first in business world wide, i'm becky quick with andrew ross sorkin and brian sullivan. in studio with us, jay jordan the chairman of the jordan company. we have been watching the futures the morning. they have been under pressure, the nasdaq futures were under pressure. itative turned around relate now they look look they've opened
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up. s&p is up over five points. if nasdaq up over by 7.5. ali baba is now filing, famous i'm going to call it in the initial public offering. yahoo, of course, will be receiving a huge chunk of the proceeds. >> that is sort of the derivative talk to watch in all of this check out the two leading video games as well both beating stills on the strength of their own games and the fact that new consols like sonyplace play station 4 and x-box 1, are propeling sales higher. mongolese, international, one of the stocks to watch this morning, they are a winner. three pieces of fuse involving the food company. here's water going on. first it boat the street estimates with its latest earnings.
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it is combineing its coffee business with d.e. master blender, the deal will give it about $5 billion and 49% stake and announced a restructuring it says will save at least 1.5 billion annually by 2018. noen i don't know if we have nelson peltz to thank for. d.e. masters, when we first did the story, i had no idea who they were. do they eggberts, the dutch company, coffee branderson. >> that's why they've shortened it to d.e. >> his pronunciation is no better than mine. >> that is a mouthful. >> that's dutch. >> in a little while, janet yellin will testifying before congress. her testimony will likely set
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the tone for the trading session. it was a sea of red yesterday joining us is jeremy siegel professor at the university of p. and a "squawk" market master and guest host jay jordan who has taken the bearish side on post-things. jeremy, maybe you could convince the gentleman to my right, how are you feeling ab things right now, jeremy? >> well, i think two major things that have changed this year is the long-term interest rate picture. everyone expected the tenure to be 3.5 by now on the way to 4. it's closer to 2.5, i, myself, i to the interest rates keep going up. now i think we will have low interest rates on that long term for quite a while. no matter what town allen says
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this morning. think of what stocks should be valued at. if the long term ten year is 2.75%. i am sticking withpy forecast of 18,000 for the dow and 2 foul. for zap p s&p by 84 end. >> jay is making faces. go ahead. >> not faces. i'm smiling. jeremy, given your view, what do you think of the bond mark, are you a buyer of bonds or would you recommend given the potential risk of interest rate volatility? what is your view on volatility? >> i'm not positive on bond at all. my feeling is i'm beginning to think the long-term rate. the biggest surprised bill groves in his monthly newsletter, he was the biggest bear in the stockmarket for five, ten years, finally says, you know what, i think stocks are fairly valued. they're not in a bubble anymore.
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interest rates are basically not going to go up that much. i think that, wow, that's a turn around. here was the man that wrote dow 5,000, death of the cult of equities two years ago. i used to be battling him on cnbc and other networks. i was pretty surprised. i think he has come around to saying, you know, when stocks have a 2, 2.5% dividend-year-old, where do you want to be in the market? >> why do you think the yield is so low, ho? what is that a rereflection of. >> the growth will be slow. cbo says 2% over the next ten years, inflation is going to be low and the age aging of the investor class. more and more people as they get towards retirement don't want to stomach the volatility of stocks. they've going into bonds.
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pension funds are rerisking their portfolio. good or bad. they say the rules are i should go for the bonds. there is a huge demands for bonds, let's face it, the deficit, the government the cbo came out and said it's less than the historical average right now. there archbishopt that many bonds pumped into the market. >> professor that, is an excellent point. scotia bank came out and talked about pension short faums and the gps in pensions and the lack of availability of bonds. we often assume bonds will be bought because of ukraine, because of some fear it sounds like you agree with that view that bond buying and stock buying can occur at the same time because you good a different reason, which is to fill a pension if lew of cash. >> absolutely. the pensioncist is huge, it's reflected by more and more choices of the baby boomers, which still control most of the wealth getting to 65 and saying,
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yeah, stocks may be a better deal, but i got to be conservative that push on to bonds i think will keep a lid on tear rates and then i think you've got another perspective of what you should envest in. >> this gentleman at our table here basically sold all of his stocks six months ago. you said enough. >> all two of them. >> you said you were getting flat. you felt this whole thing was going to go sideways if not down. >> two different things. i want to ask jeremy a question. when you talk about pension funds buying bonds, what maturity schedule would you recommend? because, obviously, we know pensions have a real problem. they have an early return of 8% in the bond market. >> they're never going to get if bonds. i pine, you know, the truth of the matter is that yeah, bill
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groves is right, any pension fund is 8%. it's two-and-a-half, 3.5%. you feed falling interest rates. i don't think that's happening the short faum rules have been made so strict that they can't stand another stockmarket decline. that's the reason why they're pushing the bonds. >> i get criticized for it a lot. but the, i think the feds should go negative on interest rates and drive gdp up. earnings are not tracking with the stockmarket. i think it's way ahead of earnings growth. you put more liquidity in the market. if the fed was charging all banking system. they got $3.5 trillion of reserves. that would stimulate the economy. obviously, it will have inflationary effects.
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but inflation is not that bad for the economy. if you want to book gdp. >> that's not a crazy proposal. i, myself, we are talking here on the interest on reserves, which we all foe the fed set at 25 basis. 25 basis points is higher than the one-84 treasury. will is no incentive for those banks to lend it out. >> right. >> in this environment. the ecb is talking about, perhaps, a negative deposit rate to get the bmpgs to lend. i think at least we should move it down to zero again. but don't forget the lobby of the banks, they have $13 is temperature of excess reserves. the banks are not anxious to give up that revenue over there. that's the struggle with the fed policy. >> to be fair, with all due respect, we can't have a conversation without understanding variables. you are a rich guy already. if you are 35 years old,
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listening and watching, the time frame may be different tan yours, if you look out 30 years. >> they may not have the access. >> gdp growth creates jobs, it stimulates the whole economy. let's not isolate it obvious sort of a class difference. >> it's not class. it's time frame. i believe the dow will be higher in 30 years, otherwise you will be living if caves and lighting fires with sticks. professor, i'll defend the gross here for a bit. you've got to have an expengation of the future value of cash returns in order to make any kind of asum shut up of stocks or bonds, right? if bill believes that cash will return, effectively 2%, which is less tan most people, he is making an architect about future evaluations for all other asset class. >> right. well. that's exactly right. and stocks look a lot better if those cash flows are going to be discounted at 2% than at 4%,
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which i think the fed still wrongfully has as their quote, there has been a lot of discussion on that. i agree, that's way too high and actually there is a lot of fed member itself beginning to question whether they're ever going to a 4% feds fund rate. if you think about that, 2%, don't you want to be with dividends, yieldling, stocks yielding 2.5 to 13. that's my point? thank you for sticking around. we appreciate it. a nice little debate i like that. >> when we come back, we ask the question, who is jack ma. he take a look at the self-made millionaire and his prize possession aly baba.
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for your big story today, janet yellin will be testifying in congress. steve leisman what can we expect? >> there is an awful lot to listen for here. let me give you some of the things i'll be watching for. the first thing anybody cares
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about is rate hike guidance krks we get any more information on whether or not it's a second quarter, third quarter, first quarter, 2015 jump off point, she has explaining to do when it comes to recent economic weakness that, gdp number in the first quarter, now, by the way, tracking negative 0.3 in our cnbc rapid update. we will be listening to labor slack in the unemployment rate. we den know how janet yet e yellin will dance the politic. we know bernanke would go so far and back off. this will be as care janet yellin's first chance to answer questions on minimum wage, deficits, security. all the things that congress wants to talk about. >> she is getting good at saying nothing, basically. >> we will see. that's a matter of personal choice. greenspan went a little further. i want to show you the fed's
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economic project, that's the outlook for this year. it will be hard to get there with this 0.1%. the meeting of fed members, you see it's 6.2. where are we now? 6.3 i. >> i think these job footballs are a little deceptive. we had the same participation then unemployment would be 12%. 'in 2012 the re-election, if it was the same job participation rate on unemployment would be 10%. so we're looifg live income an illusion i think. >> there is a big debate. it has to do with this guy on the show allen kruger who says the people a part of that unemployment odd number are not coming back into the work farce. they're not exerting downward pressure pressure on wages.
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essentially, yellin has sort of dismissed this argument. she believes there is a vast pool as you say of labor lack out there. some of the economists disagree. with real rub is going to happen, the rubber-its the road when it comes to wages. >> may i ask you a question? >> any time. >> when i got into the business in the early '70s, tear ret cal unemployment was 14 purns employed. that's the way it was, you had 3w450e78 wouldn't and those who couldn't. today that number may be 6, 6.5%. >> that's another big debate. we have a great guest. i have one more thing to talk about with this guy coming up. >> i have a feeling you might. stick around for that one more thing. let us go on the rate decision an janet yellin. joining us, from isi group, a remember for thor fed pencer, listening patiently for this
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debate, do you think janet yellin will give us any real guidance today on what she's planning? >> i think it's going to be steady as she goes relative to the economic club speech she gave a few weeks ago. the basic message the fed thinks it's making progress towards full employment and will hit that goal and stable prices sometime around the end of 2016. number two, the fedex pecks a low for long and gradual enclose in the funds rate part will be the appropriate part, but, number three, she's cautioning us that the world is an uncertain police and the marks shouldn't assume that's a xhechlt. it's just a forecast of where the feds thinks rates should go. >> here's the problem to his point he made, define right of employment. if 10 million drop out of the work force, number employment will be a lot easier to hit. >> so that's absolutely right. what janet has been clear about is she believes there are
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important additional labor slack. the fix that cropped out. also, folks who are working part team but would like full time jobs. however, union et has alsoing a podged a lot art uncertainty as to how effective these sources are in restraining wages and prices, so we'll have to learn some as we go. >> we don't know. >> christian i want to show you, i don't know if you can see a pick. but there is one guy i think when it comes to these current low rates who is smiling right now. not so. not sullivan. it's ben bernanke. i think he is smiling right now. i think there is something we have not talked about. there he is. he is smiling. >> he just woke up. >> he is smiling because he had an argument for a long time. it wasn't the amount of quantitative easing, it was the total amount of duration as in years they took off the market. we have talked about every
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reason six days to sunday why interest rates are low. not this stock vs. flow argument. christian, does it team to you, this stock argument t. total amount the fed purchased is at least one explanation for why yields remain low while quantitative easing declines. >> absolutely, steve. are you on the nail there. we had a hunch all alorng i did. ben was right it was the stock that mattered not the flow. >> that explains why the long-end yields haven't moved higher. but, of course, that doesn't exhussein what's going on the shortened of the curve, where the market is prioritizing rate expectations. there the fed is saying, on a base case, it's a gradual increase. but be careful. this is an uncertain world. we don't know all we want to know. >> i want to follow this up. this is sort of what jay water talking about as well.
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if that is true. if the stock is exerting an influence and the fed is not going to sell these asset itself, they're going to run off, it means we will be exerting a downward pressure not just months. not to the end of qe but well beyond. >> a question ha is rerecorrodeing. it's the amount of duration or interest rate risk. as the portfolio ages, that downpaerd pressure on the term pret premium diminishes. larger rates should drift higher. >> that was a good conversation. appreciate it. pork, predicament. why you could be paying more this summer. who is jacquie ma? we will take a look at the man behind ali been ba when stock returns. .
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. all right. pink floyd, a virus is sweeching across farms. the u.s. could cut pork production 7% this year. the forecast is much steeper tan what the government was expecting for the production. the virus has killed about 7 million baby pigs since it was
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detected in the u.s. it's appeared if canada, parts of asia as well. the research estimates a 6 to 7% reduction the year. the fda says they could reduce the outlook by 5%. it's probably why the chinese bought smithfield foods last year. >> joe was saying it's gone up. it sounds like it's more wage relates to that. you have corn prices up as well which then raises the price of feed. so you got the perfect storm if you will. >> i want to know about this virus. >> it's not good. i don't want to calm at this time equivalent of foot and mouth disease. hoof and mouth. yeah, in is why people. you know what, quick aside, coffee prices, pork, bove, wheat, corn, sugar, all soaring
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this year. yelpch today, i get the inflation argument, you look at things we don't purchase, will is no inflation. the cost of food, every day i go to the store is a higher bill. to me that's inflation. >> oil prices have stayed stubbornly up. >> flat panel tvs have come down, everything is fine. >> when we come back, productivity and cost data, the numbers after the break and stock picks from john rodgers. wreak.
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. welcome back, everybody, let's go to rick saven tele. he has the preliminary numberings. >> fauven productivity down. last month has had a .5 improvement. if we look at labor costs. they were up 4.2%. wow. that's probably close to double the expectations. our last look originally started down 1 tenth moves to four tenths. to summarize, we had decisions that mitigate. productivity has been averaging a little over 1%.
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it's not nearly enough. it's a very key issue. but most of the postmortem work being done as japan tries to do everything and the kitchen sink stimulus. many believe the missing pieces of tear deck indicates lost amounts to a cumulative loss of productivity. hopefully, which won't end up in the same boat. yields are bouncing around. we still haven't had that close, all tow the february 3rd, 257. we traded below it today t. curb remains flat and relative to foreign rates, we are still probably too high. back to you. >> hey, rick, why down we've seen the ten year flirting with the three-year lows once again this week? >> i think since everybody and their brother that's an apologista for the fed, weaken economy down the road.
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door number three is what i'm picking. i think it is a variety of issues. it's what i call a turn style, you can make a case on the spreads of the europe pine rates, you high our, you sell their, theirs have compressed with the front running going into what they perceive to be qe or general interest rate management. i think the slowing economy is a big deal. i think the flattening yield curve is a huge deal i think the shortened is giving us more information. i do think the stock of treasuries and the percentage of 20 years an older, the season 30 years, the purchase contributes to it. >> that argument falls flat when you consider one rates moved up a year ago, now they're moving down, if that interim period, you look at the amount of purchases, it seems as though, you know, some of that dynamic was already in place. why didn't it hold true last may? >> let me ask you this, you have been doing this a long time, watching that market a long time, where would you guess the
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ten year yield ends the year? >> much closer to 2% tan 3%. wow! >> water that sound i hear? that's real estate agents dancing, singing. >> i think a lot depends on the general asset classes. i've never, never called for selling of equities since the bottom of march of '09. i think they are on thinner and thinner ice every quarter. >> that issue and the flashing red, i think it's a matter of time. ly tell you this, if we don't get under 2.5% in the next several week, then i think probably i would change my call to be right if between 2 and 3%. rick, thank you, talk to you again soon. ali baba filing for a u.s. ipo. we have jane wells with a closer look at the chinese entrepreneur behind the internet giant. >> lucky, just lucky.
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>> reporter: jack ma may be lucky. she also relentless, 15 years ago, he launched an online b 2 b website ali baba, no one would help him. >> i was rejected when i talk about it, they look at me strange. what, alibaba, what are you talking about? i went bab to china, with nothing, no money, nobody invested in me, but i full o confidence. i sold of american dreams. >> reporter: the hard work paying off. it did, it has turned into the largest platform, beyond b-to-b online payments and more, making this 49-year-old former teach worry taught himself english worth nearly $9 billion. >> today we have lots of money and we are careful for every penny we spent. >> reporter: ma is a different sort of chinese businessman, he's funny. here he is in stamford in 2011. >> are you going to boy yahoo? >> a good question.
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yes, we are very interested if that. >> he has a knack foranalogy justs. >> this talk is just like a peace talk on the united nations. it's very complicated. i i call myself like a blind man riding on the back of blind tigers. >> reporter: he insists on telling everyone about failure. >> like most company, we paid hundreds of thousands of mistakes. we made so many mistakes. we were so stupid at that time. >> jack ma believes you don't learn from other people's successes but from the stupid things they do. as the company he founded prepares to go public. he says his business philosophy is customers first, employees second, shareholders third. he remains a dreamer who defies critics pence and outside china. >> we find the best managers of finance, tech following and parking. you put them together. my job is every day tell them
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the dream. >> reporter: for cnbc business fuse, i'm jane wells. >> joining us now to talk more about the ipo is daniel easternst. i imagine you went through a lengthy per spectus. if you were 'look at the red flags if they were any for you what would they be? >> let me take a step back. we were bearish on internet fames and we have a sell on 26th and holds on facebook and google largely because valuations were in support of real earnings growth. if you look at alibaba, they had a slowing in the middle of last year, sales growth accelerated in the inteb december quarter. they have 44% net income margins. so it's a really well run
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company. if you look at china, it's highly fragmented. a lot of the infrastructure that amazon and ebay can use here to serve customers they don't have. so they have to put all that towing. so it's a real problem-solving company. so this is a real company t. valuation is somewhat reasonable. i think on the internal numbers, about 34 times trailing earnings, the growing earnings 100%. it's 34 times earnings. earnings were roughly flat. amazon 87 times earnings. so this is a real company. it's a great business. it's well run. but, certainly, there are risks. competition is growing as people come online. as an infrastructure comes there. other competitors can now use. so i think that for the first time they actually might start having real competition and the other fundamental issue that i think the u.s. investors have to look at is we don't have beat on
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the street there. we don't know what's going on, on a day-to-day basis. amazon's back box. but at least we have some sense of their business. wherewithal alibaba, it's hard to say matter going to happen in the business. i think that's a really big risk. >> what does this say, though, largely about internet valuations. you said in the 7:00 hour, i said, given amazon's razor thin margins and these guys with the huge margins, you said, actually maybe the opposite way around, this could put pressure on companies like amazon's valuation, people will look at an alibaba, which actually has real profits. >> i think that's exactly right. i think people look and say, hey, we can go up to this. i think i ache that, you know, your former take, which is reality valuations got out of whack, relative to growth rates.
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we had a 100% rise in internet stocks last year and a rise in earnings. somewhere in there is an air pocket we are beginning to feel now. at some point, things come home to roost. face book is not exactly cheap. they trade 25 times ebita. it's twitter is resetting it. i think that's what i like about alibaba, its valuations and growth rates are supportive. >> let's talk about yahoo. given they own 22% of the company. what does this say about yahoo going forward? at this point is the honeymoon over. do we have to base them on what they are actually doing or? >> yeah. that's probably the number one question most u.s. investors are looking at relative to the alibaba ipo, take a moment there. it's 22% yahoo pre-ipo, 35% i
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think, 33% from a soft bank in japan. so you've got half the company owned by investor was aren't involved in the day-to-day business. at some point are exiting. i think we will see large share sales into the ipo. so it's never grit to have big exits in an ipo. that's another big risk for alibaba. as for yahoo, certainly, once we kind of set what this number is, then it becomes, let's not look so much about the valuation of yahoo. but what is yahoo? where is yahoo going? yahoo has had a couple different business models, growth is kind of mediocre in their core business. they're investing a lot in proprietary content, which means their costs will go up. so now we actually go back to, forgetting the valuation of yahoo, we look at, what is yahoo doing? >> we have to figure that out, dan we have to leave it there. we appreciate it.
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we will tell uma r-- tell you, marissa myers, you will hear from her indirectly. two quick points, who will be the buyers? are there enough stock buyers to absorb another ipo? we have a move moving futures higher than they were. according to numerous reports. vladmir putin spokesman saying he is willing to be more opened to doi log to resolve the ukraine crisis, according to at least one dproup in the region. so some soft or softening comments coming out of the putin's people about resolving the crisis through dialogue, whether or not you believe it or it's accurate. >> it is moving futures? >> futures are moving higher, they are now higher than they were prior to that, so perhaps a little bit of a bid. >> it's if same old same old with him. right? he steps back a while, says he will talk. we don't reach an accord, or we
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do and it's broken. >> we just want to hear from putin. hear something, right? you have done business, jay, if russia? hear him. would you believe him? as somebody who has done a lot of business if russia? >> not necessarily. hoo es the vice chairman or vice mayor when we get in at saint petersburg, so we didn't know him that well. i don't know, i don't trust russia, itself. coming up next, why ceo john rogers thinks western union will transfer profits to your portfolio. we will get his picks when we return. .
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. all right. our platinum portfolio is expanding with the addition of yet another all star investor. joining us john rodgers, chairman of aerial investments which has $9 billion under management. he runs the funds up 12% of the year. 15% in three years. they consider themselves long-term investors with a time horizon of three to five years. in fact, some of the stock holdings have been there 28 years. john rodgers, you got to sell those radio and railroad stocks my friend. before we get to some of your pick, becky was telling me you were out with the annual meeting for warren buffet. was there anything that took away that surprised you or made you want to boy or sell an
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investment you currently have or don't have? >> it was pretty much the incorporation of his core values we under stootd in so deeply. so there wasn't any changes in our philosophy based upon this weekend. >> so no change there. let's get to some changes you do have t. most or one of the most recent stocks you have bought, john. >> we have been adding to some of our favorite fames have gotten cheap. our gameing stocks have been crushed all year. we think they're bargain prices, international game tech following selling at 11 times earnings, we think is our best bargain into today's market. >> we seen a proliferation of markets, casinos if you that you and hawaii have casinos. is that your thesis or a core business? >> we think slot machines are here to stay. it is a core business. you are right, casinos everywhere, it is also a global business. you will see more and more in
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asia, more and more in latin america as governments are finding ways to generate revenue instead of having to raise taxes. >> your other pick, western union is interesting we seen a proliferation of possibly payments, it's a little off the radar, everybody says cash is dead. wouldn't that mean western union will suffer? is there we don't think so. especially in the global money transfer business. you are moving money around the world. a place where cash is very important. even though there are these new technologies, we think the families that use western union depend on it leak cash. >> i want to go a little bruce springsteen on you if i can, janice capital had glory days of its own, it's one of the high flying funds that benefitted from the internet boom. it fell to earth. it's come back a little bit. why are you so bullish on janet that has a name that has negative connotations vis-a-vis the internet stocks. >> we think it's a relative
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price. when you look at t. rowe price, they sell at higher multiples than janice. janice are more diversified than ever. their fixed physical business is doing really well. the intech business is strong. we like the diversification. they're making progress with tear moves to sell their products in all different types and ways around the world. >> okay. and because janet yellin will speak today, john, i have been of the camp that we know interest rates will go up at some point, so you have to invest for it. i am not caught up as much as the wind. i know some people are. as a fund manager, do you care when rates go up? >> well, we're in it for the long run, you know, so we don't care too much. we are looking at what's happening into the long run, three, five, ten-84 horizons. so we think janet yellin will make the right decisions for our country and the economy. >> john rodgers, boom, boom,
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boom, we appreciate it. have a great day, take care. >> thank you. >> still to come this morning, we have jim cramer live from the new york stock exchange. we are going to talk to him in just a moment. in the meantime, check out the futures. they have improved on this news that putin is opened to conversation. you can see right now the dow futures are up 73 points, s&p futures up just over 6. the nasdaq is up by ten. skwaux "squawk box" will be right back. with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction,
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let's get down to the new york stock exchange. jim cramer joins us right now. we've been watching the ten yi and the yield on that, now back above 2.6%. does it concern you to see it even below that this week? >> i think this is what it's all about. we keep talking about bubbles. the bubble is in the bond market. anybody seems to be able to get money in the bond market that allows deals to occur. i know the bubble in the nasdaq is rapidly deflated. not the bubble in bonds. there's just a shortage of high quality bonds, people reaching for yield everywhere. if anything that is what i'm most worried about, not the stock market. >> jim, pait's brian. good morning. >> with alibaba you've bon bob pisani-- pounding the table
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about liquidity do you think there is enough buyers out there to absorb what is going to be one of the biggest ipos in years? >> absolutely not. we had a downgrade of ebay. you have to tell ebay if you want alibaba. the in et tricks are not -- metrics are not that good. at amazon, the gross margins. google, because they have a great search engine, you have to sell all the e-commerce plays. that's what's going to happen. this is -- look, i'm not going to call it a disaster, that's too bombastic. there's -- there isn't money for $20 billion deal. there isn't. >> isn't there an argument, you're making the argument the other companies effectively are overvalued. there is a company that has real profits and margins. >> he's saying the money has to come from somewhere into i know. the point is everyone will see the other things because they'll look at this and say the metrics are better. >> it's difficult to own ebay and alibaba. i don't like alibaba, the company. i think it was inflated by this november singles day. i think that a chinese ipo is
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not what i want. i think we have to remember the communist party, it isn't talked about very much, controls commerce in china. i don't want to -- every time a pmi comes in and it's bad people will sell alibaba. this is no the a company i'm saying is a blue chip. so i think that everybody loses on the alibaba deal. everybody. with the possible exception of yahoo!. the numbers are real? do i think they're funny. i don't think they're phony. i think they're pumped. they were pumped when twitter came out. >> now -- what does that mean? >> bumped meaning it's the best time in the world to sell alibaba. because it may not get better than this. >> got it. >> jim, it's great to see you. see you again in a few minutes. >> we're going to wrap up with a couple big weeks for deals and our guest host jay jordan of the jordan company will tell us if the deal train will just continue to roll right ou. we're back right after this. tdd#: 1-800-345-2550 there are trading opportunities
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for anything, everything or just to get that "thing" checked out. big, small, and yes, the best heart care in the nation. it's here everyday, for everyone. that's the power the power, that's the power of today. cleveland clinic. call today, for an appointment today. welcome back, everybody. we have seen a ton of m&a deals over the last few weeks. our guest host this morning is jay jordan, the chairman and managing principle at the jordan company. what does that mean to you. is that part of the reason you're worried about the market. >> very robust activity. means there's a lot of liquidity in the markets or the banks are
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doing some of the things they did back in the mid-2000s which is not healthy. >> some of the things like? >> lending, pick toggles and the coveted light loans and coverage ratios are very, very poor. everybody forgets about what happened back then and now -- >> well, i want to get to you on the stanford thing. i would argue to some degree on the private equity stuff most of those deals did not fail oddly enough. the pick toggles let them survive in a way. >> well, you're partially right. what it allowed them to do is restructure. you have good companies with bad capital structure. money was lost but the companies didn't fail. >> right. i want to get your views on a different topic. it's a controversial one. you're on the board of notre dame, also on the invest ment committee. >> i chair the investment. >> you chair the investment committee. stanford announced they would take $18 billion in coal related stocks and other types of assets, and they're saying they're not going to do it
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anymore. what does that mean to your whole world, the whole endowment world and more importantly to coal and other types of energy? >> we at notre dame try to be socially responsible. we have policies in place to reflect that. i don't -- we have not as yet deal with this coal issue. i'll be having lunch today with our cio in town and this is a good topic of conversation. stanford, what they say and i trust what they say, but it's hard to disengage if you're like in a hedge fund and a commitment to have a hedge fund that may have certain stocks in coal how do you disengage from that? where the intent might be there is a little more complicated? >> how do you do it? there are certain sin companies, if you will, you guys can't touch? >> we do it going in. it's not in mid-stream. we let every money manager know here are the no-nos for us. it's clear we don't participate in those. now you're starting a process at stanford where they're already in these funds so how do they backtrack? i don't know. i trust that they'll do it and
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it seems to be -- it will probably be very controversial in terms of coal and what it means to this country and what the jobs mean. >> jay, thank you so much for being here today. it's been a pleasure having you. >> brian, thank you for joining us this morning. make sure you tune in at 2:00 for "street signs." >> i'm not saying thank you back. tortured me with that frozen song. you're dead to me. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. what a morning we have in store for you today, the ceo of disney and whole foods talking about their quarters, janet yellen on capitol hill, the alibaba ipo filing, futures improving on the positive side. ten-year yields 2.61. yellen's testimony begins in about an hour's time.


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