tv Squawk on the Street CNBC February 23, 2016 9:00am-11:01am EST
>> a lot of fun. can't wait to see you again. >> all boys party. >> yeah. almost like a hazing. >> becky might be here next time. >> you guys need becky. >> you won't be back. no, we love her. it was fine today. >> join us tomorrow. "squawk on the street" is next. good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. moments from now a live and exclusive interview with united technologies ceo, gregory hayes. his company confirming the news that david broke yesterday that it held merger talks with honeywell. utx saying it decided not to pursue the transaction because of those antitrust concerns. what a crazy 18 hours it's been, david. >> yeah. it's interesting. of course a lot of background
here. we'll discuss it with mr. hays in terms of the decisions they made and what i've heard, of course, is how serious those conversations were. last april and may, when they began. when they were revisited from the honeywell side in september, when they sent utx a letter. most recently last week when they made a new proposal at $108 a share, 40% ownership of the combined company, $42 a share in cash. 22% premium to the then stock price. so, a lot to talk to mr. hayes about. not to mention my man here, mr. cramer, always has questions when it comes to the fundamentals of the company. >> sure. you get this combination going. it's hard not to say, look, we can finally deal with boeing and airbus. on a level playing field. the partners for success program that boeing has had has crushed a lot of these companies. you put these two together, they could have muscle against boeing. like that. >> utx doesn't seem to be it is
a combination that would pass antitrust muster. that's something we'll focus on. does it change your view of honeywell? you've been bullish on them. >> the honeywell quarter is phenomenal. no offense to ge, ge had a great quarter, this was the finest industrial quarter of the year. gross margins were terrific. when david broke the news, i said are you killing me? they are firing on all cylinders, they're going to be a 12 cylinder? they're an 8 cylinder. this has been a deal out there for a very long time. i broke the story 16 years ago originally when it was utx trying to buy honeywell. the idea of creating this giant industrial global powerhouse is one that both sides have shared on and off.
>> let's say nobody was involved. just these bots that looked and tried to come up with a combination. we got commercial controls for climate. wouldn't than great to marry with the actual box that heats and cools? you have this fantastic ta tastn of cockpit and engine, wouldn't that be great to go up to boeing and airbus and say we got what you need. forget rolls royce. there are people involved. there are different entities that try to get stock prices higher. maybe they can get higher than 108. maybe honeywell doesn't need do a power play. there are people involved. in there weren't people involved, i would say put this together, i'm willing to pay 120 for honeywell. right now. right here. 120 bid. >> if only it were that easy. >> i know. instead there's people. i often want to put the eagles together with the new england patriots and merge those two.
>> merge of equals, obviously. >> belichick, no. the new guy. >> who will run that combined company. >> the other guy will run it. >> sure. >> there's a commissioner -- the commissioner is the ftc or the antitrust division, don't like this if the customers don't like it. i wore by boeing tie today? why did i wear it? boeing is the loser if this goes through. the partners for success is partners for failure. >> right now there's no deal at all. >> what do you mean? taking away the whole -- >> they're talked. not talking. >> we shouldn't have mr. hayes on? >> no, we'll definitely have him on. >> just kidding. like the biggest interview we've had. >> i don't know about that. >> after we look at the pre-market. let's look at what's going on. slight declines in europe today. german business confidence fell for the third consecutive month. futures stateside. oil relatively stable after monday's 6% rally. existing homes in about an hour.
earlier we showed pk shiller price index with a gain of 5.4 in december. retailers. home depot posting record fourth quarter results. u.s. comps up 8 and 9 helped by a recovery in the housing market. the dow component hikes the dividend 17%. macy's beat the street with results. earlier on "squawk box" terry lundgren said the weather was a big help. >> the business got better in january. you know why? it got colder. it makes a big difference in the fashion apparel business. our business got better. earnings improved as a result. that's why the quarter got better than we anticipated. >> depot is the story here. >> if you cut numbers enough -- congratulations to terry lundgren. home depot, sometimes you look at a company, 8.9% gain in u.s. comps? maybe some weather related that's positive. but this is a repurchase plan that's amazing.
margin expansion. mexico is red hot, by the way. i come back and say it's like butch and sundance. at one point, you say who are those guys? how do they do it? all the other retailers right now are saying, wow. except for bezos -- >> you heard the laugh. >> doesn't laugh. >> don't typically hear the laugh. >> frank blake put in the team, he rebuilt the company. home depot, this is the kind of quarter where you think it's not possible. i looked at this quarter i said 8.9 -- no. there's something wrong with this press release. you can't do those kinds of numbers in america. people want to spend on their homes and they're spending at home depot. >> consensus was for 5.7. some discussion that guidance was conservative. it implies a less than impressive buyback number.
you agree? >> their big season is coming up. terry lundgren may like the fact that january's weather is good. home depot likes to set the barlow for the spring selling season. christmas is their holiday and then they blow it away. home depot is where you go, it's not this quarter but it's the next quarter. the next quarter will be bigger. these guys are so good. i remember when bonnenioff came there, salesforce.com, they understand the customer better than anyone. they knew exactly when we needed stuff. it was scary. they're in your head. i like amazon if you like man in the high castle, amazon was like if you have windows problems, we have windows. wow, we have windows problems, how did they think about that. >> we'll talk about depot, what
toll said today. >> people are getting too negative. try to get one of those places in brooklyn. two, three, four. i should have bought one. i should have gone in for a half dozen of those units. >> you should have. >> you should have with me. >> and let us get a taste. david and i are ready to pitch in. >> too late now. we're in bushwick. 600,000 for a one-bedroom. >> i'm shorting that right now. >> don't you dare. i'm going to queens and buying your place. >> stay out of my neighborhood. >> i'm buying your place and raising the price. >> coming up, an exclusive with gregory hayes. later on, fitbit sliding on guidance. we'll talk to the ceo. don't go away. opportunities aren't always obvious.
april. greg hays is the ceo of united technologies. thanks for making the trip down. >> thanks for having me. >> the honeywell side, the people i've spoken to recently took some exception to the language in your press release late yesterday in which you describe previous talks as preliminary, exploratory and a range of collaborative operations. they say you had formal conversations last april and may about a merger of equals that included board competition, structure, free modifications of that structure and 16 engagements for three months. that sounds a lot more serious. >> well, first of all, david, let me set the record straight. we started these discussions back in april. i met with david, we met again in may and july. what became apparent, while no one would argue the merits of putting these great businesses together what became apparent to us is that it just can't happen, can't happen from a regulatory
standpoint from a customer standpoint. there's no path forward that we could see. this is last july. after that, mr. cody came back to us in late september, september us a letter proposing a merger of equals. our board evaluated that proposal. we elected not to move forward for those same reasons, primarily regulatory. it was regulatory, governance and value. last week dave came back again with a different offer, a bit more on the value side. didn't get into the governance. nothing on the regulatory side. when our board had these discussions, there's no change to our view. there's no way to get the deal done. as much as it may make sense in a headline, there's no way to get it done. >> people told me at honeywell when you guys were having your initial conversations, you were not focused on antitrust. that we're dealing with a lot of other potential issues, including board competition,
management structure, but that it only came up when you guys had been on the defensive that it really wasn't a concern when you were initiating the conversation. >> clearly we laid out up front there would be an issue on regulatory approval. as the year went by, especially as we started hearing from customers and seeing what was happening in the u.s., in the eu, it became apparent to us that this deal was difficult. this is not just something that we came up with ourselves. we actually went out and had a blue chip law firm in new york opine on it. we have gone back to two other blue chip law firms. i saw on cnbc earlier this morning, it's apparent it's hard to do the deal. >> what did they say, when you went to the law firms? >> they bottom line said it would be irresponsible for us to pursue the merger because of the destruction in value, the etc. keep in mind we're in the process of reinvigorating utc.
we have a brand-new gear turbo fan engine, we're going to be building 1,000 of these engines in a couple years. the thought of trying to distract everybody with a merger doesn't make sense. especially a merger that is unlikely to occur. >> christine varney who ran antitrust with the department of justice, now a lawyer at korvath. she says, in fact, they're advising honeywell that 4% of sales or less would be affected by an overlap and divestiture would have to be between 2 billion and $4 billion. another respected law firm here, someone who ran the antitrust division seems to disagree. >> let me be more specific. if you think about the aero businesses, if you comb combine honeywell and utc, when you talk
to customers, that's the last thing they want. we got criticized when we had the goodrich deal, people thought we had too much pricing power. i can go to midtown manhattan and find lawyers who would say boeing and airbus can merge. we have top notch law firms that give us good advice. >> there is a company -- a company, it's name is boeing. it has partners for success. when i speak with the so-called partners, everyone says the same thing, they're afraid to say it on tv that boeing basically took all the margin away from all these different companies, airbus, incredibly difficult to deal with. wouldn't this combination be able to say to boeing and airbus you can't do this anymore with your partners for success. it's time for us to get the gross margin back. >> that's exactly why the deal wouldn't happen. >> who are they versus the
consumer trying to get the price of a plane down. >> they need to get the deals down. all the contracts have change of control in them. powerful combination, partnering for success, working with airbus and boeing always difficult on the margin front. utc has been able to push back and partner with boeing and airbus. we're not losing all of our margin. it's a tough business, but this combination makes it so much more difficult going forward. >> talking about 3.5 billion in synergies is what i'm hearinging from the honeywell side. >> right. >> that's a heck of a number. maybe try to get a shot. >> our own view is it's $2.5 billion of synergies. we can argue whether it's 2.5 or 3.5, if the deal can't get done, it doesn't matter. >> david cote -- i think the world of him. i said it to you a couple times. he has a chance here before the gear turbine which is the
greatest engine in history. i'll give you that. before that kicks in, before the restructuring in climate kicks in, before the big contracts that will be good for otis kicks in this is a great time for him to strike, isn't it? you could have an earnings breakout in 2017. >> it's very opportunistic of dave. i don't blame him. why not try? >> take the company right now. >> it ain't going to happen, jim. >> for those who say, mr. hayes, this is not about antitrust, this is about who gets the top job. when you guys made your initial interest in an m.o.e., you thought you would be running the company, once that was decided then antitrust became an issue. >> get the top job of what. >> of the combination. >> it is not going to happen. governance has always been an issue. dave has done a great job at
honeywell. no doubt about that. the thought of combining these two companies into a hundred billion dollar behemoth, great idea but it's not going to happen. speculating, while it's fun, interesting, sells newspapers and tv spots, it won't happen. >> you think your shareholders will agree? they'll say we're in your corner on this? are they frustrated given the underperformance of the stock price? >> we're all frustrated by the stock price. part of that is on us. we missed our earnings targets last year. full stop. we missed. we gave guidance last july that we hit. we gave good guidance this year, up 3% to 6% on earnings. importantly what we told share owners is utc is a long-term investment thesis. these engines go out and they're on wing for 30 years. elevators you service for 50 years. we're returning capital to the shareholde shareholders. 25% of the market cap for utc. we're doing the right things for
the short-term and long-term. >> why is there no path to divest assets after a deal? why is that not workable? >> carl, the question really is how much can you divest, which we think is bigger than what honeywell has suggested. even after that, you have this aerospace behemoth that still requires approval from customers. i don't care if you go to boeing, airbus, bombardier, mitsubishi, they will all have the same concerns. >> wait a second, you spent $16.5 billion in 2011 on goodrich. i know these guys you're talking about, none of them liked it, but nobody said a thing. you got that. that was a great deal. couldn't this be like goodrich? >> goodrich had $8 billion in sales. it took sun stream from a $6 billion business to a $14 billion business. >> some integration business. >> yeah, some issues. integration savings, synergy
savings hard to do. now you're talking about taking 30 billion at utc and making it 50 billion. the overlap is tremendous. look, great opportunities. but it just can't happen. >> arealizi realize a lot chang6 years. >> you're banking your whole career on it. >> i don't know what you were doing 16 years ago, apparently you were moving like this. >> i was worried about having a job after the merger happened. >> that's my point, a lot has happened since then. utx thought they could get a deal done back then. ge found out differently with regards to honeywell, but how much has changed. >> if you think about the ge honeywell deal back in 2001/2002, we knew it would be hard for utx to do the deal, even harder with ge with some of the assets they have, especially on the aerospace side. the last thing i want to do is decimate my company the way honeywell was decimated after the failed merger with ge back in 2001/2002.
dave took over in a very difficult situation, 16, 15 years ago. did a great job bringing the business back. but he had a tough time for five years. destroying that value is not what i want to do for the company. >> i want to ask about another division. you have premium fire and safety, they got premium fire and safety. you put together carrier with these climate controls, you tell me that's not a home run? you want to do that deal. >> of course, i would love to have their building controls business. i have a billion building controls business, you put them together, there's a real synergy. nobody is disagreeing. we have to find something else to argue about. >> last april and may, you come together, you have significant discussions over 16 engagements about a deal, then you decide against it. your stock price gets hit. they come back at you, they come back again. i'm hearing from you no way, no how this is never going to happen. it would be irresponsible for us to move forward.
>> how do you make it responsible? >> i don't think it's possibility in this regulatory environment. >> new president coming. one of those presidents might be in favor of this deal. he can stick to airbus. one of those presidential candidates would love this deal. he could get the nomination. >> he might get the nomination, but that's it, right. >> i don't know. i'm not a political fella. >> it's not often we have ceos who come on and say we might have too much pricing power. you can see how that argument rings oddly? >> sure. look, carl, we knew the merits of the deal up front. we could see the benefits of having this $100 billion business with a $200 billion market cap. having that kind of global footprint, that global reach, tremendous opportunities for cost, for pricing. but having had conversations with our customers recently, no way. >> that's what changed from april and may? >> that's what changed during the course of last summer. our stock -- >> not to mention the stock price. >> our stock went down as well.
it never got to a serious discussion on valuation. dave threw out this number of 42 billion in cash, 40% of the combined companies -- 36 billion of combined debt. you do dilution on that it's about $100 a share. you lose the credit rating, become triple b. there's more challenges around here. >> you have that analyst meeting coming up. what if you took your numbers up right here right now. >> thanks for the opportunity but i'll stand by the guidance for the year. >> your guidance is low. >> this is not about 2016 for utc, this is about 2018, 2019 this is about the next 30 years. we have to go. one final question on come a completely different topic, china, elevators, are things really bad over there? >> the market is down 10%.
elevator market will be 500,000 units. it's still half of the world elevator manufacturing happening in china. pricing is not great. the future remains. we're in china for the long-term. that's really where the opportunity is. >> last thing, is copper coming back for good? >> no. >> really? >> i don't think so. as long as china remains. china going from an industrial economy to a consumer economy. as that happens, less of a need for commodities. long-term commodities are in a downward trend. >> this new government in china, they must want more regular inspections which is a home run for you. is that true or not. >> absolutely true. regulation is coming to china. >> that's fantastic for you. >> thank you. >> got to try. >> positively no way said mr. hayes about honeywell/utx deal.
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welcome back. time for cramer's mad dash ahead of the market open. we'll talk about that utx interview in a moment. big day for jpmorgan. >> we always wonder what is this real negative about oil and gas going down. we discovered jpmorgan morgan oil and gas exposure. exposure of $44 billion. high yield. they've taken some reserves. 500 million for oil and gas. 100 million for metals and mining. maybe they were the lender. wells has got 20, bank of america has 20. jpmorgan is all over this. standard and charter had some bad numbers. a lot of that was asian oil and gas. i was surprised. they are operating with fortress principles. >> yes. >> but i don't know which fortress is looking at these numbers. >> maybe a fortress you can get
into. >> i was thinking it's not knox. it's not apache, certainly not, you know -- not custer here. i was surprised to see the very big exposure and i want to know more. that's how i'm leaving it. i want to know more. >> there's the opening bell. a look at the s&p 500. at the big board today, flex shares etf. at the nasdaq, axsome therapeutics, celebrating its recent ipo. so with just spent almost 15 minutes with the head of utx. thoughts, david? >> there's a great divergence of opinions between these two companies in terms of the antitrust risk of a deal. i'm getting some questions, like they spent a lot of time on this over the last nine months. mr. hayes or the company
described it as preliminary conversations, but i'm hearing very much differently in terms of the seriousness of the conversations that began when utx approached honeywell and was looking at very significantly a merger of equals. they were going through board composition, different iterations of structure. at one point they included a dividend to shareholders. there was a lot going on there until the stock price suffered. i'm told that they didn't really discuss antitrust. me hayes says, you know, over time our customers made it clear to us in conversations we've had, jim, that it would not be something that could work. >> right. but i think that where was that antitrust counsel when they first started happening. and the notion "ain't going to happen." the thinking, what can we divest, get rid of so this deal can come together.
sure boeing and airbus -- i have to admit the eu would be a problem. >> eu would be a problem. christine varney can say what she wants to. saying it's low risk, but that's in the u.s. eu is a different question. cynics say it was only about the top job. cote, they wanted their man running the combined company. if you switched it around, maybe you would get a different answer. i asked mr. hayes that very question. this is what he had to say. governance has always been an issue. dave has done a great job at honeywell. no doubt about that. the thought of combining these two companies into a hundred billion dollar behemoth, great idea but it's not going to happen. speculating on governance, speculating on value, while it's fun, interesting, sells newspapers and tv spots, ain't going to happen. >> ain't going to happen.
>> one thing that has happened is that he's done a remarkable job rationalizing what was basically an irrational outfit. sick co this turbo fan, is that he has, this engine is taking the world by storm. he finally has it he's with it. i would raise 2017 numbers and cote wants to get in there before they raise 2017 numbers. >> right. but do you have to imagine, let's assume that they'll -- the latest offer made face-to-face last week was for $108 a share, 22% premium on utx, $42 a share would have given ownership of 41% to utx holders. let's assume you can go holder than that. still, jim, you're talking about a year to 18 months of review
that may not end well for you. and do you really want to put yourself and your shareholders through that? that's a key question. mr. cote may be thought of the guy who can make it happen and get the synergies. but $3.5 billion. capitalize that synergy number, you're talking about huge potential, which is why honeywell is so interested. >> it's a competitive market. if you were making engines against patent whitney, would go in there and say i'll give you some engines three straight years for free. just because i -- the disarray of united technologies, whatever. they would really hurt united technologies. what's a shame is that's not honeywell's desire. it's not like -- you could argue th baker hughes and halliburton, some of that was to hurt them. none of the customers wanted that deal to happen. none. but they said nothing.
because they realized it was business. >> we'll talk a lot more about it, of course, as we dissect that interview. good stuff. covering a range, china, commodity prices, tried to get him on the guidance. >> he's really negative about commodities. he's a huge buyer of commodities. >> pretty extraordinary have a ceo say that. >> he's darn straight. >> i've done a lot of interviews, but rarely have had situation like that where they're willing to -- appreciate the willingness on their part. wonder whether mr. cote will follow through. open invitation to him. >> two straight shooters. right? one of the things that took me by surprise about hayes, he basically just tells it like it is. you're waiting for the guy to be some reserve -- he's not john ledger. >> but who is? >> that could be a good thing,
too. >> this is a man who is at the verge of doing some very tough -- taking some hard medicine to get the numbers better. right when he finally gets it, cote who had just done a big $5 billion deal says, wow. before this stock goes back to 108, i will take it. >> market caps are key. >> the goodrich deal is vunny. funny. of course nobody wanted them to do goodrich. you want our pratt and whitney, you have to take our land and gear. great combo. i have to tell you, the carrier, we didn't go into that enough. that's a killer. he said, you're right, it's a killer. never going to happen. >> never going to happen. >> we talked about home depot at the top. bringing lows along with it. masco, whirlpool, black & decker. it should. home depot is on fire every aisle. this is not even their big
season. wait until we get to seed and flat. >> you have been talking about this for a while. you nailed it yesterday. >> this company is a jugg ejug juggernaut. if you tell management that a guy sold you some great baskets, that guy is called immediately saying thank you. what about macy's, great ceo, cfo? >> macy's missed a lot of quarters. he was very more pro real estate this quarter. but in the end that company has guided down, guided down, guided down. what's amazing about depot, you have to understand they had comp growth that was already gigantic. they have what's known as a stack. two year stack of 18%. this company does not add stores. it adds in mexico. mexico very strong. incredibly strong. one store in the last couple
years in williston. wonder how that's doing. home depot is doing it by getting more money per aisle and being more in touch with the customers. >> wanted to mention valeant, has been moving down dramatically, today it's up almost 5%. been a while since we mentioned vrx. this on a restatement, not restatement on profits they took from philidor. if this is it, shareholders may breathe a sigh of relief, but there's a concern more may be coming. no idea if that's the case. >> my experience with these revenue recognitions is that the company may say how they feel, but a lot of times there's authorities. authorities may not like the shift. not so good in 2014? even better in 2015? it's not the end. one of the reason i say accounting irregularities equals
sell, the company can't clear yourself. can't clear yourself. ftc, we looked it over, all good. doesn't work like that. >> home depot is leading the dow. we're down 58 points. bob is on the floor. hair, bob. >> good morning. what is important is once again we're getting another day of sideways action. the last six, seven trading sessions we have been either up or essentially sideways. that's fantastic action overall. i want to show you how far we've come. remember the bottom? that was february 11th. hit the intraday bottom, the market turned around. the yen direction turn around. the yen started weakening again. oil generally started rising. everything changed that afternoon. so the s&p is up more than 6%. most important thing is financials are outperforming the markets. financials are still down 10% on the year. they have a long way to go when you have consumer discretionary and finlts outperforming the overall market that's always a good sign.
even energy is doing better than the overall market. the stuff everybody wanted to buy up to february 11th, telecom, utilities, naturally lagging the market. that's the way it should be when you get financials leading the way if this continues for another couple weeks, side ways to slightly up action, you will see ipo markets open up, more technical chatter. this is a good trend we've been seeing. i love sideways days. look at cabot oil and gas. another secondary. we had four of them now. not only did they price at $20 a bit below last night's price, but oversubscribed. we had four energy secondaries, cabot, eqt, den devon, energen. some have been upsized and there's a lot of buyers there. some people believe it's worth looking in who is next? i have no idea. virtually everybody could have a secondary.
anadarko, apache, murphy, marathon, all of them could do secondaries. bhp cut the dividend by 75%. freeport downgraded at citigroup. this thing was 15 dollars not long ago, now a move to the upside. here's the dividend cuts in the energy space. finally you talked a lot about honeywell and utx. we had a serious merger discu discussion going on in europe. london stock exchange and deutsche boerse talking, this may revive talks that there would be only a few global exchanges out there. that kind of bounded.
who are the big guys? nasdaq, cme, hong kong, singapore, australia. the ceo of the london stock exchange said he thinks there will only be a few exchanges in the world. looks like he's moving that direction. >> bob, thanks. let's get to rick santelli. hi, rick. >> the creep of rates continues moving higher. we crossed the threshold of 180 in a ten-year. we have not had many close above 180, since the 5th of february there's been one. if you open the chart up to get context, beginning of 2014, you can see we're flirting with the double bottom in the mid 160s. something you want to pay attention to. selling for higher rates, putting stops below that yield level. two-day bund, same dynamic.
pretty powerful. if you look at this chart, since early march of last year, you can see that the 16 through 19 area really is important with bunds. it held again as we move back into the low 20s. hyg even turned. if you look at year to date chart, of course the risk on trade is showing up in many places, not the least of which is this etf that represents high yield, not the spreads but the price value. if we look at a long-term chart study of february of '09, the pound versus the dollar, it's the talk of the town. this is a big financial kingpin out of the financial structure of london, this may change if they vote not to become or stay in the union. not on the currency but on the european side with regard to the fabric there. euro versus yen. not a common chart in many places but common down here as we flirt with three-year lows on
>> fitbit shares down sharply. earnings for the quarter came in above consensus. nobody cares about that, they care about guidance. joining us is fitbit ceo james park. james, six downgrades. people feel firmly if they had a bit more of a heads up that you would guide down in the forecast that they might be able to pull back. why did you sandbag the whole street? >> look, jim, we try to give pretty conservative guidance to the street. we had a record year and record
quarter. three straight quarters where we beat guidance. fantastic. q4, 712 million in revenue. 92% increase over the quarter a year before. 1.86 billion in revenue, 149% increase over the year before. close to 700 million in cash, no dou debt on the books. it was a great year for us. the guidance we're giving for 2016 reflects the future confidence in the business. >> james, at the same time -- i loved your call it gave all the arc i like, the narrative of health and wellness, but also, james there was an unreal -- hey, listen, we're in control. we've got it down. you don't have to worry about us. we're advertising. when i was meeting with venture capitalists, i would say we can grow this thing forever. this was a private company pitch to wall street that you gave
last night that resonated for those of us that don't care about the short-term. the short-term people must have felt, wait a second, i thought we were going to have a great year. why did he guide down so badly from everything is so good? >> before we had not given guidance. the numbers set were projections analysts had given on their own. q1, 420 million to 440 million in revenue, an increase over the quarter before. alta is looking great. order forces for alta and blaze selling well. look, we have a lot of confidence in the quarter and the year. >> i understand that, but there's a product gap i didn't count on. you have an unbelievable rollout, you say we have to
spend a lot of money but we don't have the product yet is that a manufacturing issue? software issue? or is everything fine, and what matters is the product? >> the product and long-term vision and growth of the company is what's in important. in q1 we're investing a lot in sales and marketing. for blaze and alta it's the first time in the company's history we're doing a global launch, so increased sales and marketing spend in many regions across the world. in the past we staged that over time. >> you know, we got some market data from idc about wearables. q4 up 126% or so. do you understand why i investors may be leery of hearing about yet another backwards -- back-end loaded year? >> no, the idc report is a great example of the explosive growth in this category. the data shows that we have put a lot more distance between ourselves and our competitors.
i think the data shows that, you know, we had 8.1 million shipments, versus apple's 4.1, which shows an increasing lead between us and number two. >> james, again, i thought that the china story was terrific. there really were two narratives. there was yours which is so special. so much going on. such confidence longer term. but then there were the numbers. the numbers made me feel like maybe someone is coming in, somebody else is out there. maybe nike has something i don't know about. you really did give this thing like we're the health and wellness play, but wall street does not work like that. wall street is not a big think place. wall street is about what have you done for me lately? you may still have that view, but in the end don't you still have to play by the rules?
>> the best thing we can do for share holders is continue to focus on the long-term for the company. we can't control the share price in the short-term. as long as we execute on the product plan, back it up with great sales and marketing, focus on our brand and distribution, the company's financial performance will continue to do well. therefore the stock price should do well over time. >> mr. park, is that an argument your shareholders, including employees belief in times like this when the stock comes down dramatically, and there's significant ownership among the employee ranks or a lot of their compensation, you can sometimes have a moral problem. what are you telling people who work at fitbit? >> the employees at fitbit have been through a lot. they're super committed to the business. the mission of the company to help people leave healthier, active lives keeps people excited every day to come to work. i'm a significant shareholder. i do care about the share price, but we have a business to run. we have a long-term outlook. this is one of the most
explosive categories in all of technology. >> i want to thank james park, founder and ceo of fitbit. i hope you understand there's a bit of a gulf there between the long-term and short-term and wall street does not accept that, but i understand the long-term situation. it does, i still think, looks good. i'm saying it. thank you, james. when we come back, we'll get stop trading with jim. its sleek design... is mold-breaking. its intelligent drive systems... paradigm-shifting. its technology-filled cabin...jaw-dropping. its performance...breathtaking. its self-parking...and self-braking...show-stopping. the all-new glc. mercedes-benz resets the bar for the luxury suv. starting at $38,950.
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>> time for cramer and stop trading. >> i'm reeling from fitbit, from united technologies. let's go to fcx, freeport. citi goes from hold to sell. the stock has been sneaking up. people think copper is going to do better. if you license to the answer from greg hayes, you don't want to be long a copper company. citi has said the time has happened. cabot, which is a natural gas company, selling stock at the bottom. hey, you know what? i think this call might say freeport has had a big run and i don't want to participate at this level. >> what's on "mad" tonight.
>> we have chegg, and covanta, waste energy. it's a german concept. a caller asked us about it. this is some day. i have to talk to dave cote, not just about when to take off the pool company. >> not on "mad" on here. >> can't i? it's all on one network. >> it ain't going to happen, david. it would be irresponsible to put him on the show. >> it ain't going to happen. >> how fabulous is that. >> we need longer hours. >> "mad money" at 6:00 p.m. when we come back, existing homes, consumer confidence. (patrick 1) what's it like to be the boss of you?
rick has that. >> 97 and change is what we were expecting on consumer confidence. both february reads. that's not what we ended up with. 92.2. that's the lowest level since july of last year when we had 91 even. now, we go from february consumer confidence to february richmond fed manufacturing index. that's minus 4. looking for up two to up three. minus 4 the weakest number since september of last year when we were minus 5. january existing home sales, for that we go to i diana olick. >> existing home sales, the second highest home sales level since 2007. we're up 11% year over year and the realtors are saying all
those delays from the new mortgage rules last fall are starting to smooth out a bit. this is a good, solid number. we did see december revised down slightly. what's the down side? inventory. 1.82 million homes for sale. we should be seeing supplies increase as we enter the spring home buying season. we're not seeing it we're at a four-month supply. it's not improving. six months is considered a healthy housing market. realtors are saying this could choke off a lot of potential sales this spring. median home price effected by the low supply, $213.800, up 8.2% year over year. that is a big gain in prices. we saw shiller showing the acceleration of those home price gains. realtors calling it unhealthy. we regionally we did not see hurt from the snowstorms in january,
these are based on closings, not signed contract. northeast saw sales up 2.7%. out in the west, where home prices are sky high and inventory is tight, we saw sales down 4.1%. overall this was a good number and a beat from what the street was expecting. sales up 0.4% month to month. simon? >> diana, thank you very much. 30 minutes into trade, down 54 points on the dow. stocks edging back slightly. the important point here, from a six-week high. yesterday the fourth time in six session that's s&p rallied a full percentage point or more. as you look at the chart, the s&p is up 6% since jamie dimon announced he would spend a year's salary buying up more jpmorgan stock leading to some calling it the jamie dimon market bottom. let's bring in our guests. let's kick off with you, mike.
what do you think of this consumer confidence figure that comes through at 92.2. in an environment where, of course, the fed and everyone else is concerned about what the market did in january and february but might not back into the real economy. it's a disappointing figure, isn't it? >> definitely. the thing about this number, it tends to respond more to labor market developments than equity market developments. so i think this will put us on edge and see what we get next friday in terms of the february jobs report. as it stands a disappointing number. we want to see how the real data shakes out. >> survey data, often times markets move on it and the surveys are not backed up by hard numbers. the point you're making, if i hear you correctly, usually you expect it to correlate with employment, which, by inference, i think you're saying is strong. the fact it's fallen here is a surprise? >> right. the jobs numbers both the payroll numbers and the initial claims numbers have been solid. so, it's surprising to see this
number pull back so much. it could reflect concerns about the stock market and some other things. it is a surprise. we'll have to see what the hard data next friday is. >> jeff, let's look at the big picture here. six-week high. strong rally now, quite clearly. have we reached a bottom here? what do you think? it really does change the narrative for a lot of people that we have come back as strongly as we have. >> yeah. i think you made a double bottom, what a technical analyst would call a double bottom at the 18.12 level. you had a sharp lowback rally has stopped around the 1940, 151 1950 level. we have a proprietary way of measuring the internal energy, i told institutional accounts and advisers that we would probably back and fill as the internal energy gets rebuilt. >> how correlated again do we
appear to be, jeff, to oil? we have some comments from iran where -- obviously not supportive for the oil market. if oil heads down again, does the market fall back again? >> yeah. i made the case that sovereign wealth funds have been selling u.s. and japanese stocks because they can't get enough revenue because the price of crude oil. the largest sovereign wealth funds are in oil exporting countries. i find it coincidental that crude oil and the s&p bottom on february 11th if oil stays up, i think the market will take another stab to the upside. >> let me -- what you're saying is we're not just moving on the fact that energy stocks would fall any way, it's the sovereign wealth funds that are liquidating and perhaps if oil bottoms they won't liquidate as much as they would have in other assets not related to energy? >> that's exactly my point. >> i think that's what the ecb was saying. >> michael, there's a g-20
meeting this weekend of finance ministers a few key central bank meetings come up in the next weeks or months. is there some sort of hope for a policy response to this global market turmoil and economic turmoil. >> i wouldn't hope for much from the g-20. certainly, you know, there's no appetite among the g-7 nations for coordinated policy for exchange rate intervention. we will see action in coming weeks from the ecb and the boj to lower further into negative territory, and from the fed we'll see in mid-march, you know, dots that are more dovish than the dots they had in december. that's a safe bet. >> haven't we learned that markets react negatively to negative interest rates, if ecb and boj go deeper, isn't that a risk? >> it's a risk, they're pushing up against territory. it's questionable how much further they can go here.
it's had some -- perhaps some negative, psychological implications. that seems to be what they're aiming for now, rightly or wrongly. for the fed, it's a message of more gradual pace than what they were thinking back in december. >> michael, what do you think of the fact that they're calling this the jamie dimon bottom. if you work at jpmorgan, are you allowed to call it that? i can't say that, don't say that. how do people react. >> i just focus on the economic data. >> very wise move. jeff what do you think will win here moving forward? what sectors will make the greatest gains? >> i think technology. technology trades at a price to estimated growth ratio or peg ratio of 1.4, while utilities trade at a peg ratio of 3.2. technology looks very cheap to me. i think you'll do just fine with some of the beaten up names where price has been cut in half and revenues are still doing
well. >> good to see you both. thank you very much. a very different view of antitrust risk when it comes to the potential getting together of united technologies and honeywell. this a story we reported on yesterday. the back and forth between these companies that most recently included a face-to-face proposal being presented to utx by honeywell for a $100 a share takeover of that company, $42 of that share in cash. 22% premium to united technology's stock price at the time. as i said it was offered in person. it followed letters that had been sent by honeywell back in september of last year. in which they proposed a emergenmerger of equals, and followed ahead of on that, from last april and may when united technologies
approached honeywell about a potential merger of equals. in a press release yesterday, united technologies called those talks flim ma s preliminary and explorato exploratory. others close them said there were 16 separate engagements between advisers that went over three months. barely a mention of antitrust risk. very different story when greg hayes joined us on set at post nine, when i asked him, well, was this really about social issues and the fact they wanted dave cote to run the combined company and not you? here's what he had to say. >> they bottom line said it would be irresponsible for us to pursue the merger because of the destruction in value. keep in mind we're in the process of reinvigorating utc. we have a brand-new gear turbo fan engine. we, we got 7,000 orders, we're going to be building 1,000 of these engines
in a couple years. the thought of trying to distract everybody with a merger doesn't make sense. especially a merger that is unlikely to occur. >> that's not the view of those advising honeywell. christine varney who used to run the department of justice, head of antitrust enforcement told honeywell that she believes the deal would get approved in the united states and by the eu, and that it would actually require only about 2 billion to $4 billion in divestiture. mr. hayes countered by saying they have an army of legal advisers who tell them something different. and when speaking to their customers, they also heard a lot of potential opposition to any potential deal. which, of course, would include huge synergies were it to actually happen. honeywell estimating those could be $3.5 billion. one reason why the two companies have been sort of thinking about this potential deal for a very long time. though as mr. hayes sat here, he
made it clear, at least in his opinion, it ain't going to happen. carl? >> even though we tried. >> in all your years of m&a reporting, how many companies come on with the ceo to make such a sharp refusal of a deal? >> and why is he doing that? >> it's very rare. i can remember ebay's ceo joining us, when icahn was in the stock making the case -- >> that's an activist situation. i cannot remember many. many may have cited antitrust, but not in an interview like that. >> he wants to kill any opportunity for anyone to think there's a possibility of a deal here despite the fact there's real history over the last ten months. >> and spoke about honeywelling
did decimated after the deal with ge fell through. >> it remains to be what honeywell's response will be. they made a choice not to follow up by making that knowledge public, not going to share holders and press their case. now do they want to come back and share the view that mr. hayes has done this forcibly? >> it can't be done. >> that's what he said. >> let's go to eamon javers. >> attorney general loretta lynch a few minutes ago weigheden weigh eed in on the issue of apple and the fbi. >> it's our obligation to leave no stone unturned to take every investigation to its fullest effect. when we are faced with a challenge to try to work with --
whether it's a company or individual, and when we can't resolve it, we do what lawyers do, we go to court and ask for a legal resolution which is where we are now in the current apple case. >> loretta lynch also said something that struck me as something interested today. talking about the value of law enforcement in gathering digital information in this modern era of investigation. she said the digital information is as important or more important than all of the other stuff that investigators used to go after, which was written records, documents, tape recordings and the like. they're focused in the law enforcement community on what is on peoples smartphones, that's where we all live our lives. loretta lynch re-emphasizing the value of this data to the fbi. >> and why this case is hitting a nerve on both sides. eamon javers, thank you very much. when we come back, macy's reporting strong sales and a fourth quarter earnings beat. is the stock now a buy? "squawk on the street" will be right back.
shares of macies are higher as the company beat estimates. terry lundgren talked about what drove the fourth quarter earnings. >> the business got better in january, you know why? got colder. makes a difference in the fashion apparel business. business got better, earnings improved as a result. that's why the quarter got better than we anticipated. so for more on the macy's story, let's bring in the ceo of
telse adviser group. was it just the weather or has macy's turned a corner? >> i think they were able to clean out inventory because of the weather. gross margins were worse than expected. they took the hit to keep that inventory clean. going into 2016, in order to be able to manage margins, you need clean inventory. the focus on new product and innovation, whether it's jewelry, what they're doing with the millennium floor, they're trying to reinvent that whole department store. >> clearly he used the conference call, the interview, even the press release as a pep talk that the bad performance last year will be turned around. they're working on it. what do you think of their strategies to do so? when do sales go positive again? >> i think you're still going to flow through the first quarter. it's going to continue to be a challenge. we don't have the tourism in the flagship cities that we had in the past. i think also, the combination
with omni channel and what they're doing to integrate digital, mobile and online with the stores, that takes time to play out. they're certainly one of the ones ahead of the game. this year the guidance is for lower same-store sales, and we'll see the back half potentially stronger than the first half. >> investors are wondering if that means it's time to buy the stock. i know you last had a $40 price target. macy's is trading about that. what do you do with it now? >> one thing we're seeing is the valuations of department stores are coming in at depressed levels. certainly with improved sales, there's opportunity for those valuations to move higher. but it takes patience. >> dana, it's carl. terry talked about the consumer saying eventually they'll come back to our category. in his words, how much cars do they need. how valid of a question do you think that is? the theory a lot of people have, they call it peak auto.
>> one of the things we're seeing is that it's not just autos. durable goods overall have been outperforming what we've been seeing in terms of regular apparel. the services area, whether it's services with experientiaexperi we've seen consumers distribute their dollars wider than ever in the past. we are beginning to see the change, look at 11 million loyalty members that macy's has. they're poised to show improved growth as we get further along in the year. >> when we think about macy's competition, we always think about amazon eating their lunch, the growth of the online retail apparel business. how much, though, is it the off-price retailers? the tj maxx's of the world that are loss doing quite well and
posing a threat to macy's. >> we are seeing off-price do well in the past. macies is entering that arena with the back stage concept. we will hear from tjx tomorrow. better brands have come into the off-price arena and you're getting better quality products and brands at cheaper prices than you ever have had before. that's why you're needing to see, whether it's accessories or cosmetics, you need the categories that deliver high margins to continue to be part of the growth drivers of department stores. i think off-price will continue to grow. >> i wanted to ask you about these reports that we've been seeing, wwd and business insider covered it, that amazon is getting into its own fashion brand? launching trademark brands. is that macy's worst nightmare? >> i think we're seeing amazon get into every category. the private label that amazon has, i don't think it's just a nightmare for macy's, it shows
the apparel area is more competitive. basic apparel is priced very competitively. what's the new distinctive item you will do to be different? that's what you saw at the new york fashion week last week. >> all right, dana. thank you very much for joining us on the macy's story. >> thank you. >> dana telsey. >> thank you. we have sad news to share. donald drapkin, m&a attorney and most recently ahead of the activist hedge fun, casablanca capital has passed away. he was 67. make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant.
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that comes a day after opec said any opec cuts would be met by producing u.s. shale. we'll keep our eye on oil, down 3.5%. >> iran's oil minister making some fairly negative comments about a production freeze. straight ahead, president obama set to give a statement on guantanamo bay. he will present a plan to close the prison. the question is whether it will get past congress.
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a live shot of the white house, the president suspected to speak in a few minutes, unveiling a plan to close the prison in guantanamo bay. john harwood joins us with more and what the response may be in congress. this is something president obama has committed to do in the 2008 company. it fell to the end of his priority list while doing other things, like the recovery act, healthcare, dodd-frank, limt change. now he's trying to see this priority through before he leaves office. now, i was on a conference call earlier with senior administration officials outlining the plan. they say there are 91 prisoners
left in guantanamo. they hope to transfer 35 to foreign countries over the next several months. that would leave fewer than 60. they priced out cost estimates for congress and said it would be cheaper to house those 30 to 60 people that they expect to be remaining within the united states than it is to house them in guantanamo. i don't think the administration expects congress to approve this plan, fierce resistance from presidential candidates as well, and the white house has not ruled out using executive authority as commander in chief to effectuate this plan if congress does not go on. on the call, senior officials were asked over and over, what's your deadline for congress? what will you do if congress doesn't act? they say time is of the essence. we need to do this now. that indicates this president is inpatient to get this done even
with some political risk and at the risk of litigation that could tie up the potential fulfillment of the goal. >> i think it's worth pointing out what the administration is doing here is responding to a 90-day legal deadline which was set to come up with a plan. congress made it illegal to take prisoners into the united states. i think there was a message from the joint chiefs recently saying the president would not use executive power. >> hi, everybody. in our fight against terrorists like al qaeda and isil, we are using every element of our national power. our military, intelligence, diplomacy, homeland security, law enforcement, federal, state and local, as well as the example of our ideals as a country that's committed to universal values, including rule of law and human rights.
in this fight we learn and we work to constantly improve is when we find something that works, we keep on doing it. when it becomes clear something is not working as intended, when it does not advance our security, we have to change course. for many years it's been clear that the detention facility at guantanamo bay does not advance our national security. it undermines it. this is not just my opinion, this is the opinion of experts, the opinion of many in our military. it's counterproductive to our fight against terrorists because they use it as propaganda in their efforts to recruit. it drains military resources. with nearly $450 million spent last year alone to keep it running.
more than 200 million in additional costs to keep it open going forward for less than 100 detainees. guantanamo harms our partnerships with allies and other countries whose cooperation we need against terrorism. when i talk to other world leaders, they bring up the fact that guantanamo is not resolved. moreover, keeping this facility open is contrary to our values. it undermines our standing in the world. it's viewed as a stain on our broader record of upholding the highest standards of rule of law. as americans, we pride ourselves on being a beacon to other nations. a model of the rule of law. 15 years after 9/11, 15 years, after the worst terrorist attack in american history, we're still
having to defend the existence of a facility and process where not a single verdict has been reached in those attacks. not a single one. when i first ran for president, it was widely recognized this facility needed to close. this was not just my opinion. this was not some radical far left view. there was a bipartisan support to close it. my predecessor, president bush, to his credit said he wanted to close it. it was one of the few things that i and my republican opponent, senator john mccain agreed on. so in one of my first acts as president i took action to begin closing it. and because we had bipartisan support, i wanted to make sure that we did it right.
i indicated we would need to take our time, do it in a systematic way. and that we had examined all the options. unfortunately during that period where we were putting the pieces in place to close it, what had previously been bipartisan support suddenly became a partisan issue. suddenly, many who previously said it should be closed backed off because they were worried about the politics. the public was scared into thinking that, well, if we close it, somehow we'll be less safe. since that time congress repeatedly imposed restrictions aimed at preventing us from closing this facility. despite the politics we made progress. of the nearly 800 detainees held
at guantanamo, more than 80% have been transferred to other countries. more than 500 of these transfers, by the way, occurred under president bush. since i took office, we've so far transferred 147 more. each under new, significant restrictions to keep them from returning to the battlefield. as a result of these actions, today just 91 detainees remain. less than 100. today, the defense department, thanks to very hard work by secretary of defense, ash carter, as well as his team working in concert with the office of management and budget, today the department is submitting to congress our plan for finally closing the facility at guantanamo once and for all. it's a plan that reflects the hard work of my entire national
security team. so i especially want to thank ash and his team at d.o.d. this plan has my full support. it reflects our best thinking on how to best go after terrorists, and deal with those who we may capture and it is a strategy with four main elements. first, we'll continue to securely and responsibly transfer to other countries the 35 detainees out of the 91 that have already been approved for transfer. keep in mind this process involves extensive and careful coordination across the federal government to ensure our national security interests are met when an individual is transferred to another country. so, for example, we insist that foreign countries institute strong security measures. as we move forward that means we'll have around 60 and
potentially even fewer detainees remaining. second, we'll accelerate the periodic reviews of remaining detainees to determine whether their continued detention is necessary. our review board, which includes representati representatives from across government will look at all relevant information including current intelligence. if certain detainees no longer pose a continuing significant threat, they may be eligible for transfer to another country as well. number three, we'll continue to use all legal tools to deal with the remaining detainees still held under law of war detention. currently, 10 detainees are in some stage of the military commission's process. a process that we worked hard to reform in my first year in office with bipartisan support
from congress. but i have to say with respect to these commissions, they're very costly. they have resulted in years of litigation without a resolution. we are therefore outlining additional changes to improve these conditions which would require congressional action and we'll be consulting with them in the near future on that issue. i also want to point out that in contrast to the commission process, our article 3 federal courts have proven to have an outstanding record of convicting some of the most hardened terrorists. these prosecutions allow for the gathering of intelligence against terrorist groups, it proves that we can both prosecutor wrie terrorists and t the american people. terrorists like richard reid, omar farooq, faisal shahzad who
put a car bomb in times square, and tsarnaev, they were all convicted in our article 3 courts and are behind bars here in the united states. so, we can capture terrorists, protect the american people and when done right we can try them and put them in our maximum security prisons and it works just fine. in this sense the plan we're putting forward today is not just about closing the facility at guantanamo, about dealing with the current group of detainees, which is a complex piece of business, because of the matter in which they were originally apprehended, what happened. this is about closing a chapter
in our history. it reflects the lessons we've learned since 9/11. lessons that need to guide our nation going forward. so, even as we use military commissions to close out the cases of some current detainees, which given the unique circumstances of their cases make it difficult for them to be tried in article three courts, this type of use of military commissions should not set a precedent for the future. as they have been in past wars, military commissions will continue to be an option when individuals are detained during battle. but our preferred option, the most effective option for dealing with individuals detained outside military theaters must be our strong proven federal courts. fourth and finally, we'll work
with congress to find a secure location in the united states to hold remaining detainees. these are detainees subject to military commissions, but also includes those who cannot yet be transferred to other countries or who we've determined muss continue to be detained because they pose a continuing significant threat to the united states. we're not identifying a specific facility today in this plan. we are outlining what options look like. as congress has imposed restrictions that currently prevent the transfer of detainees to the united states, we recognize that this is going to be a challenge. we're going to keep making the case to congress that we can do this in a responsible and secure way, taking into account the lessons and great record of our maximum security prisons. let me point out, the plan we're
submitting today is not only the right thing to do for security, it will also save money. the defense department estimates that this plan compared to keeping guantanamo open would lower costs by up to $85 million a year. over ten years it would generate savings of 300 million. over 20 years the savings would be $1.7 billion. in other words, we can ensure our security, uphold our highest values around the world and save american taxpayers a lot of money in the process. so, in closing, i want to say i am very clear-eyed about the hurdles to finally closing guantanamo. the politics of this are tough. i think a lot of the american
public are worried about terrorism and in their mind the notion of having terrorists held in the united states rather than in some distant place can be scary. but part of my message to the american people here is we're already holding a bunch of really dangerous terrorists here's in the united states because we threw the book at them. there have been no incidents. we managed it just fine. in congress, i recognize -- in part because of some of the fears of the number which have been fanned oftentimes by misinformation -- there continues to continue s to be a fair amount of opposition in closing guantanamo. if it were easy, it would have
happened years ago, as i wanted. but there remains bipartisan support for closing it. given the stakes involved for our security, this plan deserves a fair hearing. even in an election year. we should be able to have an open, honest, good-faith dialogue about how to best ensure our national security. and the fact that i'm no longer running, joe is no longer running, we're no longer on the ballot, it gives us the capacity to not have to worry about the politics. let us do what is right for america. let us go ahead and close this chapter. do it right, do it carefully, do it in a way that makes sure we're safe. but gives the next president and future generations the ability to apply the lessons we've learned in the fight against terrorism and doing it in a way
that doesn't raise some of the problems that guantanamo has raised. i really think there's an opportunity here for progress. i believe we've got an obligation to try. president bush said he wanted to close guantanamo despite everything that he had invested in it. i give him credit for that. there was an honest assessment on his part about what needed to happen. he didn't get it done, it was passed to me. i've been working for seven years now to get this thing closed. as president i've spent countless hours dealing with this. i do not exaggerate about that. our closest allies raise it with me continually. they often raise specific cases of detainees repeatedly. i don't want to pass this problem on to the next president, whoever it is. and if as a nation we don't deal with this now, when will we deal with it?
are we going let this linger on for another 15 years? another 20 years? another 30 years? if we don't do what's required now, i think future generations will look back and ask why we failed to act when the right cour course, the right side of history and justice and our best american traditions was clear. so, again, i want to thank secretary carter. you and your team have done an outstanding job. you have shown great leadership on this issue. with this plan, we have the opportunity finally to eliminate a terrorist propaganda tool, strengthen relationships with allies and partners, enhance national security and uphold the values that bind us as americans. i'm committed to closing the detention facility at guantanamo. i will continue to make the case for doing so as long as i hold this office.
but this is a good moment for everybody to step back, take a look at the facts, take a look at the views of those who have been most committed to fighting terrorism and understand this stuff. our operatives, our intelligence officials, our military. let's go ahead and get this thing done. thank you very much, everybody. >> okay. so, as required by congress, the president has laid out in that 90-day deadline that he had, a comprehensive plan to close guantanamo, but importantly he's given no indication that he's intending to use executive powers to further that process. given that congress has already made it illegal for him to construct or use funds to move those most dangerous people from the southeast of cuba to the u.s. mainland. let's join again john harwood, he was watching that. john, that would surprise a lot of people that effectively he's signing off now on guantanamo
this early. >> i don't know what you mean by signing off, he did not indicate he would use executive power, but he didn't indicate he wouldn't either. his aides have pointedly declined to rule that out. i think you heard a plain president obama trying to make the case in the face of bad politics, especially after paris and san bernardino, trying to make the case that president bush wanted to do this, john mccain who ran against me in 2008 wanted to do this, it's in the national security interest of the united states, but it's very, very uphill. he said he was open-eyed, not blind to the politics here. he's trying to push back against them, but this chapter is not over. i think we will see what the response is from congress. i think the president expects it to be no. then we have drama potentially to play out in the last few months of his term. >> in an election year. thank you. when we come back, the saudi oil minister is speaking now. and oil is taking a hit.
to over one hundred of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. and now you can use zip recruiter for free. go to ziprecruiter.com. welcome back to squawk on the street. i'd like to welcome my guest, former fed governor. thank you for taking the time today. >> good morning. >> good morning. listen you have written a piece that captured my imagination and attention. how congress gutted the fed's capitol coughers. we're talking about $117 million
remitted by the federal reserve. why don't you tell us how all that came to be. >> well, i guess the federal government passed the fast act which is the federal transportation act and section 32,202 they had a provision to take away the capital resources of the federal reserve all in excess of $10 billion has to be transmitted to the federal governme government. >> so the transportation bill allowed them to siefen off the funds. if that wouldn't have occurred what are these funds? where were they and what would have happened to them without that remittance? >> well, they were the capital resources of the federal reserve and the federal reserve banks. there's 12 federal reserve banks in the country as you know and they function like regular banks.
they have to have reserves if they should have any losses sometime in the future and these reserves amounts to about $30 billion as free surplus plus they paid in surplus and capital stock of the member banks and together that constitutes the capital resources of the federal reserve system and the government took away 2-thirds of these resources in one fail swoop. >> well, i know that it's very difficult to compare the federal reserve bank to a regular bank because of the issues of money and balance sheet and printing and relationship with the treasury but if this was a regular commercial bank this would have pretty much made them close their doors with respect to the set aside reserves versus the size of their balance sheet. not an issue for the fed? >> you're absolutely right. they have a capital ratio of
less than 1%. it's the least capitalized bank in the entire country. so that's not setting a good example for the rest of the banking system i would think. >> no, and we only have a few seconds left but they still have to pay interest to banks that have 2 ptd 5 trillion stashed with the fed. this will be an interesting issue which is why we'll really dig down as to how vulnerable this may leave the fed. thank you for bringing up this issue and we'll move to cnbc.com, bob. simon, back to you. >> thank you very much, rick. potentially big turning point for the markets here. we're down about 144 points on the dow. oil is heading lower. dow jones now confirming a comment from the iranian oil minister that called this idea and it's been discussed for over a week that there would be a freeze in production. a joke. iran is coming back to the market. it wants to ramp up it's
production to presanctioned levels. this was always the fear that the international community couldn't bring iran on board. it was the big caveat in any deal with the iranians. joining us now, the head of commodities research. is this why we're heading down, do you think? >> that's part of it. we had some positioning over the long president's day weekend and over the last week the market is extremely short already so we saw a rally yesterday in advance of the minister speaking today. with the lack of data the market awaits the rig count data on friday and the stocks data from the eia on wednesday and other than that there's not very much to go on so the market trades on the headlines. that's what is going on until the market sees signs that the
supply and demand side are adjusting to this new reality. >> there were people that felt that we kind of put a floor under the market because everybody was talking and therefore there was the possibility of a deal further down the line and it wasn't necessarily safe to short the market medium term as it had been. is that still the case in your view? do you think people could come back and short in the way they did before? >> there's certainly going to be macroeconomic factors that can drive this but it's true that this freeze and this talk of a freeze is something that will support the market sentiment and in effect it gives the market certainty at least if it is agreed to and it hasn't been agreed to but if it is agreed to in the next couple of weeks it could lead to a situation where there is generally a cut on or at least a freeze from saudi arabia and into the summer it
could result in their exports of their supplies to market and that will help the overall market balance going forward. >> that is the fundamental question, michael. that is what have we learned from saudi arabia. we're also getting headlines out from the saudi oil minister. combine that with the freeze you were just talking about and is the real lesson here for the energy market that saudi arabia has now changed it's position? >> saudi arabia set forth it's policy quite clearly in november 2014 and hasn't waivered from it. the interesting things from this morning is clearly that, you know, it's not realistic to expect a cut and this freezes the first step in a trust building measure and they have to wait and see if the rest of the countries will sign on. as your colleague mentioned of course the question is whether iran or iraq that are raising output would be part of the freeze and i think at a certain point, if prices do go lower
then they'll have to be part of the discussions as well but at this point they have been under the brunt of sanctions and they'll have to be reviewing their output plans going forward. >> it's good to see you. thank you for your time. michael joining us there on the breaking news effecting not just the oil market but the stock market as well. meantime, let's send it over to squawk alley. >> thank you very much guys. good morning, it is 8:00 a.m. at fitbit headquaters in san francisco. it's 11:00 a.m. on wall street and squawk alley is live.