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tv   Squawk Box  CNBC  October 8, 2009 6:00am-9:00am EDT

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england. economists are predicting that the ecb will keep its main refinancing rate at 1:00. market watchers are interested to see if the jean-claude tray shat wants to see if he give us any indication on his last night the. >> the release is set for 8:30 eastern time. polled economists expect claims to fall 11,000 to 540,000. the nation' retailers reporting september sales. that comes today as well. and they -- thompson reuters survey of analysts predict the that comps fell by % last month. that would be an improvement from august and the best showing of the year, but analysts are quick to caution a decline in comps is still a concern as it points to ongoing consumer
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weakness. you were supposed to read that. i beg your pardon. i read right past the cue. >> no, but that's good because we share everything. you know, the early mornings are a little to adjust to because nothing is the same. but did you notice you get here in half the time? >> i'll tell you, it is beautiful. they're just starting to do some new traffic patterns and big construction on route 80, so that's my excuse and it's going to get worse. but today i got here in like 20 minutes. >> that's the best thing about working these hours, you get so used to the idea that you're the only person aweigh wake. i turned illegally right on a red today, which i do at this hour, but who was watching? >> yeah. you're watching. the s.e.c. wants a jury to hear its dispute against bank of america. a trial date is set for march 1. at issue, the s.e.c.'s accusations that b of a failed
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to adequately dispose bonuses paid to merrill lynch. it is suggesteding that there is some shuffling of management that may be needed. published reports this morning say two members of vickram pandit's team were given less than favorable grades and i'm sure we'll hear more about this today. >> absolutely. the justice department reportedly probing allegations that ibm has abused its monopoly in the mainframe computer business in an attempt to keep competitors out of the space. the government is looking at whether the tech giant tried to force customers into using its mainframe computers. i ibm says that's not the case.
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>> a reform legislation would expand coverage to 94% of all eligible americans. the cbo is putting the 10-year price tag at $829 billion and says that the bill could cut federal deficits by $81 billion over a 10-year span. a senate vote on this bill could come as early as friday. we'll be speaking to senator bradley. he's talking about the cbo's scoring. we'll hear more on about later on squawk. looking at the futures this morning, the futures are sharply in positive territory now. the markets ended mixed, down, but just barely. most of the major market averages ended at their highs for the session this morning. you'll see the dow futures are up by about 83.5 above fair value. s&p are stronger, as well. we have quite a bit of data
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coming this morning. we get weekly jobless claims coming up at 8:30. that will be important for the markets. we have same-store sales throughout the morning. oil prices at this point back above $70 a barrel. yesterday after we saw the inventory numbers that showed a big spike in supplies, you saw oil prices down by about %, but this morning, back up to $70.28 a barrel opinion if you've been keeping an eye on the 10-year note is trading right at 3.81%. the big story, though, is the dollar. the dollar continues to get pummel pummeled. right now, the dollar/yen, sitting at 88.25. euro/dollar trading at 1.4768. as the dollar has dropped, we have seen a new record gold price just about every day. that's the case once again this morning in europe. right now, gold prices are at a record high.
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you're talking about up another $10.20. $1,054.60 an ounce. every day, we're watching a new record as we continue to see the dollar under so much pressure. let's get to the overseas markets right now. christine tan is standing by in singapore. steve sedgwick has the latest out of europe. you have to be watching many of the same things, as well. >> absolutely, yes. it will be very interesting to see if jean claude trichet has anything to say about it. up to now, he's been very cautious saying we have appropriate policy at the moment. a lot of exporters in the euro zone are struggling with that dollar weakness. we have a bank of england meeting, as well. the other point you mentioned
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was exporters. the basic resources are the key driver to the upside today. 3.33% higher at the moment leading the ftse up 32 points at the moment. that is what the basic resource seconder is doing. but we're looking at lloyd's growth is potentially going to have a riots issue to triple its wait to the government. lloyd's wants a rights issue. the problem is, the government would have to subskrooip scribe to that rights issue because it is a major shareholder and hence put up another 6.5 billion pounds of sterling. it's almost like michael berlioni in godfather. every time they think they're out, they get pulled back in
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again. elsewhere, as i say, it's the interest rate decisions we're expecting mid day london time and around about 53 minutes london time and 45 minutes later, we get the ecb rate decision. that's the european story. now owe out to christine in singapore. >> thanks, steve. most asian markets rose here today. alcoa's announcement led to the global recovery strength. currencies were clearly in focus today after strong jobs data pushed the aussie and the kiwi dollar to a fresh 14-month high today. the rba would have to raise rates again after hiking earlier this week. that job helped push the aussie market. the s&p and asx 200 up 1.55%, highest close in a year. the central bank of korea is likely expected raising rates.
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that made investors weary today, but the kospi managed to close a strong 1.1% higher. the nikkei in japan rising 1.3%. cautious trade, worries about the stronger yen putting a lid on gains of the exporters there. that's the action in asia. tyler, becky, back to you. >> alcoa, the stock to watch this morning. as we mentioned at the top of the program, the dow component reporting better than expected results at the close. chuck bradford joins us now with his insights. chuck, you were among the people who thought alcoa would do better than the consensus. you had him at break even. the consensus, a loss of 9 cents. why? >> first of all, i was more optimistic about the cost cutting. we all know what the metal price is. that's quoted every day, no big secret. and the metal price did go up over 20% in the quarter compared to the second. still down almost 40% year over year. but you knew the metal price was going to be up. there were some things going
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against them, like currency. because they operate in australia and canada and brazil, they have to worry about their cost. so unlike someone like a coca-cola, who would benefit from a weak dollar, they lose. so if i'm tempted by thernings report to jump in, what is your thought here? am i getting in too late or is there still room to run on it? >> i can't justify any of the prices based on next year's earnings outlook. you really have to go out and look at 2011. because i can't justify alcoa either on next year's earnings outlook. it's not there. now, there were a lot of write-offs of these companies in 2009 when they have to write down inventory values. you'll get a big bounce at all the commodity companies that did acquisitions. because they have to write their inventories up to market and
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back down again when the market fell. so that is going to be a big difference next year. but still, you really have to be pretty optimistic about 2011 and i don't know anybody who really has a good clue about what 201 looks like. this is the first dow component people are trying to report. revenue is actually up, which is surprising. revenue was better than expected. and last earnings season, we had so much of it just being cost cutting. on this one, you did see better than expected revenue, as well. does that tell us anything about what's happening as a broader gauge to the economy? >> i think it tells you more about the market for aluminum was up about 14 cents a pound. shipments were lower in the third quarter to the second. the big gain in the joef all
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bit, currency was weak. >> they said some of the strength came from china because of the chinese stimulus package. is this something that you expect to see continue thing? are you going to see it drop off as that stimulus package winds up. >> i've been going to china since the 70s. you couldn't get a legal vitae in the u.s. when we first went. you had to go to a back room guy in hong kong. china was up 20% in aluminum in august. that was really impressive. one thing i know about china, is it's continuing to boom. the numbers are going to be flaky. they had a week long holiday the first week of october and people cheated and left for holiday a few days early. they do their holidays all at once. and they started on the 28th of september. that could affect the numbers a
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bit. but china basically, i think, is doing really well. >> so bottom line me on this. this quarter and the profit that they -- i wouldn't say eked out, but that they managed is largely because of cost cutting. mr. clinefeld has cut 10,000 workers, caustic soda, the price of that has come way down. how strong is the business? >> he also had a tax cut in the quart er and a gain on an acquisition. he really did break even. but they are seeing underlying changes. for example, in the automobile industry, we went frp 120 days inventory down to 30. well, they need 60, so that's being bmt back up again. i think that's more of a fourth quarter issue than third. third we had the big sales and the cash for clunkers, but it didn't help productionit, but it does help now.
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so i think you are getting some of those gains and some of their distributor customers have very low inventories which he talked about. very small segment of their business, but it's one you focus on because you get good data. that's getting better. >> terrific. chuck, thank you very much. >> my pleasure. >> alcoa will be a marriage market driver this morning. ben lichtenstein was standing by at the cme. ben, we're looking into alcoa trying to see if we can read into our things that will look at this first earnings season. >> what was the case last quarter hopeful live will be the case this quarter. we have big components coming out later on next week. we have jpmorgan, goldman sachs, with johnson & johnson as well as google. assuming we have this continuation aefk, we will see a
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higher respond for this. assuming b again, that we could get some high results. we've had a wide otherschneider rang here and we're possibly going to make act at this major level o on the. >> again, against the yen, as i heard you guys mention a moment ago, the dollar has been getting pounded recently. another thing we're focused on here that's taking a bit of the focus away from the futures models here is the gold price as it continues to rally well up above $1,000 an ounce at this point. it shifts the focus away from some of the major markets here, but it certainly hasn't hurt anything by any far stretch of the imagination in terms of the
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rally that we've been seeing. >> do you think we're rachg the point of a dordly decline in the doorl, ben? some say it's final, but not shortly. >> i think that the fed is focused on that. but between, i think to see an all-out meltdown, we're a bit ways away from that. i believe that the fed would step up and take some sort of action. they're certainly focused on it right now and i don't think we're get to that point, no. >> we've got the weekly jobless claims numbers coming out at 8:30. after the disappointing monthly jobs numbers from last week, how much will be paid to this earnings as well.
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we've come off well up above some of the lows that we've experienced recently. but keep in mind that some of the rejection that we had seen from the upper extreme levels, as well. we're basically sideways trading right now. but again, focuses right now on the jobless claims, focus is on unemployment rate in addition to the staggering rate of foreclosures that we've been seeing recently. that's really weighing on the market. >> yeah. yesterday the of the home builder stocks got pummeled. is that a concern, too? >> i think it's across the board some of the fundamentals aren't adding up to the level we've seen in the stock market and that will be one of the major contributing.factors to hold the market below 10,000 at this point.
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>> ben, we want to thank you for joining us today. >> my pleasure. got comments? you can join fuss.the quickly when we we return, we'll have an update. tdd#: 1-800-345-2550
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♪ it's a beautiful morning i think i'll go outside for a while ♪ ♪ because your smile >> it's that time of year again where it's dark a lot later than we realize it.
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welcome back, everybody. right now it's time for our business traveler's forecast. scott williams of the weather channel is here. good morning, scott. >> good morning, becky. it looks like new york city will get a break from the gut gusty conditions that you saw yesterday. yesterday, upwards of two hours we had guts. take a look at this active radar this morning. if you are heading over to kansas city, expect some delays. the radar will look like this throughout the day. st. louis, watch out for showers. elsewhere, we are talking about flash flood watches for a good chunk of the heartland here, especially for the missouri valley. watch out for anywhere from 3 to 5 inches of rainfall. flying out of dfw this morning, reduced visibilities, dense fog advisories in effect as you move into southwest parts of mississippi and some of the parishes here to the north of baton rouge. as far as yourover all
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traveler's map, you can see dallas, thunderstorms likely to cause delays. kansas city, st. louis, call ahead. download an extra application. chicago, showers will be moving in your area, but great travel weather across new york city also as you move into the nation's capital. we're going to send things back to tyler at the news desk. >> scott, thank you very much. that much talked about home buyer tax credit may be extended and expanded. democratic congressional leaders are working with the white house now to extend that $8,000 credit past the november 30th deadline. aids say they are thinking about extending the credit to current homeowners who buy a new home. the issue was reportedly only briefly mentioned in a meeting between president obama, house speaker nancy pelosi and senate majority leader harry reid on yesterday. you have to believe that all the real estate agents love the sound of that. >> especially if it's for
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existing homeowners, as well, because right now for that tax credit, you can't have owned for six yearing on something before that. if they do bring this, though, they are likely to get some opposition on the hill. some of the republican members we talked to said we're talking about massive deficits that we've just heard about overnight and something like this you have economists who wonder, too, is this something that just spurs the man that puts us on a sugar high? >> yeah. urth to that point where you start to wonder whether we are not creating a bubble via policy. not that's there's any evidence of a fresh housing bubble, per se, but that we're throwing so much cash in various ways through monetary policy and fiscal policy into the system that, really, we're not creating an authentic recovery but rather
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a synthetic one. >> and you see this with cash for clunkers. what happened to ford sales after cash for clungers? we haven't seen people necessarily in the showrooms. we'll talk to fritz henderson asking whether we need a tax credit for cash for clunkers. >> well, you wonder, is this something that can be sustained? if there's a sharp falloff in consumer spending and there is then there's something about creating a false sense of demand. >> and this story in the times could be sort of a trial balloon, as they say in washington. >> right. >> coming up this morning, we'll have more top stories, plus the nation's retailers will report monthly sales today. and we're looking at this number and we are going to go shopping for the real store from the mall to the sandwich counter.
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the ceo of subway on the appetite of the american consumer. i can't believe it. they now have roughly the same number of stores worldwide as mcdonald's. >> as mcdonald's. some of the stores aren't that big. when i saw that number, i thought, wait a minute, i've seen the stores that are as small as a kiosk. but we have some here this morning. >> we'll be right back. ♪
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good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with tyler mathisen who is hanging out with us for the morning. >> it's a pleasure. thanks for inviting me. >> yeah, of course. carl and joe are off today, but we have a lot to talk about. david faber is going to be joining us in half an hour's time. we've been watching the futures. dow futures up by close to 85
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points above fair vau value. the s&p 500 is up by better than 10 points above fair value. the nasdaq is higher by about 14 points above fair value. this is coming as we're continuing to see a lot of strength in the gold and weakness in the dollar. >> let's check on this morning's top headlines. one reason for that strong performance in the futures is the following. dow component alcoa marking the official start to earning hes season, shares higher at this hour. there you see the bid/ask and the 4:00 p.m. price. look at that. the nation's largest aluminum producer post ago profit for the first time in nine months and many people thought that the company would show a loss. bank of america says it would meet goals under president obama's foreclosure plan starting trial mortgage modifications by october 1st. in august, b of a was cited as the slowest bank to move people to making home affordable modifications.
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alcatel-luce alcatel-lucent's ce owe says he favors partnerships and argues that alcatel needs, in his words, fix its own stuff. >> shares of marriott, the company is just out with earnings and those earnings are slightly better than expected. marriott coming in with earnings of 15 cents a share. when you try and dig into this quickly, again, these numbers just hitting. but j.w. marriott jr. saying revenue per available room declined, but it declined by less than had been expected during the third quarter. they take about leisure travelers responding to attractive promotions. they lowered their prices. leisure travelers came back better than had been expected. they talked about having solid cost controls and saying their hotels translated better than expected occupancy rates into
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better than expected earnings. so this could be a sign of some strength or some sign of a turn, a recovery of some lesh your travelers at least when you're offering big, discounted prices. marriott coming in with earnings two cents better than expectations. major retailers are out there morning. dana telsey is joining us now. dana, we're going to be watching september numbers closely because this will give us an indication of back to school sales. what are you looking for for the month? >> we think the month of september will be better than what we saw in the month of july and august. a later labor day, definitely june traffic to the first half of the month, tailed off to the second half of the month and we think that this should have added at least 200 basis points to comps with that later labor day. it should be a good month. >> is that a sign that the consumer is back in full force or is this a sign that we've been out for a while?
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what do you expect to see happening now and into the holiday season? >> i think now into the holiday season we're going up through negative compares to the balance of the year. the easier comparisons, the lighter inventories, the lower prices, consumers need to replenish and replace. we're going to see more of a pick up. it's not that we're back, but it's that less worse phenomenon. >> dana, we want to get your idea as to whether the notion that the consumer now finds not spending as fashionable as they once found spending to be. >> i think overall they're putting their money in their bank accounts. it sounded a little bit more comfort and they have at least 90% of the population employed, even though that unemployment rate kicks ticking up. people are still employed. they need to spend.
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it was not like it was a year ago or in 2007. >> who is that bad news for, that consumers spend a lot less things on apparel, things that they don't need having things they do need? when you start looking at a few shining stars, what are the companies and the stocks you're focusing on? >> i think the companies that will be shining stars, you'll continue to see aeropostale in the teen sector, certainly ross stores examine i think we'll see kohl's continue to be a shining star. and gap, it will be interesting to see how old navy does given that they're going up against a negative dece-sent. i think there will be less discounting this year than last year. overall, inventory levels should be down double digits to mid
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teens. so there's not as much on the shelves this year as last year. but the prices will tb to be negative. in a recent survey, prices on average this year have been down recently 9% compared to last year, an increase of 8.8%. >> you know, dana, when we goot the nrf numbers the other day saying they're expecting sales to be down 1%, they were paintsing this saying, at least it's not as bad as it was last year. with you you're talking about down 1% off of a down 3% or 4% year. we've never seen two years down in a row. how much of a positive spin should we be putting on that analysis? >> i think basically the retailers don't have enough to order the confidence. i can its businesses are being managed better. we need to man recovery. we're not seeing the consumer out there in full force, but we're seeing steps of improvement and hopefully that leads us to a better 2010. it will be a better christmas. you can't say it's going to be a
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great christmas. >> dana, thank you very much for joining us this morning. >> thank you. you, too. let's head to the futures pits and bob iachino, i hope i did not butcher your name. >> i'm pretty much cattle hair. i get butchered all the time. >> okay. but i can say bob. >> i can spell bob. >> if i spot you the bs, you can spell. >> spot me both bs. >> what are you looking at this morning? what do you have your eyes on the most? >> well, obviously, the alcoa numbers were out and now the marriott numbers. i also wanted to make note because, obviously, we're watching the dollar quite a bit and the strength and the commodity based currencies, the aussie, the canada, the kiwi,
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australia had a strong unemployment number yesterday, which is right off the back of their central bank raising rates. so that kind of thick can bleed into the markets. follow that up with alcoa and possibly the nine retail sales numbers and you could see a strong day. >> what do you think the dollar is going to do? if you look at it right now, where do you think we go in this fourth quarter and into 2010? >> on the medium term, i think it's going to remain rocky. i don't think there's any significant dollar strength on the horizon. but it will be interesting to me the time i finally believe in the u.s. recovery which i don't fully believe yet is when we saw dollar strength and equities rallying off the back of that and with the amount of debt that's been taken out, it's interesting, there's a study that i read in the paper yesterday, i believe it was the wall street journal that talked about the rise of the sort of
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weaker economies, some of the emerging economies, i'm sorry, the return is there, but the risk doesn't seem that much worse than being in the dollar base or the yen base right now. >> thanks so much. i appreciate you coming in. shares of marriott, coming in better than expected, talking about how revenue per available room was down, but down by less than expected. they said leisure travelers were responding to some of their deals. they say that investment spending in 2009 is declining by more than 50% from the year before. and they say they will not be able to give guidance as expected for the year 2010. at this point, it's too difficult to get around the lay
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of the lapped. >> the one thing, becky, that i'm focused on, you mentioned a few minutes ago in one of the prior segments, what are revenues doing? >> right. >> look at the revenue there for marriott international. $2.5 billion versus $2.389 billion. >> that was the estimate. they came in better than expected on this. >> and the same thing with alcoa, a little better than expected. that is a croakus, a green shoot to use the phrase there. >> but to show revenue -- and i guess the question is, revenue versus expectations and revenue versus prior years. >> prior years, prior quarters. maybe not great news if you're looking at we're back to normal. but maybe we're better than the market had been anticipating. earnings are continuing to come out after the kickoff of earnings season yesterday with alc
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alcoa. if you have any questions or comments about anything we've been talking about this morning, fuch an opinion with the earnings, e-mail us, squawk@cnbc.com. still to come this morning, it is more than just lunch. so they tell me subway's ceo is coming up next. we will get his take on the consumer and the state of the economy. believe it or not, subway can tell us something about what's happening out there in the economy. please help me welcome a long-time friend of glencoe baseball.
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welcome back, everybody. let's take a look at this morning's headlines.
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a chevron executive is calling for investment in natural gas. the company's head of global upstream in gas arguing that more than $5.5 trillion will be needed over the next 20 years. chrysler's ceo says operating profitability is possible within 24 months of the automaker. he says chrysler does not need cash from fiat. the company is heading for an ipo next year. fiat's level of ownership will be unaffected by all of this. tile ler, are you right behind me me here inspect. >> i can almost see. >> sandwiches, beckoning. when it comes to dining out, consumers have been tightening their belts. 60% of restaurant owners say traffic is down as is spending. that is according to a recent survey. meanwhile, subway is among those offering recession friendly
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fare. consumers are biting. with us, jeff. i have to ask you what your title means. >> it means that we have an entity that runs all the marketing and advertising from subway that's separate from the company that does the franchising and the operations and i run the advertising entity. >> and your advertising, i must say, have been extraordinarily interesting. jared, and other things that you do. he's the face, the body. >> he's been the face and body for ten years now. so he lost weight and became a phenomenon, kept the weight off, but we had to broaden it into a $5 footlong. >> that has done extraordinarily well. >> yes. >> why? >> fist, we introduced this right before the economy collapsed in march 2008. so believe it or not, we've had $5 foot longs for 18 months now
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and it's become a multibillion dollar brand for us. it hit a hot spot for consumers. great food. it is fresh, it's customized, we'll hit a lot of things important to consumers in a good or bad economy. it's interesting. the woman that was on before, dana telsey, they came out last week and said $5 is now the second most important price menu. and we created that a year and a half ago. >> you did that in march 2008. was that because you're lucky or you saw something coming? >> no, really, we identified that even back then, value is important to consumers and it became even more important as the economy got tougher and unemployment increased. so it was an opportunity for us irrespective of the economy and now it's a core part of our business. >> i want to talk a little bit, we were mentioning earlier, the number of subway locations. some of them are stores within
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stores. others are freestanding locations. >> yes. >> you've got, what, 33,000 worldwide? >> closing in on 33,000 worldwide. we have more than mcdonald's here. >> now, you know and i know that chains that overexpand run into trouble, gap, starbucks. >> yes, we do. >> lots of them do. >> yes, they do. why are you different? or are you? >> we're different. we expand at a pretty linear pace. we're expanding, looking for trade areas where they don't have much opportunity to cannibalize other stores. some of the other ones that we put inside stores are different than the ones that might be a mile down the street. so our franchisees are savvy. >> do your franchisees push back and say, hey, you're putting a store too close to me?
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>> i think there's a natural and it keeps stores going in the right places. >> but it's 40 a week or something like that, right? >> it is. but there are a lot of people here and there's still a lot of trade areas if we pick the right ones where there's consumer demand. wh . >> what have you seen in terms of traffic over the last 18 months since you've had this? >> initially, there was a huge surge and it's tapered off a little, but we've maintained the traffic increases for the most part that we got back when the economy was better. so it's been successful. it's a product that we'll can eat every day. it's affordable. so it's really met the economic needs of the consumer. >> my brother-in-law who recently lost 45 pounds, he goes to subway every day and gets the same thing, which is a chicken salad with a vinaigrette on it.
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do you -- you sell nothing, i understand, that is fried. >> that is correct. we don't have a fryer in the restaurant. >> and i imagine that a lot -- but one of the attractions, that's absolutely true. >> so on and so forth. you hear all this talk about americans eating healthier. i kind of don't buy it. >> it's true. people typically don't eat the same thing, three meals a day the same day. your brother who will eat the same sandwich every day will probably compliment that. there's issue with fat, sodium. some people want to watch their salt intake. health is a trend but i think it's a long-term trend. >> thank you very much and
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continued good luck to you. >> thank you. >> i can't remember what your title is. ceo of the franchise trust. >> subway fund advertising trust. subway is what we're selling. >> looks like little subway things we have in new york. >> thanks. >> appreciate it, jeff. thanks a lot. >> bye-bye. >> coming up this morning we have legendary money manager and julian robinson's manager and making a load of money. very interesting calls, picking crashes before they happen. now he's got a new title, "squawk box" guest host. boston men will be joining us for the next two hours. we'll be right back. >> this cnbc program is brought to you by british airways. discover how you could do business face-to-face.
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stock market futures showing some strength once again this morning. you're talking about futures now 80 points above fair value. also we've been keeping an eye on gold prices. i it's at a record level once again trading at $1,054.70. gold prices are something to watch this morning. when we come back we'll have more of this morning's top stories plus a dynamic duo of "squawk box" guest hosts. two of wall street's most powerful players. they are spending the morning with us. "squawk box" will be right back.
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when the biggest names on wall street want to be heard, they came to "squawk box" first. in this hour a double dose of guest host. five star fund manager and the former right-hand man at tiger management. they are investigating ideas their next moves and how you can
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profit. bringing his expertise to "squawk box." head of research at goldman sachs shares his thoughts on the economy. then a special "squawk" summit. three corporate leaders join us for a special 30-minute conversation on the auto industry and beyond. auto nations mike jackson, general motors ceo fritz henderson and american business visi visionary from the auto industry, the role in america, how financial regulation changes and health care reform could change the business landscape. as the the second hour of "squawk box" begins right now. praef. good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with cnbc's managing editor tyler matheson and david faber.
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gentlemen, thank you very much for coming in this morning. >> thanks for having us. >> we have a ton of stuff to talk about. we have a big show. >> and two great guest hosts. >> we're going to get to these guys in a second, but i'm thrilled to have you here. >> i don't think you and i have been on a set together since the old building. >> 2002, 2003. >> so anything could happen today. >> anything could happen today. >> exactly. >> there's just a little more to love. >> if you guys are going to schmooze, let's dr. love over here. >> bank of england, we've been waiting to hear what they do with their rates decision. they are deciding to do nothing. they are leaving key rates at .5%. just out. a lot of stuff happening. we've got earnings coming in plus biggest and brightest names on wall street. all this news is coming together so let's debt started right away. >> give you some top stories
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here at this hour at 7:01 on the east coast. what's being called the most important earnings season of 2009, since the last earnings season of 2009 is finally upon us. alcoa gives it a positive start yesterday after three conservative quarterly losses. a surprising profit, $0.4 a share analysts expected $0.9. they reached $4.6 billion from the prior quarter. there you see the bid ask from yesterday's close at 14.20. justice department alleged monopoly from ibm. the group says ibm abused dominant position and kept competitors out of the market by not allowing its software to work on non-ibm mainframes. we have heard or heard alleged in the past about some other companies. ibm says the allegations are without merit. and in washington, cbo's much
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anticipated cost analysis shows the health care reform bill moving on the senate side would reduce deficits by $81 billion over ten years. report clears the way for the finance committee chairman max baucus to push for a panel vote within the next few days and take legislation to the floor by the end of the month. those are stories making millions this morning. becky. >> david faber just mentioned, two special guest hosts joining us. legendary investment officer and the president of argonaut capital. also managing director of tiger management. gentlemen, welcome. it is great to have both of you here this morning. we've been talking all morning long. we started off camera but also we've been watching what happens happening with the dollar.
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david you've made some calls, the collapse of the british pound. when you look at the dollar do you see another potential collapse. >> i don't think a collapse but i think the dollar is in trouble, trade deficit is in trouble. the fed made clear they are in no mood to raise interest rates. the economy is supported by public stimulus and private sector demand is weak. by contrast things have improved elsewhere and there is clearly desire to dwerify reserves out of dollars. the time being the dollar remains under pressure. >> mario, he said this is not something you would be making a major -- >> what we do is different. the last 12 months you've had every company reporting and the dollar strength was a headwind when you translated revenues. so companies like coca-cola,
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procter & gamble will get higher revenues and higher profits. that will be helpful for these big companies that are global. >> in the case of alcoa a headwind against it. earnings are stronger than expected but when you start putting the dollar into that scenario, some companies of suffer. >> alcoa, they reacted not because of when they reported but will incur going forward. then you focus on the balance sheet. david just came back from china. mainly inventory rebuild and consumer demand. i don't want to preempt your two-week trip. >> things are strong in china at this point. >> seemingly so. >> we'll get -- >> their banks lent enormous gdp in one year. >> huge. funneled through the state on enterprises, largely to construction activities. one of the things i hope we'll get into on the show, whether
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that's sustainable or ends smoothly or not. >> is it? >> i think it is for the time being. the scare -- the alternative version of the story is they are at the end of an overinvestment binge, money supply is slow and they will have a hard landing as a result. i think it's unlikely but possible, something to hone in on. right now consumer demand is up. >> that's what i was doing to ask you, what about chinese consumers. they have been not particularly robust spenders. have you seen that change? >> clear evidence in china. you see it in the numbers whether or not you trust them or not, 15% annualized growth in retail sales. you see it in some of the companies. >> is that good for american companies that would sell consumer products? >> not necessarily american.
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it could be anybody. >> whether john deere or export of our agriculture products or entertainment products or whether it's walmart. >> where i was in china in july. >> they sell $2,000 bottles of wine and sell a few every couple of weeks. upper class in china. but again it's not a consumer-led economy, it's an export-led economy. >> some of the biggest beneficiaries in the pick up in consumption are our manufacturers. a surge of auto sales from china. the biggest winners, the koreans. they are major beneficiaries of that. you see significant pickup in flat panel tv sales, significant external content for the devices as well. but there's no doubt that the consumption picture has improved. similarly there's no doubt that the government would -- your plan is doing all it can to try
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and push growth in the interior part of the country to facilitate consumption there. if they get that right, pull that off, they can reduce their dependence on capital spending, fixed asset, investing, and shift -- >> you're not concerned they are building a bridge to nowhere with all this enormous government-mandated lending for banks going on for construction? >> i am concerned. the airport, put ours to shame. look, this is a very big country. if you think about the level of per capita income. we're doing some work on this, not complete. the bull case here is that the level of economic development not dissimilar to where japan was in the early 1970s but they don't have the labor
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constraints. they don't have the external balance of payments constraint china had. finally don't have the research constraints. they can simply buy the companies, the resources they need. so the limits to growth in china i think are a ways away as long as policy is conducted effectively. the negative story, one that says they have overinvested already. they have made a lot of bad bank loans on the back of this, and the chickens will come home to houston and look like japan circa 1989. i don't think we're there. i think we've got time. >> the other thing happening, this could make you so happy, return of deals. a lot of mergers and acquisitions. a couple of them that you've got the game on, including what's happening, talks about nbc
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universal, teaming up with comcast selling a majority ownership position to them. you own vivendi, comcast, what do you think about this deal? >> what's been announced by some at this table, discussed or laid out with strategy, i think it's a win-win for everyone. nbc universal is going to be put in play by vivendi, for whatever reason. whether a gdp bill, telephone company in brazil, $2 billion topped by telephonica. they want liquidity for that. that dynamic set in play the next motion. that motion is obviously comcast, which wants content, says, hey, i have an interesting idea. let's put it together of the numbers were compelling. the company, general something, goes from $9 billion in debt to a big pot of cash, which they can then put and buttress up their financial entity, which is kind of their achilles' heel. >> some comcast holders afraid
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of brian roberts wanting to get into content. you think it's a good way to get into content. >> $6 billion in cash, 51% looking at pro forma in these companies, wow. >> everybody seems to be marking it up. those cable networks comcast, i don't know if they are work $6 billion. >> it's bid ask. >> they are the enetwork. >> golf channel. >> and versus. >> regional sports networks combined with nbc sports could become something interesting, at least that's what i'm hearing from people around and close to the deal. they see that as a possible -- >> david, 12 times or 10 times of ebita. >> let's hope so. >> they have other assets. >> this is not a deal. >> this is on a path, i've
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reported this any number of times. the latest update is that talks continue and are going along. many people close to them expect this has a decent shot of occurring. of course ge keeps warning pr in washington, they keep thinking there's still newspapers out there and we've got to protect that business. >> ge willing to make nbc universal a core asset and essentially give up control of the company? >> i'm not surprised at that. basically, wright is gone, welch, new issue, the debt and finance but i'm not going to speak for ge, i'm just going to talk about comcast. the economics aren't that bad when you lay out all the numbers in terms of the value. control is a different issue. >> when you start talking about the combination of the two, part of the add in value would be combinations we haven't seen before. cable companies that can actually control content. that's going to set off bells in
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washington. >> go back to 1972 when prime time access rule came in. today you have three networks. hulu, assuming they have the airways and can solve that issue, wheres the control? >> by the way, comcast would rather not have nbc. >> hey, you've got to take the bourbon and scotch and take rum with it. >> that is what you do? that sounds like a nasty combination. >> hangover. >> more because mario has a big interest in what's happening with kraft and cadbury. both mario and david will be with us. stick around. >> comments, questions about anything you see at "squawk." e-mail us at squawk@cnbc.com. still to come on "squawk box," a who's who in the auto industry, gm chief brit
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henderson, businessman in a 30-minute segment you see only here on "squawk box." you're watching cnbc, first in business worldwide. still to come on "squawk box," the goldman rock star, jim o'neill predicted the rise in the mid anyone 90s, forecasted the strength of the euro in 2004. now what is he predicting for the dollar? we find out right after the break. time now for today's aflac trivia question. what are the only two state flags in the u.s. whose mottos are not in latin or english? the answer when cnbc "squawk box" continues. well...i couldn'e gotten by without aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really?
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now the answer to today's aflac trivia question. what are the only two state flags in the u.s. whose mottos are not in latin or english? the answer, minnesota and monta montana, whose are in french and spanish. >> welcome back to squawk. we've been watching the futures this morning. stock market futures are showing a positive open at least if things continue on this track. right now talking about dow futures up 79 points above fair
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value. we've been getting a slew of numbers, same-store sales results coming in. jobless claims numbers as weekly jobless claims come out in an hour and 15 minutes. some of the corporate headlines, s.e.c. wants a jury to hear the dispute against bank of america. trial date for march 1st. last month the judge rejected $33 million against bank of america. at issue, s.e.c.'s accusation b of a failed to expose bonuses paid at merrill lynch. >> now for a special "squawk" exclusive. the man who coined the phrase bricks and business week called goldman's rock star. jim o'neill and guest host gerstenhaber of argonaut capital and mario gabelli, chief investment officer of gamco
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investment. why don't we start off on the dollar, given a lot of conversation about that. what are your thoughts? >> i'm not sure to be honest. i was listening to some of the discussion earlier that you guys were having. you know, obviously the aggressiveness of the fed policy is why the dollar is where it is and as long as the fed stays exactly with that the dollar might weaken further. in terms of valuation which guided me over the years, the dollar is now pretty attractive against the euro and yen and main-of- many major currencies. i can't get too bearish for that reason. in addition the thing which kind of indirectly causes crisis, the massive growth of the current account deficit is solved by this crisis. a year from now, my bet is the dollar will be quite a bit higher. i don't know if you want to dive in and pick the absolute bottom. i'm not there with all the popular bears. that's a story of the past not today. >> david, react to that.
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i thought you said you thought the dollar was in real trouble. he says it's going to go higher in a year. >> well, jim may be looking at a year. i'm commenting on what's going on right now. what we're seeing are various central banks are going to tighten before the u.s. does. i think the u.s. is stuck with the current monetary policy so there's pressure on the dollar. i agree completely with jim that valuation is attractive. i couldn't agree with him more that the value of the yen at current levels is totally out of whack with economic fundamentals in japan. and i would think at some point you could have a very powerful reversal. >> jim, engage with david about a point we were talking about a few moments ago. that is the chinese consumer, which i believe you and he would have sort of vigorous agreement over. >> i'm glad you've been out there drinking $2,000 bottles of wine, david. >> that was me talking about them selling that at sam's club,
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walmart, jim. although i can't speak for david. >> you know me better than that. no $2,000 bottles of water. >> you only go for the $3,000, right? >> i find this is the biggest story of our time. it's good for here, dave, having been here and heard that. you need 25 planes out of jfk every night and a lot more people in the u.s. going there and realizing what's going on. the story behind the global recovery here and the beginning of the story for the next decade is the emergence of the chinese consumer. it continues to astonish me how few people around the western world, particularly western states realize this is trting. it's a huge, huge story. >> can it be sustained? i'm sure you've heard enormous stimulus by the government. the government can essentially -- bangs don't keep things on reserves. when they get money they have to lend it out.
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enormous amounts lent out in terms of gdp, something we haven't seen in a western country as bad as things have gotten. >> i think in terms of that, what complicates the tactical thing to do with some markets here, it's quite possible the case chinese growth might actually slow a little bit. we reckoned second quarter growth was 16.5% annualized. the chinese, partly because of these concerns they have heard a little bit of, put the brakes on. i think in the next couple of courses growth might slow the way you guys look at it, year on year, accelerate 10%. this is only a tiny part of the story. the other thing that's really going on in the background on top of the stimulus, these guys are started on the path of social security reform. when you ask, you know, is it sustainable, the chinese consumer starting from a position of 35% gdp past where
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you guys are despite the crisis. this the beginning of a massive story. we're just starting. the question whether it's sustainable in my judgment is completely their own question. >> jim, i think moving in to provide the consumer with a safety net so the consumer can start feeling comfortable about the future and start spending, that's your basic premise. >> it's beginning. i was in beijing myself a week ago. i had dinner with somebody who is a so-called party school where the next leadership is picked to go three months powwow with all our colleagues around the country. the biggest topic we've been discussing is how to accelerate, make effective broad social security reform. this is obviously a huge issue but policymakers are highly focused on it. i think together with probably better energy efficiency, the hints are to me the 12th five-year plan is dominated by
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those two areas and more related to sustaining domestic -- sorry, just to say one other thing. you know, the more i think and the more i travel, i actually think this crisis has been really good for china. it forced them to realize what many of us knew that the whole export boom was not sustainable. it's almost like doing the policymaking machine a favor. they couldn't have stopped it themselves. this crisis has done it for them, forced them to push the whole policy bias. >> in 2010, is that based on what you're talking about here or what else goes into that forecast? >> in terms of consumption and sustainability, yeah, that's right, the half of it. but in addition i didn't hear you guys discussing this earlier, i might have missed it, so i apologize, some of the leading indicators that guided us strongly since march when we first become optimistic are in
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addition and in some ways from a global perspective even more important, what are we watching. and they are all, even though the rates of improvement have slowed a tiny bit in the last month, all these things we look at are still really positive. >> hey, jim, one of the things that maybe you can address briefly is the issue of the risk that the strength in china breeds commodity price inflation that either derails china or is problematic for the rest of the world. do you want to touch on that for a moment for us. >> i think that's amongst the key issues i worry about. i think last year when we were -- the markets were playing the decoupling theme, we had oil going 150 bucks and a touch above it, that clearly became a new dilemma for the leveraged constrained west. there's some level of commodity
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price, threat. probably in addition a squeeze on real incomes. that could be a real issue. it's something we're watching really carefully. we have what we call a financial index, how we process the lead indicators. currently it's not a problem but we've got to watch it. >> final question, we have to wrap it up. a question about latvia, imf led by u.s. and japan biggest donors getting in a lot more trouble with baltics and eastern european countries. is that contained? >> i find it hilarious, the discussion on latvia. it's 1/15 the size of poland. poland has not even had a recession. i was in japan a few months ago
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and every single investors asked me about latvia. by friday i was so board, i said have you guys ever heard of poland. that looked at me like i was from another planet. >> why so much focus on latvia? >> i would say it is a symptom of this great wall of worry this crisis has left. people look to worry about everything. it goes from one thing to another every week. latvia is among the 20 things that people look to worry about all the time. in the big scheme of things, unless latvia really goes belly up and drags down a lot more countries, which, you know, by the way people have been talking about for a year, i think it's not irrelevant but it's a tiny issue in the global perspective. >> jim o'neill, global head of research for goldman sachs, thank you for joining us. >> you're welcome. if you have questions, epa
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us at squawk@cnbc.com. still to come, a check on the markets plus more of the morning's top headlines. "squawk box" will be right back. tools are uncomplicated? nothing complicated about a pair of 10 inch hose clamp pliers. you know what's complicated? shipping. shipping's complicated. not really. with priority mail flat rate boxes from the postal service shipping is easy. if it fits, it ships anywhere in the country for a low flat rate.
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we travel the economic road to recovery with a who's who in the auto industry, joining us for a look at the sector, the economy and markets. buckle your seat belt as this special "squawk" summit begins right now. ♪ >> all right. welcome back to "squawk box," everybody. this is cnbc and this is a very special "squawk" summit. we've got plenty of things happening and big guests. before we get to that, let's get a look at the morning headlines. >> thanks very much. good morning, everyone.
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the futures pointing to a higher open. one of the reasons why, yesterdayed report from alcoa, s&p, dow jones and nasdaq all looking very positive right now. among the stories we're following, ibm the subject of a justice department probe. it accuses ibm of monopolistic behavior in the main computer market. ibm is shutting competitors out refusing to let mainframe software work on ibm computers. bim says the charges are without merit. shares of marriott, hotel chain reporting a quarterly profit of $0.15 a share. $0.02 above estimates. beat wall street consensus. objecting to alleged merge are of ticket seller ticketmaster and event promoter live nation. they say it could lead to higher ticket prices and less competition. u.s. regulators have also been examining the deal. analysts say the two sides may have to change some of the terms
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to get regulatory. becky. >> the health of the auto industry after cash for clunkers that's focus for a special town hall at the school of business this morning. lucky for us we get to talk to these gentlemen first. joining us with a preview is the founder of waste management. auto nation and blockbuster. mike jackson, chairman and ceo of auto nation planned henderson, ceo of general motors. gentlemen, welcome to all of you. we appreciate your joining us this morning. we're very happy to get the chance to talk to you about all of this today. >> good morning, becky. >> good morning, becky. >> the health of the auto industry, that's something wall street is following very closely. mr. henderson, maybe we could start with you. you've been talking about how gm is doing just 90 days out of bankruptcy. so far sounds like a little bit of a mixed bag. why don't you give us your analysis of where things stand right now? >> i'd say, becky, a mixed
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picture as i think about the u.s. market. it is -- we think we've found the bottom, clearly the clunkers program had a stimulative affect. the pay back was sharp but fairly short. as we look into the forth quarter of 2010 we see opportunities for growth. small amount of growth, modest. but that's what we're ago for for next year. performance down year to year, a full point better than we thought we would be at this time going into the bankruptcy. so mixed picture. we don't like being down but we certainly like being better than where we thought we'd be. >> some of the things people have been wondering, though, are you on schedule for certain issues. there's a few areas where i believe we've fallen behind schedule in terms of the number of workers that are going to be let go and in terms of those deals, the hummer brand. >> couple of things in terms of
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manpower. we were down to a little over 47,000 people in the hourly workforce and then a little over 24,000 salaries. by the end of the year we will be quite close to our goals. that was the upas of october 7th, if you will. i guess the other thing i would say, we've added production back into a couple of plants, bringing some of the folks back from layoff with a positive, chevrolet cobalt or equinox. it's a good thing to bring people back and there's more demand for vehicles. manufacturing capacity, other cost reductions, we feel very confident on the path to get operating side of the business restructured according to our goals and capital structure side of the equation when we get that job done, too. >> mr. henderson, how disappointed were you that the saturn deal did not go through and what went wrong? >> we were disappointed.
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we had worked hard with roger penske and his organization to put the deal together. it was not a conventional deal the way i looked at it, roger involved and his organization involved we felt confident it would come together. we had the deal with roger. what went wrong, fell through, roger's long-term product fell through and he really couldn't proceed on that basis. we were disappointed but need to move on and we did. >> when you look out over the next five years at the auto industry and lo at what was going on on global consolidation, how important is it for you to have a presence in europe and how important is it to have a presence in china. japan with 10 million in production is a country that doesn't have an american presence. i don't see how that's ever going to change. is that important on a global basis to stay present in these markets? >> well, one step at a time. china is very important. the market last month, 16 million unin china. it will be over 11 million, largest market in the world this year for the right and wrong reasons.
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we expect the u.s. to recover. but china is extremely important. our position we have with all of our brands, 14% market share, leadership position and stepping on the gas. extremely important to be in the china market and we are. japan for us unimportant. it's a market that shrunk the better part of the last 20 years in a row. we've concluded our capital better served in a growth market like latin america. we have not tried to deal with the japanese market. >> opal. >> we're in the european market, chevrolet is one of the fastest growing brands in europe. that is not part of the deal, it is part of general motors, gchl good morning. when we close the deal with magna, 35% shareholder and work with partners to make our business successful collectively. >> mr. henderson, strikes me one
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of the single most popular events that occurred was the cash for clunkers program. from the data we've seen, appears to disproportionately favor import marks rather than domestic manufacturers. obviously that may not have been the intent of the government. can you address that and give a sense what the consumers want to do moving forward as well? >> well, when you just look at the data, we were the second manufacturer on the list of companies that participated or the products participated. when you look at -- we were actually the second highest volume with only one car in the top ten. i think it was number nine. what you saw was at the top of the lead table, if you will, you saw smaller cars. you saw corollas, civics, ford focus. cobalt was the best selling vehicle at the end of its life cycle. if you give a $4500 discount, top end discount on a $15,000
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car, it drove enormous interest in the cars. by the way, the second point is it also took a lot of sales away from used cars. many of the cars sold might have been used car sales. >> we want to get the other gentlemen involved. mr. jackson, credit is a huge issue in this country, consumers taking down credit balances as we saw yesterday reported by the federal reserve. what can you tell us opening up of banks, willing to finance to customers, where do things stand? >> i think it's certainly improved from the beginning of the year and from the crash after lehman brothers. but looking into next year while we're forecast ag 10% improvement in sales to $11.5 million we should not lose sight of the fact that is an absolute depression level sales for our industry for the second year in a row. and the only way you can get to a number so low is with dramatically restricted credit. now the approval rates are going up but the terms and conditions
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are much tougher. consumers are being asked to pay higher rates and being asked to put more equity into the transaction and are really struggling to come up with it. so credit availability remains an issue i think through 2010. i don't think it ever gets back to what we had in '05, '06, '07, it's still a major issue for our industry. >> wayne, you are somebody who understands business in and out. you have developed all kinds of businesses and brought them out. when you look at the landscape, what do you see? is this an economy in recovery or do you still have a lot of concerns? >> becky, i think we're at the bottom. i think we're going to be at the bottom for a while, i think we're gradually coming out of this but it isn't going to be an accelerated pace. thank fully we're in the bottom in my opinion and we're starting to move forward. >> wayne, congratulations on
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having all that intellectual power at your school in florida right now? >> thank you. it's terrific to have mike and fritz here. it's great for our students. we need more of this type of thing at the school of business and entrepreneurship. we're certainly pleased to hear them. we're going to have a town hall here in about a half hour. >> gentlemen, we want to actually hold you over for a break but we'll come back with fritz henderson, mike jackson and wayne hiezenga right after this.
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let's get back to our exclusive conversation, chairman of huizenga holdings, waste management and blockbuster and mike jackson ceo of auto nation and fritz henderson, ceo of general motors. welcome back, guys. mr. huizenga, i'd like to just sort of get your impressions of where the south florida economy is now, both in terms of real estate and in terms of sort of the consumer and travel and leisure. you're an acute observer of that
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area. you've spent most of your life there. i wonder what you're seeing and feeling? >> i think we're the same here in south florida as the rest of the country except for real estate. we have a lot more real estate in trouble here than most states do. by putting the real estate aside i think the business community is as low as it's going to get. we've got to get the small businesses involved. the small business community once they start hiring again we can gradually climb out of where we are. the real estate in south florida will take a few years yet. >> mr. jackson, as you look at employment, we're going to get another employment number later today, i believe it's jobless claims. how do you make headway, particularly in the car business, when so many people are out of work. >> well, you're absolutely right. you're not going to get back to normal level of sales or new normal, whatever you call it, until the employment situation turns. that's why i say still going to
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have depression level sales next year of 11.5, something like that. by 2011, we should be able to move back to 13, 14 billion units for the industry. recessionary level. i can't wait to just get to a plain old recession, enough with this depression stuff, and clearly the employment numbers are going to have to turn tore that to happen. i fully agree with wayne. the situation is so severe and dramatic, we be with thankful we have a bottom. anybody that thinks this is a v recovery is not being realistic. it's going to take a long time to heal. that means a gradual recovery and employment turning is going to have to be part of that. >> mike there's been a structural change in the auto industry, fixed cost, a lot of legacy costs they have to deal with, litigation versus japanese, with that out of the way, dealers fewer in number,
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strong will get stronger, automaker in a strong position, entrernlged capital, nobody will start new dealerships, used cars doing well, parts, insurance, everything is working, even with a number -- mario -- >> i'm talking about your stock. you can't talk about it, but i will. >> mario, as you know, i'm a worrier. i worry about everything. for the last seven or eight years i've been worried about the day of reckoning for the domestic automobile industry revolving around too much capacity and too many dealers. we've had that day of reckoning. the work done at gm and chrysler with the auto task force is truly remarkable. it was not a bridge but it was a revolution for the industry and now we're moving to a model that's about sustainability, viability and profitability and
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a much more rational business. in a rational world auto nation is going to win every time. relative to our competition, i think we're in a dramatically superior position than we were a year, 18 months ago. it was painful for everybody to go through and i would never wish for it, but the fact is we're well positioned when i look at, even a gradual recovery, six, seven years of growth in our industry before something stupid happens and we have to have a recession or correction. i've never been more optimistic about the outlook to the industry, both at the oem and retail level. >> mike, i gave you a high inside pitch and you were waiting for it. you slammed it. >> like derek jeter. >> anything you want to tout on your portfolio. >> going back to general motors and the industry, given that structural change that's taken place, what happens to profits
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per car going forward. >> mr. anderson. >> the truth is our structural costs or fixed costs are way down. the exit barriers associated with legacy costs have been fundamentally restructured. as i said it's about getting back to the different business model. we have more flexibility, our capacity is aligned. we aligned our capacity for 10, 10.5 million unit industry. like mike said, post world war ii, post level depression level we have up sides in terms of adding shifts, flexibility. much better position to react when things improve even a small amount. talk about mike's numbers, 11.5, too. any other year one would look at you like you're from mars, 11.5 in industry, that would have been lowest since world war ii. but it's an improvement i worry about the tier one, two suppliers, fortunately shrunk into tier one and get pricing
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power at the level they have never enjoyed in the past ten years. we'll talk about that another time. >> okay. >> mr. henderson, thank you very much. we have to wrap it there. fritz henderson, wayne huizenga, mike jackson, we appreciate it. we're lucky to be the warm-up act for your town hall in just a few minutes. thanks again. >> good to see you, wayne. >> good to see you. >> all right. we are just getting started on "squawk box" this morning. more of the amazing guest list continue. take a look at who is to come in the next hour, senator chuck grassley on tom mcmahones from wells fargo and in coming chairman of blackstone. biggest names in business all morning long. "squawk box" on cnbc first in business worldwide. (announcer) we call it the american renewal
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and at ge it means innovating, inventing and building things. it means everything from shipping a new wind turbine every 4 hours to creating some of the world's most advanced healthcare technologies. manufacturing is part of ge's belief that the american renewal is making things right here in america. the american renewal is happening right now.
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for long time viewers of the show, you may remember this video, back when we made fun of analysts in the 1990s. we went with the penguins and became a legend, one that has past, history of "squawk box" when they would all upgrade or downgrade the stock based on information you already knew. that being said, take care of that, take a look at stocks to
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watch. actually really just want to look at pepsi if we can. the company reported numbers that looked to be on the face of it, certainly pretty good. the outlook also not bad. rich goodman cfo saying as we prepare for 2010, targeting eps, $1.09. we'll take the opportunity to do strategic broad-based interests. pepsi is in the process of buying in two of its largest bolters at this point, mario. we have seen activity in the consumer area. pepsi certainly having made that unsolicited bid for both its bottlers, succeeded in acquiring both of them and cadbury being approached by kraft. we're waiting for kraft and ceo there to make a formal approach under uk takeover laws. they do have a drop dead date a few weeks hence. >> november 9th.
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>> thank you. >> they are going to do it. the question is, the cadbury shareholder and a fairly large one, what are your expectations and what do you think is appropriate for kraft to offer you when they do offer. >> chocolates are wonderful. what we did was the following. we got into cadbury a couple years ago. the reason we bought it, they were splitting off dr. pepper. dr. pepper was an interesting franchise. then what happened and what was a major catalyst was when mars and wrigley got together it was a global confectionary. maureen felt they were ready, got cost structure in place. >> they are raising financing, which won't be a problem. >> kraft is extraordinarily attractive at $26. even without this deal that stock will do well over the next several years. independent of that, cadbury was in disequilibrium.
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if you're interested in china, emerging markets, not bric, when you don't make it. cribs are when you come out of the emerging countries. cadbury is a cheap stock on its own. it was a bargain to begin with at 35, now it's 50. what happens. >> wait a second. do you like the deal as it's been presented or do you want more money? >> i have no problem taking kraft stock -- i've always said -- >> i want a kiss from irene. >> you wan a kiss but you're happy to take more stock, not necessarily more cash. >> there will be a pushback on holders that don't wan to hold kraft notwithstanding i don't see how she can't bump it up 2 or 3%. >> more with mario, david et al. when we return on "squawk box." we'll have tom mcmanus with wells fargo and later senator chuck grassley on paying for
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health care reform. all that and more when we return on "squawk box" you're watching "squawk box" on cnbc, first in business worldwide. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.
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's our friends from blackstone advisory services will tell us how to play the picture right now. solving america's health care crisis, ranking member of senate finance committee chuck grassley talks to us about getting a deal done. >> let's make a deal! >> and we have breaking economic news. we are counting down the weekly jobless claims report. "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. good morning again, everybody.
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i'm becky quick along with managing editor david faber and tyler matheson. thank you for being here. hedge fund manager david gerstenhaber and mr. gabelli. futures, continued weakness of the dollar, continued strength of gold with gold setting new records. right now the equity futures for the dow about 75 points above fair value. the nasdaq is higher as well, up by 11.5 above fair value. there are two stories we're watching closely to see about their impact on the markets today. weekly jobless claims less than 30 minutes away. nation's retailers reporting monthly sales throughout the morning. some of the other headlines we're following, alcoa shares higher. they are giving the broader market a boost as well. this is the nation's largest
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aluminum producer posting a profit for the first time in nine months. al come ark says it now expects a an 11% increase in aluminum demand the second half of the year. some people looking into this wondering if there's signs of improvement in the economy. s.e.c. wants the jury to hear the dispute against bank of america. trial is set for march 1st. last month the judge rejected a $33 million settlement between s.e.c. and bank of america and some new insights. on the state of the auto industry in the economy this morning in the last half hour we were joined by ceo fritz henderson, businessman wayne huizenga and auto boss mike jackson. >> things have certainly improved from the beginning of the year and from the crash after lehman brothers. looking into next year while we're forecasting a 10% improvement in sales to about 11 point 5 million we should not lose sight of the fact that is an absolute depression level sales for our industry for the second year in a row.
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and the only way you can get to a number so low is with dramatically restricted credit. >> up 30% year-to-date. our next guest says remains on the sidelines, tom mcmanus chief investment officer of wells fargo. as we look at same store comparable sales numbers, a mixed bag. abercrombie better than estimate, american eagle and gap worse. goes to the question you've been following which is to say consumers, investors willing to part with their cash and buy thins or put it to work in more risky assets. what is it going to take to get investors to come off the sidelines and in a bigger way even than they have move money back into risk assets. >> well, i think it's been happening. it happened slowly at first in the spring and it's been speeding up. i think the market became
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oversold in the winter as a lot of investors were concerned about the value of their accounts and dumped stocks and put money into treasuries and money market funds. we see a lot in money market funds but seem to be dribbling back into stocks as they go higher. >> now, let's talk a little bit about the where the money is going. what kinds of stocks does the money seem to be chasing? >> well, i'm not saying it's necessarily chasing. i think that's what remarkable is how little cash people had at the top. at the top it looks like the overall asset allocation of retirement funds invested in mutual funds were only about 5% in cash, another 15% or so in bonds and the balance in equity. now they -- >> let me get you to change gears for one second. >> sure. >> one of the issues strategists like you have to focus on all the time are what are stocks worth. some interesting research reports out recently from you,
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from some of your competitors that suggest that the market is probably fairly valued at current levels. now, i'm an economist, not a strategist, i don't have to worry as much about that. the question i have is the following. american business has done a great job cutting costs. that's one reason that the profits are coming in the way they are. without top line growth in a comparatively weak economy, what can happen from here to take this market higher, can it go higher, are we now at a pint where it's a market of stocks and look for disappointments in areas. >> it's definitely a market of stocks. one of the reasons stocks have done well this year is because earnings have come in better than analysts were expecting. so analysts weren't expecting the level of cost-cutting companies were able to effect so far this year. aggregate profits are still dependent on the trend rate of growth for gdp. me believe potential gdp will probably downshift as investors
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and consumers actually raise their savings rate to try and rebuild their investments after a year like 2008. >> so what's the answer to david's question that in other words -- are people going to continue to pay for margin improvement, tom, or do we need to see revenue growth? you didn't indicate we were going to see it. >> i think we will see revenue growth, it will just be along a slower trend as we move out three, five years into the future. i think we're already starting to see revenue growth in emerging markets. i think revenue growth in europe will be disappointing a while. i think revenue growth domestically will be disappointing. the markets themselves, businesses based in the u.s. that have exposure to emerging markets are in better position than domestic oriented business. >> that is because, let's come back to the consumer and tyler's original question, 7% of gdp, consumer savings going up, debt
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is going down, how does that figure into a positive outlook for the u.s. >> one reason there is so much cash, a lot of consumers are shedding assets, raising cash, and paying down debt. they are deleveraging. they are shrinking their balance sheets. in the meantime, however, a lot of other consumers are stuck because they are either unemployed, their portfolios are down. their opportunities are down. they are not seeing wage growth, therefore spending is down. that's what happens in a credit crunch as al greenspan pointed out the only company that can get a loan during a credit crunch is a company that doesn't need a loan. the good thing is that the fed has managed to open the pipes of credit flowing first to -- between banks then to better companies as you see a lot of companies able to raise money in debt markets. ipo is opening again. credit is beginning to flow. >> tom, given your outlook, are
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we likely to see a double dip with obvious implications for the market or a smooth hand-off from the government sector driving growth to a disabled private sector going forward? >> i can't pretend to know whether we're going to have a double dip. i think right now the market seems to be building in the expectation of a normal recovery, normal as measured by the last, say, eight or nine recessions in the u.s. this one seems to us, anyway, to be a little bit abnormal, a little bit more like the last two recovers. each of them was called a jobless recovery because it took a long time for us to get back to the old highs in terms of non-farm payrolls. so the aggregate level of profits, it will take a long time for us to achieve that same level of profits that we had at the top in 2006. >> tom, i've been sitting here listening for the last three minutes, i'm trying to figure out what is your actual outlook,
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are you positive or negative on u.s. stocks. >> i think investors can be fully invested today relative to their benchmarks as well as they are focused on some of the companies that, say, mario has talked about. i heard him mention kraft, for example, as an attractively valued stock. i think that there are certain areas of the market that might have more risk if we have that double dip that david gerstenhaber just mentioned. i think that overall we still are coming out of a very deeply oversold condition and investors with a three to five year time horizon can be fully invested relative to their bench marks. >> tom, thank you very much. appreciate you being here. >> mario, i want to ask you a question. we were talking earlier about the weakness of the dollar and what this means for companies. we have a viewer who wroin and asked if this is something you're now assessing. when you look at companies, does this change the way you look at
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companies? >> there's no question. s&p, 40% come from outside the united states. so now if you can sell more widgets in china, more in europe, if you're a consumer products company and you're translating those earnings you get higher revenue, you get higher profits and your multiples are reasonably low. these companies, big strong companies are going to show terrific growth at an extraordinarily reasonable price. >> what are companies you've looked at and said, this is worth another look. >> we own them. >> we already owned them and we were there and road down the bad cycle but we did add money to coca-cola as an example in our equity income fund. we are buying things like rolls-royce because we believe in the china play. we believe boeing will eventually produce a new airplane and the growth will occur in china and that will create demand for companies. the one thing i heard mcmanus mention, u.s. companies that do
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business in emerging market he thinks will grow faster than. >> duh. >> you said that, i didn't. >> emerging markets growing much faster than we're going to grow. i think the key issue and one this rally in the stock market has caused people to lose sight of is are we experiencing a true v-shaped recovery or is this just a production normalization. you have a situation where production collapses farther than demand does. that can go on so long. companies need to build up production. that's a relatively short-lived event? another few months into early next year? then you've got a consumer and balance sheet that's going to represent a significant headwind for business in the united states. >> let me give you an example, headlines on car sales 9.1 million rate down from clunkers inspired 15 million. but production, there's no -- they are out of stock. that goes back to inventory
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rebuild. production in the fourth quarter is going to be two seven up from two four, up from one eight, next year's first half is going to be very strong, that gets into gdp. you'll have a gdp lift and that will help a lot. >> that's short-lived. >> car sales are at a depressed level. at some point in the second half of 2010 they are going to pick up. at some point you'll have financing, lease cars are strong. >> i wonder if they will pick up that strongly. >> the key issue is the consumer is determined to deleverage. we see this with consumer credit. we've seen this in japan. we've seen this in other places that have had financial crisis. there's a very real prospect particularly given the demographic overlay in this country now. >> we agree that the cyclical recovery may not be as vibrant, secular over five years may not be as strong if you look at the u.s. as an island. to add to that your premiums that china's consumers are going
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to grow, the chinese consumer -- chinese gdp at 9%. they will grow substantially. they are going to be higher than the u.s. in ten years. >> guys, we've got to take a break. i want to continue this conversation but after the break. we're counting down to jobless claims, data due at 8:30 a.m. numbers, instant analysis plus the cost of health care reform. now we'll hear from the front lines of congress. senator grassley joins us when "squawk box" comes right back. >> you're watching "squawk box" on cnbc, first in business worldwide. out the blue carpet for drivers of these great gm brands. we can do the small things, the big things, just about everything... right inside your gm dealership. find out more at goodwrench.com.
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welcome back, everybody. a quick recap of retailers reporting numbers. running through this we're seeing a lot of bid asks higher even companies reporting higher. macy's down 2.3%, that's better than analysts had been expecting. bid ask looks like it will be higher as well. gap same store sells 1%. worse than the street forecast. you're also talking about
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gains -- actually that bid ask is all over the map. we're not going to say that yet. american eagle missing the mark this morning. its sales down 8%. as you can see, that stock looks like it's indicating a higher open. a lot of talk that maybe consumers are a little stronger and will be back in force for the holidays. abercrombie down 18%. that is not a bad a number. it's actually better than had been expected. as a result that stock is trading higher as well. aero postal, up by 19%. that stock getting help. b.j.'s, better than expected, bid ask all over the map. many stocks trading higher, even the ones that missed expectation. key democrats on the senate finance committee are cheering the latest estimates on health care reform. congressional budget office says the committee's health care billion will cost $820 million over the next decade. maybe more importantly ceo says it's likely to trim federal
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deficits by $81 billion in the same period. our next guest has a slightly less upbeat view of these findings. joining us senator chuck grassley of iowa, ranking republican on the senate finance committee. senator, thank you for being here this morning. what's your take on what you've heard from the cbo. >> let me give credit to the finance committee democrats compared to the democrats in the house or senate health committee because cbo gives it a much better reception than they gave those other bills from the standpoint of being a revenue neutral or in this case even positive. but that's only part of the story, because you've got to remember this fits in with the grassroots of america, with their whole objection to the big increase in the deficit that's coming. people are really questioning whether there ought to be a $1 trillion expansion of federal programs at a time when we have
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the big budget deficit and they see the stimulus not working, et cetera, et cetera. so you've got to put it in that context. then another context you have to put it in is, yes, cbo gives a positive rating from being neutral. but that doesn't take into consideration the increased taxes that are going to be passed on to premium holders because the big untold story here is that most everybody is going to see their premiums go up for a couple of reasons. one, because people that don't have health insurance are going to be mandated to buy insurance and if they don't buy health insurance their families are going to pay a $1500 penalty to the irs if they don't want to buy health insurance. secondly there's taxes on insurance companies that's going to be passed through according to cbo and according to the joint tax committee going to be passed through to premium payers
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down the road. the premiums are going to go up immediately whereas the bill doesn't even kick in until the year 2013. >> yet this bill seems to meet all the requirements president obama has laid out for what he's looking for from congress. is your expectation a bill similar to this senate finance committee is looking at will be passed on and forwarded to the president's desk? >> let's hope so compared to the other radical bills that are out there that pelosi is putting together in the house of representatives or put together by the democrats on the senate finance committee. see, none of these bills are bipartisan bills. at least this bill in the senate started out in the senate finance committee started out with a group of six being bipartisan. then the white house pulled the rug out from under the bipartisan approach because they want to do things in a partisan way. now, to answer your question, i
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don't know really the answer if this bill will move forward because there is a group of about seven to maybe ten democrats that are raising questions about a lot of things that are in this bill that maybe would change it somewhat. and slow it down. maybe even make it a possibility of being a bipartisan bill in the end. but i don't know. republicans are looking at it from this standpoint. we don't like the individual mandate where you're going to tax people if they don't have health insurance. we look at it from the standpoint of 444 billion being cut from medicare because we think that's going to be a bad for senior citizens and we see it as a $1 trillion increase in government programs at a time when people are questioning whether government can handle whatats doing right now. >> very quickly, senator grassley, what would it take to get you to vote for, let's say,
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the senate bill? >> a reinsurance program instead of the individual mandate. less taxes so that premiums on middle income people don't go up. >> all right. senator grassley, thanks very much. we appreciate your being with us, as always. coming up much more from our guest host mario gabelli and david gerstenhaber and investing ledge end and "squawk box" regular, legendary byron wien. he'll join us. as we head to the break, check out crude, back above $70. "squawk box" coming right back. do you trust your coworkers, yes, you do, so just let go. [ groan ] okay, what did we learn there? is there such a thing as personal space,
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all right. let's take a very quick look at the dow. futures are still above fair value up by 55 points or so. this is all happening on this morning we are getting same-store sales. one quick clarification, american eagle same-store sales, flat, faulty headline moved on the wires. american eagle's same-store sales are flat. >> target down 1.7% in the month and the estimate had been i believe i heard 2% down. there you see the stock. it's up 70% over the past year.
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so really i guess you'd say a mixed picture in the same store comps. as you pointed out a moment ago, looks like the stocks indicated higher based on the exceeding of estimates. >> target no exception to that. they actually came in with numbers that are down but better than expected, also looking high higher. weekly jobless claims quickly becoming one of the most important economic points for the market especially of a the monthly job number we heard just last week. a little later we have five all-star stock picks from mario gabelli. he is the manager of five five-star fund. you're watching "squawk box" on cnbc, first in business worldwide.
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welcome back to "squawk box" on cnbc, first in business worldwide. we're one hour away from the opening bell. our guest mario gabelli, david
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gerstenhaber. we have weekly jobless claims. that report is about to be released. we've been watching futures. they have been higher all morning as we await numbers. rick santelli standing by at the cme group in chicago. rick, why don't we start with you and get numbers. >> survey says 521,000 on initial, from revised 554,000. so 33,000 drop is going to be viewed obviously in an optimistic fashion. is it real or memorex, real or falling off who is falling out of the system. what may be a better metric is moving to all-time month lows that's continuing claims. they have reached a level that was close to 7 million now we are really backing it down 6.04 so closing in on 6 million from 6.11 revised. now, of course looking at the two-minute chart i can see
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treasury prices are falling pushing the yield all the way up to a whopping 321 in the ten-year note. nonetheless, is still several basis points higher than we settled. of course the equity markets should be enamered with news because they are whether real or not. s&p up. you asked about the dollar coming in a spit above its closing lows going all the way back to september of last year. it isn't looking pretty for the dollar. i urge everybody to real mr. malpass's op-ed piece in the journal. he so neatly summarizes why a weakening dollar has a dark side to it, unless you're, of course, exporting to a wealthier overseas economy. they call that, of course, better exports international companies, so i guess you need to own their stocks if you want to find that glimmer of hope. back to you. >> rick, while you're at it, what do you think about gold
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continuing to climb. another day, another record for that, too. >> you know, i can totally understand the logic of gold because i don't know that many have been as upset about the strategy of a weaker dollar for many years as i have. however, the old trader in me looks at the location, i'm not so sure i would like to buy at these levels. but i understand the dynamic of gold. many investors, especially retail investors frustration what's going on with the dollar trying to protect their wealth in gold. they need to be careful. commodities can go parabolic and pull right out from under you. >> just mentioned the dollar, something to be fearful of. same thing our guest host david gers etenhaber told us as well. what do you think about the dollar and how important will it be? >> rick and i have had this discussion for months. for the first six months the weaker dollar was the right move bit government. soften that up in the
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short-term, take the hard edge off the recession we're seeing. now we're getting into a point we never wanted to start cascading, all we wanted to do was manage a weaker dollar. we are starting to see a little indication that people are starting to borrow our currency and invest in other places. we don't want a demand-type situation. it seems to me if the hand-off is actually happening, i'm not sure it is, we see alcoa making money, cost-cutting, a lot of chinese demand, but it probably is a time you look at maybe australia gets blueprints for it yesterday. they raised rates and everyone is okay wit. >> jim, are you aware of what's going on in latvia these days? >> no, i'm not up on latvia, tell me. >> i know it's just a canary in the coal mine, but this little country in europe trying to get out from under, imf and others nations are lending them money. but they are thinking maybe they would have to devalue this currency and everybody is up in
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arms. why is that any different for us, big guy? >> i don't know what latvia is but the value in our currency is what took us back from the brink. >> don't give me the back from the brink stuff. >> seven months ago we were staring into the unknown, no clarett. the om thing the government could do -- >> the only thing the government could do is devalue dollars and give them to all the people that took us down in the financial system. what a great plan. >> we had to find a bottom in the stock market. the only way to do that was for stabilization. throw liquidity at it, which they did. >> that's your opinion about the only way to do it. it seems to be the government's way about how to do it. but there's people in the streets that think there's a different way to do it. >> now we start pulling back. now you and i are right on the same page of it's time to go back. >> our currency is freely traded. >> no, i don't think it will stop now. >> david gerstenhaber, i don't think the guys heard you. >> our currency is freely
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traded, not a pegged currency. the market is taking the dollar down dpchlt japanese have a trillion and change, there's a lot of reserves held in dollars. it's very different than a pegged currency. >> when these countries start talking about did he nominating oil in something other than dollars it's a big deal. >> of course it's a big deal but not a big deal because it's going to happen any time soon. it's a big deal because of our discussion, jim. forget the independent article, a lot of it is probably what we call speedy. but the underlying weakness and the vulnerability of our country with that weakness as a reserve status, that's what needs to be debated. >> the whole thing, the whole debate is whether or not our policymakers are responsible enough to know when to pull back. you and i agree they are not. >> policymakers is in congruent. >> agreed. >> on that note of agreement
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we'll leave it right there. rick, thank you, jim, thank you. don't forget you can catch jim friday night at 8:30 eastern on options action. >> chicago street fight right there. you've got to love that. a little passion. >> we should have sent them to copenhagen. a little passion there. one of our guest hosts this morning personally manages five five star morningstar rated funds. that's a mouthful. let's ask mario gabelli for his top picks. starting with one called hawk which i thought was tony hawk, but it's not. >> looks differently. i own shares of companies -- fundamental research, we have a great team, they follow vertically, small cap, microcap, large cap and so on. i then take those and drop them into an appropriate fund. for example, if you're talking about hawk, that would be a very big position in, let's say our small cap fund. we own it.
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18% of shares. the company not allowing us to buy anymore because they have a poison pill. we're fighting. as much as we love them -- hawk sells replacement parts. like everyone else, demand went off the cliff and their earnings collapsed. 8 million shares, cash and debt are equal. over the next three or four years, demand will recover, replacement parts wear out, get demand, revenue up, earn 2.25 and ceo has done a reasonably good job and brought back stocks in the face of the climb. why? will that stock double in the next five years? the answer is yes. somebody will want to own it. i just want to own more for my clients. i can't buy anymore that's why i'm recommending it. >> small, small company. >> tiny. >> 8 million shares. >> weinberger own his piece, our
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clients own our piece. you asked me about one of the picks that we own -- not a pick but we own it in our small cap fund. the next one is equity income. in equity income we own a company called swedish. i happened to stop off to buy you timberwood, smokeless tobacco. why did altria by u.s. tobacco and pay 12 times ebitda in tobacco. why did they come out with this? it's a little product, 80% of the market in scandinavia. you take a little pouch, put it in. >> smokeless tobacco. you cannot smoke anywhere but people do want to have that. this is a huge cash generator. they cut a deal with philip morris, marketing the product, eu will lift the ban and this is why we have that company.
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we've owned it seven years. it's not something we miraculously parachuted into. utilities, largest holding is a company called national fuel and gas. 80 million shares, $46 stock. why am i buying it? a margin of safety, gas utility in buffalo, products pipeline. just announced they are putting a connector in to deliver natural gas from an important new discover, marceles deal. 600,000 acres. by buying the stock you get that for free. 600,000 acres where they have an enormous discovery of natural gas. why? they now have something called horizontal drilling. those are things we own. that's what we're buying. in terms of abc, we are looking for deals. and we're going to get a lot more. we're in the fifth wave of takeover since the second world war and that is just starting. >> mario, gabelli, have you ever
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tried smokeless tobacco yourself? >> i actually do sample a lot of things we do. some of them are not particularly good but this you put under your lip and you can try it. i'm not going to say anything about product endorsement that's probably a violation of ftc rules. we own it, it's a five-star fund. >> i'll say i've tried smokeless and chewing tobacco. >> those are two different products, totally different. >> they both gave me horrible -- >> he's not talking about cat litter. >> that's right. came on talking about cat litter. >> we used to have clumping cat litter, technological improvement way beyond. >> if you have mario on you have to talk cat litter. >> that is perfectly plausible. perfectly plausible. >> quick break, a trip to the nyse for the trader's edge with
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art cashin. first, three reasons to watch squawk on the street at 9:00 a.m. we have nouriel roubini, five star tech manager and a look at the tal u.s. building in the world. and a bonus reason, opening bell. that starts at the top of the hour with me. it has more cargo space than pilot. and traverse beats honda on highway gas mileage too. more fuel efficient and 30% more room. maybe traverse can carry that stuff too. the chevy traverse americas best crossover. introducing the 60-day satisfaction guarantee. buy a new chevy and if you don't love it, we'll take it back. (announcer) we call it the american renewal
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because we believe that ideas are limitless. that's why, everyday at ge, thousands of scientists and researchers at our global research centers and throughout the company are redefining what's possible by creating the advanced technologies that create jobs. the american renewal is happening right now.
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all right. welcome back, everybody. time for the trader's edge. joining us art cashin director
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of floor services. i don't know if you heard the discussion, argument, whatever you want to call it right now between rick and jim just a few minutes ago. what's your take on the dollar? is this a point where it's a disorderly decline? >> it better not be. if it begins to turn disorderly and people start actually dumping dollars then we're going to have a problem. i think it will destabilize markets in a way somewhat reminiscent of last year. let's hope if it stays week it does so in a drip, drip trickle mode rather than sharply. that would be disruptive. >> we've been watching futures all morning, certainly help in jobless claims. they were hiring before that. is this because of what we heard from alcoa, better than expected earnings, same-store sales figures coming in, because of the weak dollar? what's your thought? >> all of the above. i would say primarily alcoa and
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interpretation of alcoa. i think the markets put a little more faith in those numbers than i did. it was nice to see it wasn't all cost-cutting. i'm not sure it's going to be a symbol of what we're going to see in other earnings as we move along. i'm still skeptical. we'll see if the s&p could get over resistance of 1075. there should be a lot of churning there. >> art, one of our favorites. great to see you. >> how are you? >> hi, mario. >> comments on quarterly conference call at the outlook that's going to drive a lot of these stocks. you've got to look at the second part of the equation. >> art, thank you. we'll see you again tomorrow. >> coming up, shopping for stocks. retailers to watch this morning when we come right back.
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welcome back, everybody. we've been watching retailers. went to check out shares of target. they are called higher after the company came in with same-store sales drops. better than expected. making comments.
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the chairman and present ceo said they had better than expected sales for september. also stronger than expected retail segment ebitda margins. as a result they say they are going to exceed current call estimate of $0.43. that's what he say. $0.44 on expectation. higher in bid ask, 48.86 and 49 after closing at 48.51. >> all right. well, next byron wien, new guy at blackrock, thoughts on upcoming season, flurry of deals and state of the economy. you're watching "squawk box" on cnbc, first in business worldwide.
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how about 38 minutes until the open here on the east coast. let's check the futures boards. they have been driving higher all morning. there you see them up. the dow industrial futures up 64, as we move along here. lots of numbers for the market to digest. a better maybe than anticipated jobless claims number. down a little bit sequentially week over week. the continuing claims down as well. some of the retail numbers
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actually looking a little better than some had anticipated. a lot of those stocks are moving up. david? >> thanks, tyler. earnings season has officially begun. our next guest says the market momentum will be tied to better than expected third quarter results. joining us now is byron, vice chairman of blackstone advisory services. byron, always good to have you. >> good to be here, david. >> are you forecasting revenue growth for the third quarter perhaps as a driver of better than expected or what we had second quarter? >> well, i don't think there will be revenue growth across the board, but i think there will be revenue growth. some companies will surprise. we've got a lot of inventory rebuilding that's going to be done, that's going to help some companies. generally the third and the fout quarter are going to be better than expected. >> that is largely due to inventory, or what else? >> you're going to have inventory rebuilding. that's going to be an important part of it. i think the consumer is going to spend -- feels a little more
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secure about his or her job and christmas may not be as disappointing as some of the critics think it will. >> what would you point to to support that contention. unemployment, yes, it is lagging but it is roughly 10% or as high as 17% when you take those into account who are looking who are underemployed. >> right. yeah, but i think the unemployment rate is going to level off here. you see a rise tin temporary employment. that's usually an early warning or early encouraging sign. there are more favorable signs than unfavorable ones. most everybody is negative on the fourth quarter outlook on reta retailing. >> how much of the move in this market is due to so many people being negative, therefore, very large short position in so many sectors in. >> that helps it. the fundamentals are improving. we are off the bottom on the economy. i don't know. i don't think we're in the midst of a boon but i do think the
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market is improving. >> byron, let's address another part of the market that is reflecting things differently. one of the things that you predicted as the recovery unfolded is that as things strengthen we see treasury yields rise and perhaps rise fairly precipitously and we're hovering over the low 3s. i was andering why you think that happened, what sort of inflation you see on the horizon and what the impact that may be on the markets. >> well, i thought the ten-year treasury would be 4%. and it already has been 4%. but it's down now again. i think we're going to see reyields rising maybe not before year end but next year. it isn't because of inflation. it's because the u.s. government is going to be borrowing so much to finance the stimulus program and the deficit. i think yields are going to rise for that reason and not for inflation. >> longer-term yields but not necessarily shorter-term yields.
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>> right. the interest rates, two-year is lower because a bank can borrow at 0% and buy a two-year or ten-year note and get 2% to 3%, 3 1/2%, that's too attractive. that's just money left on the table that they're taking advantage of. >> it's an argument that the yield could have bought a steep moving forward. >> that's what i believe. i don't think you'll see a rise in short-term rates any time soon. >> byron, quick question here. are you still comfortable with your earlier prediction of a 1200 close on the s&p this year? >> i am. didn't look too good in march, but it's looking a lot better now. it's only 150 points from here. >> and gold? >> i think gold will be 1200, too. i'm a bull on gold. have been. it was one of my ten surprises. it's going higher. but that doesn't have anything to do with inflation or
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geopolitical. it's really more than people are buying insurance on their paper currencies. people are disenchanted with the dollar, true. but also, with the euro and the yen. and they want to own something real. people with the big trade surpl surpluses, japan, china, middle east, they want to own something real and they perceive gold as real. >> let me take you out a few years. you know, you talked about short-term rates and long-term, in two to three years there is a growing concern among some out there that the quantitative easing that's been undertaken by the fed, $1.2 trillion added to the balance sheet and the ability to pull that money out of the market which may not be that easily done, ultimately going to lead to significantly higher rates and perhaps hyper inflation. do you buy into that at all? >> i don't buy into the hyper inflation part because i don't think you're going to get significant wage inflation, and wage inflation has got to be
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behind it. also, i don't think rents are going up. so i think the cpi will stay under control, at least for a couple of years. on the other hand, i do think that the the heavy borrowing that will be done by the fed in order to finance the deficits, which are going to be $2 trillion for a couple years in a row, i think that's going to push rates higher. i don't think we're going to have soaring long-term rates, but i do think you'll see rates in the 4% to 6% range one of byron's points. we were just showing it on the screen, is that he's expecting very strong m and a activity. mario, that's been something that you're talking about, too. >> byron is at the font of all of that good stuff for me. private equities coming back slowly. yes, very slowly. nowhere near participating. >> that's good. because the companies that want to grow have an ability to generate significant energy. >> byron? >> byron, is that another one of your surprises, that m and a, it's moving at a pace.
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it's not a deluge and won't be any time, at least. >> look, we're not going to go back to 2007-2008. >> not in private equity. >> yeah. but the economy is going to do better next year. and i think there will more ipo activity and more m and a activity. >> and the stocks are starting to reflect it. you look at the behavior of lazard and ever cord and they very strong stocks recently. >> byron, thank you for joining us. david, mario, gentlemen, thank you for being here with us for the hour -- for the last two hours, you guys have been here. and david faber and tyler matheson. that does it for us today. make sure you join us tomorrow. "squawk on the street" is next. live from the financial capital of the world.
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>> and live from london, as well, mark. the other financial capital of the world. >> good morning, everybody. i'm mark haines. >> and i'm erin burnett. obviously i am in london today. we have a lot to talk about this morning, mark, including this. take a look. the newest, biggest building in the world. it is absolutely amazing. i have to be honest. we're going to take you inside in just a little bit. >> where is it? >> you'll have to take a guess, mark. it's in a city in the middle east. that's all i'll tell you. >> okay. let's start with the futures. let's start with the futures because apparently they're not going to reset this teleprompter no matter what. the futures right now up 980. that's an outstanding showing. fair value is about what you see is what you get. we're looking good here. about 75 points on the dow at the open if things stay that way. too big earnings report this morning, pepsi beating

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