tv Squawk Box CNBC April 30, 2010 6:00am-9:00am EDT
question and we're going to be talking an awful lot about that, too. because warren buffett's berkshire hathaway has been behind the push to try .make sure that the derivatives action. we've got a big show this morning. among our guests, buffett biographer andrew kilpatrick. and in the next hour, the man who is widely considered to be on the short list to succeed buffett, david sokol. at tomorrow's meeting, we'll join carol loomis and andrew ross sorkin. the three of us will be sitting on the stage here helping moderate the event. now, carol and andrew will join us at 7:40 eastern time this morning and we'll talk a little bit about what you think will be some of the biggest topics that will be discussed. joe moglia will be here, as
well, and enterprise chairman and ceo andy taylor who will be joining us to talk about what this weekend means for enterprise. there's a lot of price gouging that goes on, so we'll talk to him about why he's not doing that and what it means for his bits. monday morning, we'll bring you the highlights on squawk and then we'll be joined live by warren buffett. he'll be sitting down for his first live interview after meeting with the shareholders from 8:00 a.m. to 9:00 a.m. eastern time. so we have a busy morning in omaha. why don't we start with some of the other morning's headlines. >> why don't we talk for a second. wait your turn. okay. go ahead. >> i'm here and it's really early. charlie munger, is he going to answer questions, as well, about goldman because he was very outspoken in the last few days. >> yeah. in fact, i have an interview with him later on this morning, guys. and he has made some very big
statements about how the entire wall street environment was like a casino environment. he has said in the past he didn't think goldman sachs behaved as badly or less et ethically than some of the other firms bub i'll be interested to hear what he said. >> yeah. like bill clinton didn't think a law had been broken, but the moral compass was loss. it was interested. when you were talking, he said the man to succeed warren and then we had andrew ross sorkin's picture up. >> well, you know, he is a rising star, i will tell you that, joe. >> the guy is like walk on water, but he's not really in the running to succeed at this point, right? >> no, no, not as far as i know. >> i'm on page 11. what page are you on? >> 30. >> 30. becky, did you see warren yet?
have you spoken to him since you've been there? >> i did. i saw him yesterday at his office. >> can you let anything out of the bag about goldman? >> he didn't tell me. he had that he's got a lot to talk about, he's been thinking about it, he will answer at length, he says, at the annual shareholders meeting. but he doesn't like to steal is thunder because this is a big week yeb for his shareholders and he wants to give them the news first. he's been thinking long and hard about gold pan and derivatives. >> he didn't say anything to you about the derivatives to you, either, ben nelson and fim reg and all that stuff. >> no. but we have dave sokol coming up >> just about an hour and he was labeled as the guy as the massive lobbyist. dave sokol was meeting with the people in washington. so we'll get a choons to ask him about that in just about an hour's time. >> becky, you might find out from war b buffett if he has any
deja vu stuff. i was at solomon brothers -- >> salaolomon? the idea of having to go before congress and apologize and makes sure he handles this, that's what he would be most furious about. i've been thinking a lot about that, too. >> yeah. that was his preview game. he did a spectacular job. lloyd blankfein and goldman are very lucky to have him on board. >> right. we'll see where he stands on this. the news flow plays right into the meeting's timing in terms of making this one of the most interesting meetings that we will ever have had. >> did you have steak last night? >> no, i didn't. i had salad and soup. i'm saving steak for later in the weekend. >> you're in omaha. >> order fish.
>> no. do you want to know why i didn't eat steak last night? i have a very good answer for you. >> you do? i do want to know. >> all right. you know how i'm not so good with flying on planes? there was a lot of turbulence coming in. >> did you have to use yours and borrow the one next to you, too? >> no. i only used one. thank goodness there wasn't somebody next to me or i would have gotten them all over them. >> that's only happened to me one time. >> you were drunk. >> no, i wasn't drunk. >> thank you. >> becky, thank you. >> thank you. you asked. >> i know. now, we are going to start with the headlines. let's start with goldman sachs which we've been aloout looting to this morning. we are expecting to see weakness, perhaps, in the shares this morning because they were lower after hours. following a "wall street journal" report that federal investigators have begun the firm, ray zing federal charges
again the employees or the company. but our own scott cohen says it's overflow to refer to this as a criminal investigation. probably disappointing, scott, but at this point -- whenever you have a similar -- you know that prosecutors aren't going to just sit there and look stupid and say they didn't even look into it. criminal authorities, rather, are clearly keep up to speak with the s.e.c. case and have been conducting their own inquiries and nbc's pete williams reports that no grand juries are involved and no subpoenas have been issued. none of the usually steps that would be taken in a criminal investigation. a goldman spokesman says the company was not surprised at the news given the recent focus that has been on the firm. the u.s. government regulating its sponts response to that major spill in the gulf of mexico.
you know what people in new orleans are saying. they're saying it's katrina two. where is the federal government? and now president obama is going to get so much heat from the refrt, whether he's going to think of opening up the drills. the leak is from a ruptured oil well on the coast of the floor off the coast of louisiana. it's pouring out 5,000 barrels a day and it's not capped and who knows how big the well is. it happened after a rig exploded and sank last week. and the government is now mobilizing the navy to try and avert an environmental disaster along the cost line of louisiana and three other gulf states. at this point, there are some -- you know, hopefully these dire predictions about it being worse
than the valdiz lnlt be born out. you never know. but at firsts, people are saying that it could be worse than originally thought. a first read on the first quarter gdp, due at 8:30 eastern. the nebs are expected to mark three straight quarters of growth. the economy tries to dig itself out of a recession. economists polled by dow jones news wires predicts 3.3% is what we'll see for an annual rate the first three months of the year. remember, the fourth quarter logged a 576% pace but that was a lot of the inventory and other factors and we've been speccing it to slow. forecasts suggest consumer spending growing probably doubled and its business investment likely rose while presidential faults. >> can you read that? >> yeah. joining us -- >> let's get ready for the trading day ahead. go ahead. joining us -- >> joining us is me from fulcrum
strategies? no. but we will have rob morgan in for my chief economist nariman bare verb. >> this could qualify almost as a task force. would you have said that if i asked you to say that? >> i would have. >> rob morgan, nice move yesterday. are we back on track here? he needs a script. let's get him a hard copy script. rob, where are we? back above 11 sthous,000, but they're falling like dominos in europe. is that going to eventually come home to roost or are we heading higher? >> a lot of momentum behind stocks here since we had our lows on february 4th and 5th. not only have stocks been straight up, but the breath has been very impressive and i think that's the most notable thing. >> but not volume, right? >> well, not necessarily volume.
volume is, in fact b, starting to trend down a little bit. but seasonally, march, april, may, the best time to buy stocks. now in the summertime, as you alluded to, you've got storm clouds brewing in a number of fronts, probably have a sideways market in the summer. but i think the risk is being out of this market and it could go higher. >> i thought you were supposed to say sell in may and go away? >> sell in may and go away is probably not a bad strategy this year, but at the same time -- and we were looking for a choppy side baes market in the summer. but with all this momentum, we could climb that wall of worry as we get into june, july and august. >> nariman, what's your number for first quarter gdp and are you now ready to say this is a v recovery, or not? >> nights not a v recovery, but it's strengthening, no question about it. the numbers, 3.2, it could come
in higher. the underlying growth is stronger this quarter than the first quarter than the fourth quarter. and it's all about inventories. 4% of that 5.67% in the fourth quarter was inventories. only about 1% of the three plus this first quarter will be inventories. it does suggest that the what's called final sales, gdp minus inventories strengthening and what we think will continue to strengthen. so this quarter, the second quarter we think could be as strong as 4%. so the recovery is definitely building up some momentum. but that is a little bit of a stretch. >> so nariman, you're not in the camp with the people saying, we're now experiencing the height of the economic recovery, it's going to trail down from there? >> i think so. housing still hasn't recovered. it's still bumping along the bottom. once that recovery kicks in, which we think will probably be towards tend of this career, you can start to see more strength
there. no, our view is at least through next year, we'll see this recovery gain something steam before it sort of tails off a little bit. >> nariman, before i get back to rob, the consumer -- and i've now learned that when you talk to the consumer, you say she. that's what terry -- all these guys that sell into the biggest retailers call it she. and i knew this rawle long base odd my household. >> consumers -- >> no, because we don't consume anything, beer and doe in us nuts. but women buy everything, at least around where i am. but the consumer, is she back, nariman? >> she is back in the sense that growth and consumer spending in the first quarter was the strongest in three years. but she had not back to the spending patterns in the boom years. so it's pretty good, but not quite what it was during the boom years, which actually is a good thing, of course.
you want households -- you want her to save more, as it were. that's what we've always been asking for. so it's a nice balance, decent growth, more savings. >> rob morgan, is there any roar that this is all sort of illusionary, like a shuler high, that it's low interest rates and government stimulus and it's not sustainable, not long lasting and another rate is come? >> sure. the fed will have to raise rates in the not too distant future. they'll have to walk that fine line by not throwing us back into the recession by doing that. i believe what fed chairman bernanke says, they're going to keep rates low for an extended period. i think they'll do a good job of walking that tight rope. but sure, there is certainly a risk that they can do that. >> rob, nariman, thank you.
and there's a reason we put you on the retail beat, becky. is it sexist? >> no. you asked good questions. you admitted that the consumer is a she. but he asked good questions. well done? >> could that be construed as sexist? >> no. i think it's giving credit where credit is due. women make somewhere from 70% to 80% increase. >> 50% of the things i do here is still determined from home. anyway, what's coming up? >> yeah. we've got buffett buying on ger andy kilpatrick. this is his latest edition. this is edition number testify literally about 20 pounds worth of books. anyway, this is his 13th
welcome back, everybody. to say that our next guest knows warren buffett better than most, well, that would be a big understatement. he has been conicaling the live of the billionaire investor since 1992 and the latest edition is now a three-volume set. andrew kilpatrick is the author of "of permanent value, the story of warren bust." this is the latest edition, all three of them. i don't know how many pages, with but 2,000 altogether? you have been chronicling his life since 1992, as we mentioned. what first got you into this? >> well, my father was in the newspaper business and buffett made an investment in the '70s
in the washington post. and i came out here as a meeting and i thought, as a reporter, this is the best story and the most fun and it turned out being that way. >> and you've been coming to the meeting every year, as well. >> i have, since the mid '80s. >> and what do you think about this year, the timing is going to be very interesting given the news cycle and where it stands right now. >> you mentioned it's the perfect timing for everything. you can talk about anything, talk about the number of people that you mentioned, 35,000 or 40,000. everything has come to this moment. this is sort of the culmination of all his work and it's just great to see how it's all -- what the story has become. >> how many people were at the first meeting that you attended. >> the first meeting i attended was about 400. but i have interviewed people that were there when there were 12 people in national indemnity. but it's grown all along. >> they're talking about maybe 40,000 people will be here depending on the number of tickets that went out very early
on. you've updated this volume, these books, 13 times. >> it sounds like i can't get it right. >> 13 times. why do you keep going back to it? the story keeps changing? >> to me, it's fassing, it does keep changing. now the first chapter is 13 pages about burlington northern. it used to be solomon and coke cola. but it keep revising it, keep putting in knockout photos and knockout chapters and add new stuff. to me, it's fun. >> you know, i know you're going to be here signing books this weekend and selling books, too. but you mentioned this that is going to be -- this is almost a culmination of everythingee he's done to this point in his life. how do you think he's going to handle the goldman sachs question? >> well, i think the solomon is the point. i don't know that he can comment about any legal charges, but i think he will address the
overall issue. i'm sure he will say, if there are problems, we will correct them immediately. and where there are not problems, goldman expects not to have their names smeared, and i think he will do it a lot like he did solomon, where he famously rescued. >> do you think this could be a situation where he rides back in or is he going to -- >> oh, i think he'll try and be as helpful and supportive and express confidence in goldman if there's some one person or one problem, they will fix it. he will have it fixed. >> andy, last year at this time, things were looking incredibly bleak. >> yes, they were. >> it was about the worst year for berkshire ever and it was the worst year for the economy. the mood is different this year. >> and i think he's beginning to say the economy is ticking up. you've talked on your show about how many businesses and he can see everything coming across his desk. he was saying he didn't see anything.
then i think he's saying it is popping up. >> so it will be great to get his take on what is happening in the economy. >> i think so. >> when you come back, there's 35,000 to 40,000 people who are going to be here. when you come back, this is almost like old friends week for you, right? >> it is, yeah. >> and what do you do for the rest of the weekend? >> party, try to do some interviews, sell a few books. >> so you're here for the whole weekend? >> absolutely. i love it. i've been here, as you say, mid '80s and i love every minute of it, as does everybody else. >> rhode island going to revise this again? >> you'll have to ask pat. >> enough is enough. >> i'm already started on the next one. i never stop. >> you're kidding me. >> i'm not kidding you. >> the next one is going to be bigger? >> i may try and cut it down. people are intimidated by the size and i'm trying to get that in my head that people don't want to buy anything that big. maybe i'll cut that out. >> how are you? i love all this stuff. but does anyone ever look at you
and say, man, this guy is some kind of weird stalker? what if buffett had never been born. you would be like this. >> i don't know. >> you'd be looking around. >> i don't know what i would have done. i have gotten that and i take that in the spirit that it was given. >> exactly, okay. >> the answer is yes. >> you know, holland, around me, is very similar. he wants to know and it's uncomfortable. it must be uncomfortable for warren. >> he handles things like that very well. he can do that. >> i'll bet you got from free dairy queen. i've got a brick. it's not here right now, but we've got one of the nicest bricks that i've ever -- yeah, it's beautiful. and it's inscribed. oh, here it is! i've got it. joe, this is from acme brick. solid. it's the best brick i've ever seen. i have about to send you a marquis card but since you asked
for the brick, you can put that in your book. >> sure. next year, joe. >> all right. andy, thank you very much. >> my pleasure. thank you, becky, a pleasure. don't drop it on your toe. >> i won't. i'll be careful. >> andy doesn't have a brick. >> i'll bet. >> coming up, this morning's top stories, plus we'll make a stop at the futures pit for a preview of the trading day ahead. >> and what about later? >> later, an "american idol" legend crosses the finish line, gm vice chairman bob lutz is joining us today. don't miss him at 8:00 eastern. >> punch it, perfect.
the income half hour is apparently brought to you by at&t. good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick reporting live from omaha. carl is off today, but mike holland is spending the morning with me in studio. when you buy a song like that, becky, it becomes associated with -- we played john mellencamp, whatever that chevy song was. you're going to think chevy. if i hear that oasis song -- >> it kind of ruins it, though. it ruins it as a music lover,
because now you think commercials in your head. >> not with at&t it doesn't. anyway, making -- making headlines this morning, euro zone leaders say that the plan to help greece, which as you can see we're talking about right now because of our unnecessary wallpaper video, but the plan to help greece is likely to be unveiled tonight or during the weekend. imf, eu and ecb officials are in athens where we are looking right now to negotiate the bailout. now we're going to switch, though, and talk about france for a second. france's market watchdog says greece will not default on its debt. we use that as a metaphor. see i'm saying? crumbling ded debt.
meanwhi meanwhile, we have ireland. the unnecessary wallpaper video of ireland. ahead of ireland's debt agency says its country may not hold its next monthly bond auction as scheduled in mid-may, a bond yields stay as high as they have been this week. don't do it, hen. >> they are so much better than the rest of europe. >> and they were worse a year ago. >> but a year ago, they told us they have to do something and they did it. >> right. it's called austerity. i know. and i love these huge demonstrations when you try to cut back on anything. and it shows you when you go to a certain point of entitlement, of a status entitlement, you can never take it back. you can never, ever go back without -- >> industries. >> yeah. but it will have to go back or you'll default. now to the futures pits in chicago. we can show the sears tower, the hancock building, right? bob iaccino of lotus
brokerage.com, what's your suggestion? what would say chicago if we were to show unnecessary individual quo? >> first of all, i'm glad to hear you call it the sears tower. it's technically the willis tower now. >> what you mean, willis? wasn't that -- it's named after. >> will withis karon tower. >> oh, oh, okay. >> yeah, but it's still the sears tower to me. >> is it still the hancock building? is it still the standard oil building? >> i don't even know that. you know, it's funny, because to me, quintessential chicago will be lined up in front of the art institute. but i'm a little more cultured than some of these guys. >> and that's why we have you on. but what are you expecting to happen today based on the gdp numbers, based on greece, based on goldman, what's going on? >> based on all of that. if you ask me to go long on the
equity markets today, i would probably tell you no, simply because the greek plan has been -- they've let the euro sink too far too fast and now we're going to have a second wave of greece worries when they announce the plan, is that enough and is that enough to stop the spread of that particular contagion. we have to be talking about different contagions every six months or so now. we're down about 7 a.5% year-to-date in that range. i feel like the guy that like the prom queen said yes, but i'm sort of waiting to prom to get here. >> said yes to what, to go to the prom? >> to go to the prom with me. i'm just waiting. >> all right. >> waiting for that last -- >> that would never happen. >> i couldn't agree more. it never did happen, by the way. >> exactly. you didn't want to go with her, anyway, right? or the prom king. >> yeah, i was not a prom king. >> i was glad with what carrie
did, if you remember. >> it feels strong. it feels like there's a wind behind it. it feels like we could go into the end of 2010 and end up with a 15%, 16% year and we're up about 7 right now so there's plenty of time for that retail investors to get back in. high yielding bonds have sold about $100 million so far according to s&p this year, which is better than last year. so it seems like maybe the retail, the retired investor, the person who would buy the unions incorporate is starting to get back involved as opposed to leaving it, making zero%. >> bob, could you describe to the viewers what you think is going on with the short positions? earlier this week, we had that big tanking with the greece downgraded curves and the spain thing after it a little bit. with those -- short sellers should have been happy for a second and it's like, oh, no, they're taking them up again. is there continuing capitulation with each one of these?
>> with either position, mike. i mean, i think the issue here now is that it's still a traders market. it's still guys like myself who said, okay, we made a few bucks here, let's get out and do what's next, especially when you have a situation like greece. we've been talking for a long time about the problem with having a single currency and the sovereign. we don't have any way to understand that. this is really the first sovereign debt crisis within that currency. so really, we're all about duration, as i say over and over again in the interviews. when you're talking to an investor, the type of person like you, mike, who probably knows that we're going to have a good year in the equities, but the traders themselves are moving it up and down and you guys are busy trying to convince your clients that everything is okay. >> if the greece thing gets done over the weekend in a positive way, last night it was said the market is going to take off once again. you don't agree with that? >> no, i do. i just wouldn't agree with it
today. we got into a whole round of is this move good enough? does this make portugal okay? i think the market is going to take off. i just don't think it's going to be okay. we've gotten a little bit of a rally. a three digit move yesterday in the dow. i think you're going to see some window dressing slash -- we always use the phrases window dressings. profit taking for the end of the month in order to balance out their books. i'm not looking for a negative day. i'm not looking for three digits today, either. we're talking just today, mike. >> mike holland, in fact, was one of those guys. >> he was prom king. >> he was leading rusher at harvard. >> no. >> no, you were. >> doug castle. >> no, you were. he had gains -- what, you had 200 yards against wellesley. >> anyway, thanks, bob. hey, beck, let's go back to you
welcome back, everybody. we are coming to you live this morning from the quest center in omaha, nebraska. this is the site of this weekend's annual berkshire hathway shareholder meeting. we're on the stage right now where warren buffett and charlie munger will stay center stage tomorrow morning. our next guest knows what made warren buffett so successful. harvey is the inspiration behind the university of missouri's course on the investment strategies of warren buffett. harvey, it's great to see you. >> thank you for having me, becky. >> you are the person who created this whole idea of come up with a class at the university of missouri that teachers the principals of warren buffett. why do you come up with that and how did you come up with it. >> on one hand, you can listen to a dry, boring, unsuccessful guy telling you how to invest your money or follow warren buffett. you tell me what you want to do.
>> the idea of taking what you learn in bits schools or watching somebody who has put it all into practice sfp. >> you got sdmript and what kind of enrollment do you get for this class? >> well, first you have to go through the university brewer okaysy. bottom line, standing year only. >> how many years have you had this program? >> 15 been. >> and do the kids get to meet with warren buffett? >> absolutely. you know that. what do they say? >> they say it's the greatest experience of their college life. and i say to warren, if that's the case, they better start thinking about other things. >> kids at this point, if you've been doing this for 15 years, they've had a chance to get out and establish themselves. what have some of them gone on to do? >> so many have gone in the business, many have written me notes saying, i got my job because i told them that i took this course, i used the words that warren uses. i mean, warren buffett is a
unique character, as you know, because he lays it all out. there's nothing mysterious about it. so it's been a tremendous success jobwise for people. >> what does the course lay out? that was warren saying, they're playing up the volume of the tape they're watching with warren. but what does this, of course, lay out? >> well, we lay it out following exactly what warren does. nerldz, forgets all the things that you can't figure out. forget predicting the futures, forget predicting the economy and the fed policy. the bottom line is, find a great business and understand in accounting what is important. how many catch did you generate? exactly. >> harvey, i was wondering, did you offer this to nebraska, the cornhuskers? you know, i would be -- there's a lot of competition in the big ten. what happened? it went to missouri, instead. >> well, i went to missouri.
are you going to offer things to cbs or abc? who do you think i'm going to offer it to? >> and the other thing i was wondering, harvey, given the -- is it some of the backlash, i was when roxy tried to get on a college campus when i was in school. i was wondering, is there any backlash? if you don't go into some social science or sml that he thal be good for society, is there any backlash to idolizing a business icon or big business in today on today's college campus? >> as you know, it's like sideways. sometimes it's good, sometimes it's bad. but the idea is, from my point of view, having come from a humble background, i wanted to make money. i wanted to make a living. i wanted to do a lot of different things. what we've done is try and help people understand how to invest their money. no matter what you do, doctor,
lawyer, indian chief, you have to invest your money. who is the best at doing that? warren buffett. >> to joe's point, we did see college protests break out when jamie dimon was going to go and give a commencement speech. has there ever been that sort ooh a backlash when it comes to warren buffett? >> i know this is a family show, but these are college kids. they've got nothing better to do except march around -- no. the answer is yes. >> it's mike. how are you doing? >> hey, mike, good. >> viewers may not know, you spent a number of years working with sandy weil. >> yeah, and mike holland. >> sandy weil. how would you contrast the business approach of sandy weil with warren buffett? >> well, number one, they're very different people, as you well know because you know them both well. but the bottom line is, when it comes to business, they are both laser-focused guys.
they know exactly what they want to do. they get it done and they do what it takes to get it done. >> you know, harvey, i'm just glad that you pointed out that i guess we forget this is a meritocracy in the u.s. and not all rich people or wealthy people inherited it from a feudalist state of is she as that. parents. so this country used to be aspirational, but well seem to be losing that. >> look, the greatest thing about this society is that people like you, me, mike, can go and get an education and compete on an equal playing field. that is the key to this whole deal. >> in the old days. hopefully we can hold on to that, you know? >> no. do it today. look what your buddies at goldman are doing.
they're trying to throw this sack official virgin into the fire at 27 years old. it's a great country. >> i know. that was the one question which i wish they would have pursued. out of all the questions, why did goldman release the e-mails for this poor guy? maybe because he was friends. >> because there always has to be a fall guy, joe. i'm explain it to you when we have some time. >> maybe it's not pursuable for everything. >> harvey, thank you so much for being here the whole weekend. you're going to be here for the whole weekend? >> i wouldn't miss it. >> harvey, thank you so much for your time. we appreciate it and for getting up with us. we've got much more still to come from omaha today, including david sokol. he is the man that many say is the front-runner to seed warren buffett. also, joe mogglio, he will join
tdd# 1-800-345-2550 to help with my investments. tdd# 1-800-345-2550 so where's that help when i need it? tdd# 1-800-345-2550 if i could change one thing... tdd# 1-800-345-2550 we'd all get a ton at advice tdd# 1-800-345-2550 just for being a client. tdd# 1-800-345-2550 i mean, shouldn't i be able to talk about my money tdd# 1-800-345-2550 without it costing me a fortune? tdd# 1-800-345-2550 if i had my way, tdd# 1-800-345-2550 investment firms would be falling all over themselves tdd# 1-800-345-2550 to help me with my investments. tdd# 1-800-345-2550 (announcer) at charles schwab, investors rule. tdd# 1-800-345-2550 are you ready to rule?
i think becky is here, too. one of the things that happens as you get older, you don't stay up with the "times." when i was there, its with a the big eight. it's like the g-20. >> notre dame will be in the big 13. >> it was the big 8. there was the big 8. >> now it will be the big 12. work with me here. did you get a copy of "the journal" today? >> i read a bunch of it online but i don't have the physical paper here yet. it's too early. >> what is this called? the funny thing at the bottom. >> the a-head. >> not a-hole, a-head. i didn't say it. >> that's called the a-head. >> besides, after levin i could
sit here and just say -- >> potty mouth. >> don't say it. don't say it. >> i won't lower myself to that. >> you know who is in demand? icelandic translators. >> because of the volcano. >> actually because of all of the bankruptcies in iceland and iceland's banking system that collapsed. they need these people to help work out the problems and they need to speak icelandic and english but we actually did our own little thing on that with the volcano because no newscaster says the name of that volucan volcano. it has a name but we never tried to say it. in this piece on a-14 they have a phrase that i don't know if we had a chance to put it together but it means wanted icelandic to english translators and it's this long. there's about 86 letters. they are all smushed together.
it's almost like they have like a different word for every word we have. it's very strange. >> almost like that. almost like that. that's pretty tricky. >> it is pretty tricky. do we have anything? we don't have anything for that. we do. on the lower third. we have something coming. what is this? that's cdo. that's a cdo in iceland. that's not a synthetic one. that's a good one. i think that's all we have. so if you're going to talk cdos and in congress they would have been proceeded by shi something and then it would have been -- >> you have a problem this morning. >> the bar has been lowered. >> not for you. >> the bar has been lowered. >> you have a standard to uphold here. >> it's much higher than
those -- i said that to steny hoyer yesterday that i have a new respect for the house. really. >> he liked that too. >> the detainees in guantanamo were treated better than the goldman employees by the senators. ksm was treated probably better. >> they weren't read their miles an houreneda miranda rights. >> we'll go house hunting and becky catches up with the man some believe will succeed warren buffett. david sokol stops by.
welcome to omaha. ♪ somewhere in middle america >> berkshire shareholder meeting bigger and better than ever. the state of the economy, fuel prices, climate bill and derivatives. the countdown is on. the commerce department ready to release the data that will be the focus of the markets this morning. has the recession truly ended? our market panel is ready to tackle that question and much more. >> animal spirits. professor robert shiller talks housing, home tax credit and where we stand in the economic recovery. the second hour of "squawk box" begins right now. good morning. welcome to "squawk box" here on cnbc. i'm joe kernen along with becky quick who is in omaha, nebraska,
this morning covering the berkshire hathaway shareholder meeting happening this weekend. in studio to keep me company and also -- not helping me with the big 8 that became the big 12 because the big 10 stayed the big 10 but there's 11 teams now. the big 8 when i was there. it became the big 12. that's where missouri and nebraska -- >> you got it right. >> also joining me richard smith, ceo of the parent company of century 21, e.r.a., coldwell bank banker and southerby international. first, let's get to becky whos had a a preview of what's coming up from omaha. becky, help me.
>> joe, joe, take a look around the studio. we are sitting right now on the stage where warn buffett and charlie munger will take center stage tomorrow. right now it's empty. tomorrow there will be so many people jammed in that they will not have seats for everyone. there are spillover rooms to try to take care of the thousands of people who will not fit into the stadium. they are expecting somewhere between 35,000 and 40,000 people to arrive. that would be a record. last year we had 35,000 who attended this meeting. this time around based on the ticket requests that they got ahead of the meeting, they expect close to 40,000 people and this will be the first meeting since berkshire hathaway did that 50 for 1 stock split to go ahead with the purchase of burlington northern. this is the first time that you bring in shareholders not only from burlington northern but also shareholders that buy into this stock at around $60 a share
because always this is one of those very expensive stocks. an exclusive ticket to get at this point berkshire hathaway is in the fortune 500 and listed in the s&p 500. first time you see all of the new shareholders coming in. it's a different atmosphere than what we saw last year when things were at a bottom. nervousness and last year warren buffett told us the economy looked like it was getting worse all the time. lately he said it looks like the economy has turned saying we could see a stronger recovery than many people are expecting. we'll talk to the man himself over the weekend and he'll join us live on "squawk box" on monday morning from 8:00 to 9:00 a.m. that's his first sitdown after meeting with shareholders over the weekend. stay tuned for that. much more coming up this morning. in fact, in just a few minutes, mid-american energy chairman and netjets ceo david sokol will
join us. we'll talk about cap and trade that looks like it is making a comeback. we'll talk energy prices, the economy and we'll be talking about derivatives because david sokol is the man seen behind the push on derivatives. we'll ask him what's going on with that. later this hour we'll be joined by carol loomis of fortune and andrew ross sorkin. we'll give you a preview of what we think some of the big questions are going to be. we'll dig into questions that shareholders crave to hear answers for including the s.e.c.'s case against goldman sachs. remember, mr. buffett purchased 500 preferred shares in the company and he's talked about goldman stellar reputation through the financial crisis. we spoke to mr. buffett yesterday in his office and asked if he's getting ready for this. he says he's preparing some very long answers for questions about
derivatives and goldman sachs because he thinks those questions will be many that he'll be receiving here as well. there he is yesterday. >> yeah. i recognize him anywhere now. and, becky, too. that's good lighting you have out there, becky. >> well, thank you. i didn't do it myself. >> joe was saying how lovely you look today. >> well, thank you, joe, really? are you being sarcastic? >> no, i'm not. >> he said it seriously. >> in a little sister way. i wasn't leering like you. >> please. >> gdp due out later this morning. he insisted to sit in your chair. i don't know. figure that out. key read on economic growth that will most likely drive the markets this morning. joining me, is ed. you have been at the prudential
since the 18th century. >> when dinosaurs were there. >> guest host today is mike holland and we'll talk to you in a second, rich. can't wait to get to the stuff we can talk about real estate. we have ed here. i don't need to ask you a question. just take it away. where are we and i think you've been pretty friendly toward the market. more friendly than a lot of your peers. still feel that way? >> i do. i think the key to the market and the economy are roughly the same. that's is where are we in the cycle. we tend to underestimate the power of psychsles. think about the beginning of 2008, we knew we had problems with real estate and subprime. we never knew how bad it would get. good things lead to good things and bad things lead to bad things. we know for sure retail sales have improved. the employment picture is getting better even better than the establishment survey suggests. and i think we're going to see much stronger growth over the course of this year than the
consensus expects. >> what does that mean for the s&p? do you even at this point in your work even try to figure out whether it is fairly valued and what constitutes fair value? it overshoots or undershoots what it is worth any way. >> we're trying to figure out where do you get better value. u.s. stocks? international stocks? part of the bonds markets and right now we think that riskier assets in general are better bets than safe assets. we're overweight stocks. you look at the s&p and consensus earnings for next year is now about $100. throw a 15 pe and you get 1,500 over the next year or two. >> that's 30% higher than where people thought we would be six months ago. >> it's where people thought 2009 would be until it turned out to be half that. the consensus is rising. once a trend begins in earnings
expectations, it continues in either directions. it went through the great recession and now we're getting back to where we were a few years ago. >> is it doable when the training wheels come off. >> i think the answer is probably yes. we've already given up the fed's purchase of mortgage backed securities. we'll give up cash for condos program today. there will be some of the support the government has put to the economy is being slowly pulled away but the history of the american economy is that it is inherent robustness through political squabbles. >> they'll do some things. and, you know, there's dividend tax rates that are going up 200% when it is all said and done if you add health care 3.8% in. there's some conjecture about the bush tax cuts. we could have a different
congress. they are most likely going away. there are a lot of headwinds. when do they get your attention? >> look objectively. >> i can't. >> if you look at economic growth in the period before the tax cuts, we had very high marginal tax rates and since then we've had lower marginal growth rates. the link between taxes and economic activity no doubt if you tax something, you get less of it. that's always been the case. tax changes will have an impact on economic activity. will they have a major impact on our long-term ability to grow the economy, probably not. >> what about just the government's involvement starting with health care 17% of the economy. going to be a much bigger involvement. going to be fairly significant involvement in financial services and wall street and you
just heard that the prospects for cap and trade are getting -- the government will be a lot of different places. it may not be manifested in taxes, which it will be, but maybe you don't care about those but watching the private sector disappear. >> i don't think the private sector will disappear. >> if it got to -- rick santelli talked yesterday about the second derivative. you know which way we're heading now. we may not get to europe but you know which way we're headed. >> if i'm right about the next couple years, we'll have better growth than we're expecting. tax revenues will be higher and the economy in better shape than it is now. it's like getting a reprieve from the governor. we have a chance to deal with longer lasting problems. we have an opportunity to do that in an environment where we'll have supportive thing happening in the economy in my opinion. we have a choice. we can go down the road where maybe greece is headed of maybe they take us several years but that's a warning shot across the
bough. we ha we have to deal with those issues. >> we'll deal with entitlements that we have doubled. it would have been better to deal with them when they were half of what they were. >> well, the health care bill -- best thing i can say is that at least we tried to do something different as opposed to just going down the status quo forever. >> we didn't address the delivery system and we added people. >> the changes we made may have made it worse but at least we show that somehow we could make some changes from what was going to be a terrible -- >> that's a warped view of things. >> to be continued. >> the u.s. economy indeed is resilient. it goes through all different administrations and congresses and it -- but then again, there's the individual -- the onus is always on the individual in this country and we're losing that at this point.
>> look at productivity growth, it's been pretty steady at 2.5% for the last four decades. you have administrations come and go but basic institution, educational system, spirit of the american people, entrepreneurship, that's tended to drive us to growth for a long time. i see no reason that will be a difference in the future. >> you remember the '70s? >> i do. we're vulnerable to another crisis before this decade is out unless we deal with some of the issues you've talked about. if now we have the wind at our backs for the next couple years. >> you're dragging me into a positive mindset and i'm not comfortable with that. thank you, ed. >> what if he's right? >> i hope is he for my kids' sake. remember you and your grandkids in the '70s used to always go to -- any way. back to you, becky. >> we are live in omaha, nebraska, this weekend gearing
up for the berkshire annual shareholders meeting expecting 30,000 shareholders to show up. we caught up with warren buffett yesterday and talked about what to expect. huge ticket sales. and he's got a lot on his plate because of the news hitting here. he's ready for questions on goldman sachs and questions on derivatives. he'll speak to shareholders tomorrow. when we come back on "squawk box," the growing prominence of david sokol. one of the top candidates to take over for warren buffett eventually. he's going to be joining us next to talk about everything from derivatives to cap and trade. this is an interview you can't afford to miss. stay tuned. "squawk" will be right back. >> announcer: time now for today's aflac trivia question. who was the only u.s. president to attend the kentucky derby while in office? the answer when cnbc's "squawk box" continues.
aflac is not how do i fit it in my company's budget insurance. aflac is help protect and care for your employees at no cost to your company insurance. with aflac, your employees pay only for the coverage they want or need. and, the cost to you - nothing at all. if all you know about us is... duck: aflac! ...then you don't know quack. to find out why more businesses provide aflac, visit getquack.com.
reuters. the white house says there will be no oil drilling in those new areas that the president opened up for drilling. none of the drilling will go forward until there's a review of what caused the spill that we're seeing down in the gulf. so that's just -- we'll have more on that as we go along here. becky, good time for a segue for you because i see the first thing you see here is wind power on the back of your car. >> yes. yes. yes. joe has a way of always bringing it back to the things he's tried to pigeon hole me with. he's a liar. let's talk about wind power to business jets. our next guest has been part of the berkshire hathaway organization back to 1991. david sokol who is chairman of mid-american energy holdings is also the chairman and ceo of netjets and joins us right now. david, great to see you this morning. >> great to see you.
>> thank you for coming out. this is a huge weekend. obviously the most important weekend for the berkshire shareholders. you have 40,000 people that are coming in. there have been a lot of questions that have been brought up in the news cycle over the last few days. berkshire managers will have a lot of talking to you. >> it will be a great meeting and informative. warren will hit a lot of topics that are current in the economy and so it ought to be a lot of fun. >> let's ask about a couple things. first, the economy. how are things standing right now because last year at this time warren told us that things looked terrible. business was even getting worse. if you have to look at it from businesses that you're monitoring, how does the economy look right now? >> it started in mid january to feel a lot better. i think there's still some worrisome issues. the housing industry is still in severe recession. unemployment is high and likely to stay that way for quite some time. but in mid january, each of the businesses that i'm involved
with started feeling like they were pulling themselves out of a down cycle and into the up cycle. the economic recovery is real but we have to be very cautious. >> do you think it's a sharp v recovery? there have been signs it looks more like a v-shaped recovery. >> i think we're skeptical just because i think there's so muan anchors dragging the bottom. unemployment and howiusing issu are real. we'll see some good quarters that might give the impression of that frankly from my perspective if we see a slow, steady economic growth for the next 18 months it would be fantastic. >> when you talk about what you're seeing from the utilities perspective, mid-american energy, have the industrial users come back in force? >> they are starting to. last year we had an unprecedented reduction in industrial and commercial use in the u.s. and starting again in january we're on track to actually refill that hole on the demand side. we are seeing it. it isn't nationwide but we are
seeing it in a fairly broad swath of the country. >> where are areas that see this return the strongest? >> the upper northwest, the midwest genuine midwest of the united states, somewhat in the southeast but not too much in the upper midwest if you will so far. >> you mean around detroit and michigan some of the areas there? >> it's not growing, if you will, the power demand up in ohio, michigan and those states as much as you would like to see. >> one of the huge issues that's going to be facing berkshire is the questions about derivatives because that has really worked into a frenzy over the last week or two. some of the newspapers have laid out that berkshire has been very aggressively lobbying congress to try to make sure that the changes in financial regulation don't make derivatives putting up -- posting collateral for derivatives don't make that
retro active. has there been a huge lobbying effort? >> it's not huge. 10% of my time and a third of one of my employees in washington, we don't use outside lobbyists. our goal is not to get anything for berkshire. it is to stop what could be a very negative outcome which would be if the law isn't clear on retro activity, sanctity of contract is an underpinning of the u.s. economy. we think the law has to be clear that is prospective only. we've not asked for any special treatment for berkshire nor would we. we have not commented on any prospective issues. >> meaning going forward. >> whatever government feels is the right outcome going forward we'll comply with and we're fine with that. it's not our job to try to mold that. since 1982 mr. buffett has been pressing congress to deal with derivative issues. the dangers of them. in 2001 he made the famous they can be weapons of financial mass destruction if not properly
regulated. we're now dealing with that and we're very much in favor of that happening. but it has to be prospective going forward because there are -- today there is approximately $670 tll trillion in the economy and many are contracts that exist today and they need to be honored. so that's really all we've been focused on. secretary geithner agrees with that position over 200 other u.s. companies have made the same statement to congress that it needs to be going forward only and so that's the only thing we've been working with. >> you don't have a problem with posting collateral for contracts signed down the road? >> absolutely. whatever the requirements are going forward, we'll comply with them and we've not made any attempt whatsoever to modify what congress is doing in that regard. >> austin goldsby was on cnbc the other day and was asked why you would go after a company like berkshire that performed
well during the financial do downturn, why ask them to post collateral and his point those contracts that are out there, those derivatives, could lead to big problems. it won't just be future contracts. if this is using a way to try to prevent another aig from happening, what's wrong with that? >> well, what's wrong with it is it is against the united states constitution. the fifth amendment protects property rights and contracts and it has to be maintained. back in the early '90s, i had an opportunity to travel with commerce secretary brown under the clinton administration to developing countries around the world and he made a fundamental point and the reason the u.s. economy is successful is we have sanctity of contract, independent judiciary to interpret our constitution and until the developing countries do the same, you can't have a growing economy. we can't undermine that. it's not necessary. if congress wants to require or regulator wants to require, they can raise the capital
requirements of any financial institution that they regulate. if they believe there's risk to their portfolio, they can raise the capital requirements. if they want to go forward and put different types of margin posting requirements and that, we're completely fine with that. we agree with all that they're trying to do. you can't break existing contracts. if you want to require a company like berkshire to post additional margin for prior contracts, you have to provide that the other side pays compensation for the additional benefit they're getting from the posting of that collateral. >> these are insurance contracts that were say set rate based on what you get up front and what you would be posting as collateral or not? >> you are asking somebody to change and alter a contract. congress could have tried to solve the mortgage problem by passing a law that says everybody that's got a mortgage has to today pay down 20% of their mortgage. but the argument would have been, wait a minute, i have a 30-year mortgage paying it as i'm supposed to.
it's the same issue here. you can't just arbitrarily ignore the existence of contracts particularly dangerous when you talk about the magnitude of the derivatives issue. you want to go from having no regulation and no transparency to saying, okay, we're going to put new rules in place. it will be a disaster. >> what are some of the other -- you said there were 200 other companies that agree with berkshire on this point. what are those companies? >> ford motor, conagra foods. there was a letter sent in february to congress that i'll give you a copy of when we're done here that it's a cross section saying sanctity of contract is an essential element. secretary geithner testified in front of the congress. the question he was asked is what is the administration's view on how derivatives proposals should affect existing
contracts. secretary geithner said a critically important issue and as i said in my opening statement, the law needs to be crystal clear that it leaves in place existing contracts. does not change their legal nature or add uncertainty about the legal nature of those claims. we couldn't agree more. that's the only issue on this bill that we've been attempting to make sure. >> joe? >> thanks. david, you can imagine what the possible consequenceses of that would be if it went through with all of the existing derivatives that are out there. i don't know what the unintended consequences. i'm not sure what kind of havoc it could wreak but the idea that people writing this think it's something they could do, doesn't that make you worry? we're hearing there will be more amendments added in and tougher given the last week and maybe even bipartisan. doesn't it make you worry about the people putting together these rules and regulations that they're going to mess this up somehow. there will be some unintended
consequences somehow. aren't you just scared to death? >> well, the reality is, joe, it's a great question but the reality is when industry misbehaves, government overreacts. that's just been the nature of our society and so it's likely to happen. on balance we think it's important that derivatives do become more transparent much more regulated and visible so they can be taken into account in people's balance sheets and credit ratings. on balance where congress wants to go is appropriate. the problem is the legislative process is like sausage making in that it's not pretty in the process but actually what it tends to do is like we're trying to make sure this provision gets handled properly, it brings out american industry and american ingenuity to look out for unintended consequences. we think that will happen. our sense is that senators and house members realize the importance of this bill getting done right.
hopefully they'll spend the time to try to get it right. apr i'm sure there will be some mistakes made. the process is an important one. the fact that we're back there trying to make sure that sanctity of contract is maintained, you know, i'm proud of the fact that our organization cares about laws being written properly. we've not tried to get anything for berkshire nor should we nor would we but it's part of our political system that we participate and try to get things done right. >> i just noticed -- >> you don't take offense if you're just referred to as you know that the lobbyists are going to try to come in here and represent the special interests and try to dilute this bill. left to their own devices it would be frightening. there's a positive reason to have a lobbyist and to represent your interest i would say. >> i think every american and every corporation and every
nonfor profit organization has a right to be heard in washington. i think it's offensive when people attack anyone for doing that. >> it's happening. >> i've been on the receiving side. >> you don't have lobbyists? >> we don't. we do it ourselves. but i don't -- i don't think the act of lobbying is a negative thing. i think voicing your concern to congress to please get this right, you know, certainly there are people that try to get something just for them. and i think -- but i think congress is smart enough to know when that's the case. >> whoa. whoa. whoa. whoa. >> i think it's insane. i think it's insane for us not to reach out to the brightest minds in the world on any issue and those minds on all sides of an issue whether it is a financing regulate-year reform bill, climate change, et cetera. congress doesn't have to agree with everyone's view but to not seek them is a huge mistake. >> i want to make sure that we have something correct.
there was something we flashed on the bottom of the screen that i don't think was correct. you said it would be a disaster but you said it would be a disaster if all derivative holders would be a disaster. >> both sides can argue whether they have an agreement, that would be a disaster. it's a huge part of the financial system today and it needs to be dealt with properly. from berkshire's perspective, this is a very small issue. our concern is for the financial integrity of our economy. it isn't about berkshire. i think the worst case for berkshire would be just posting collateral. that's a nonissue. some years ago berkshire had 23,000 derivative contracts. today it is under 500.
there's been no one more outspoken about the dangers of derivative. they do have place in the economy. but nonregulated and nontransparent is a real problem. this is a minor issue for berkshire but a major issue for the u.s. economy that this bill maintains sanctity of contract and not put the contracts at risk. >> is cap and trade coming back? >> you know, i don't think so. i hope not. i do think there was a useful effort by kerry, graham and lieberm lieberman. we participated in that exercise at their request. i think some good work has been done but i think it's unlikely that enough will get done to see a bill come tos passage. if a lot of work is done this year.
>> thank you for joining us today. a pleasure to talk to you. >> thank you for coming to omaha. >> we'll see you through the weekend. that's david sokol. joe, back over to you. >> do they have barf bags on netjets, do you know? >> i don't know if he told you, david, but -- never mind. we won't get into that. >> go ahead, joe. >> did you see going to break where i held up my newspaper and went like that. i did. >> he put his finger down his throat. >> i have a weak stomach. i can't help it. >> i can't believe that. on a great big jet it would still happen. >> it wasn't a great big jet. it's two in one. >> beginning of the flight or end of the flight? >> i didn't -- i got sick --
i -- only once but coming into omaha. >> sorry. >> she should not be taking commercial flights. >> she'll be taking commercial back. >> i took a commercial flight out. i'm taking a commercial flight back. that was my problem. >> any way, coming up -- >> i didn't take a private jet. >> of course not. that will never happen. >> i just want to make sure everyone else doesn't. >> coming up, more from becky in omaha later. the later s&p case. shiller data indicating fears of an unsteady recovery in home prices across the u.s. we have robert shiller. economic's professor and co-founder of macro markets will join richard smith to discuss current trends in the industry. stay tuned. >> announcer: monday on "squawk box," warren buffett live. the legendary investor
welcome back. let's look at the headlines. you will see dow futures higher by 30 points above fair value. this comes as there's talk about the greek aid package getting done this weekend. that's a possibility and that has helped futures this morning. on the economic agenda, first read on first quarter gdp due out at 8:30 eastern time. an hour away. numbers are expected to mark three straight quarters of growth. economists predict the economy expanded at a 3.3% rate in the first three months in the year. united airlines board is expected to meet today. the board will reportedly vote on that ual continental deal. an announcement is likely on monday. joe, over to you. >> okay. thank you. today is the final day of the extension of the home buyer tax credit. will the housing market continue the rebound or turn the other way? joining us from new haven,
connecticut, we have the co-founder of macro markets. you look young but you are iconic already. i was hoping you would come on today and i would ask you about animal spirits because we always talk about that. i was hoping you would say there are signs they are back. we're also joined by richard smith. you're going to have a lot of antidotal evidence about what's happening in the here and now but let's ask professor shiller, are you feeling it? animal spirits? are they out there? >> well, that's one explanation for what's happened. you know, we reached a bottom in the markets just after obama became president and then we've seen the most amazing resurge in the stock market. biggest resurge since the great depression actually. and the housing market has also
been up. some of this is animal spirits. i can -- people think that it's over. many people. not everyone. a lot of people think it's over. this is a time to buy. i'm not sure it is over. >> robert and i had a discussion about this yesterday. you know, it's hard to tell whether it's over. we tend to think the data is strongly encouraging a resurgence based on value. we saw in the downturn the high end of the market, the smart money, if you will, continue to buy real estate at a very rapid pace. they left the market. when they left the market, we saw the collapse. what we have seen of late is the very high end of the market is very active in the market again. the stories coming out of new york city and hamptons and high rent markets are phenomenal. new york, as an example, for first quarter up 80% on units.
hamptons last year there were 13 deals above $10 million for the entire year. this year we've had that many in the first quarter. it's a price value proposition. we believe that people have come to the realization that it's not going to get much cheaper. the peak to prove pricing is 32%. robert would agree with that. >> when you were here a month ago, you said that that was the key that the psychology which had been so positive for so many years had fundamentally changed. do you feel there's a change going on right now? >> we're struggling to understand exactly why. clearly we were beaten up very badly in this downturn. worst downturn in the history of the business. we see signs of improvement and encouragement but we know full well it may not be over.
we're hesitant. even in reviewing data we're hesitant to recognize the strong positives. our franchise business operates in all 50 states. units up 8%. price up 3%. if price is up 3% in that mid market range, there's a realization that that price value proposition is cascading all of the way down the price line. it's certainly at the high end. the high end we have seen more multiple offer bids than we have ever seen in the history of our business. >> the stock market to some extent? >> we thought. we survived a number of brokers in our corporate operations in new york city. only 20% of the buyers use bonus money to buy. vast majority or buying based on price value. they think pricing will not get any better. it's an interesting development. >> it's a psychological shift. >> it could be but it's also i think a bit more than that. i think the very smart money realizes its bottom and it
overcorrected on the price side and back in buying now. interestingly enough, we also asked this question of our buyers especially in new york city. are you buying for investment or just buying because you want a new place to live? 70% were buying because we want to live here. we don't care about the investment side. >> professor, what exactly are you thinking? i can't understand -- you know, maybe there's a higher highs and lower lows, maybe you test and end up higher. you think we break through the old lows? that's what a new bottom would mean. we haven't bottomed. that would be a w or worse for the economy, right? i know the new year is coming up in 2012. is this something horrific on the horizon here akin to the '30s? >> the '30s was horrific at the beginning after roosevelt came in it smoldered on. so i don't use that as an example. you know, theres was a recovery
after roosevelt became president similar to the recovery we have now. it lasted for four years. until '37. and then it dropped off. the question is whether or not we have a strong recovery or something like a double dip. i don't know if will be a double dip but it would be weak performance in the real estate markets and in the overall economy. that could happen. that's what happened in the 1991 recession. >> that would mean the bottom is in in real estate. it would be -- >> our unadjusted kay shiller numbers have been declining for five months. you might do a seasonal correction and say seasonally adjusted they're not but it's kind of iffy. it could find a new bottom. that's definitely within the realm of possibility. >> when you consider that professor, there are a number of issues that must be considered.
one that concerns us and i'm sure concerns you as well is the new norm as to unemployment. seemingly in the first quarter and also evidence of this in the upcoming second quarter, that unemployment is not an issue or doesn't appear to be. it must weigh heavily on the economy. what's your view on the new norm and unemployment over the next five to ten years. >> that's what distinguishes this recession from others. we're still up close to 10% unemployment. it's generating a lot of bad feeling. a lot of anger and anxiety and anger at wall street and this is the kind of thing i keep coming back to the great depression. the same thing that happened then. the business community then complained that the government was changing the rules on them and there was fundamental uncertainty and they could do business going toward. we're in a bit of that now too.
>> all right. >> i don't mean to be so negative. you didn't sound too happy. >> it's fine. you have to see that movie, professor. they called it long ago. i'm worried about tidal waves. that would do it. there's a lot that can happen in 2012. thank you, professor shiller. appreciate your time this morning. back out to you now, becky. >> all right. right now i'm sitting in the seats at the qwest center and right now the seats are empty but take a look around. tomorrow morning at this time close to 40,000 shareholders are expected to fill these seats waiting to ask question of warren buffett. when we come back, carol loomis and andrew ross sorkin of "the new york times" will join us to talk about what questions are likely to be raised this time around. "squawk box" will be right back.
♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community.
easier for people to buy in and become a shareholder and we'll see more this year. it's expected to be almost 40,000 people. andrew ross sorkin is here and carol loomis also is the editor of warren buffett's annual letter to shareholders. show knows this story inside out. thank you for joining us. you've been getting questions. you know there are a number of issues that are going to be on the forefront for shareholders. without giving away those questions, it's easy to read newspaper and know big issues out there. one is goldman sachs issue. the other is derivatives contract. it looks like the goldman sachs story took another turn with the justice department getting involved. how significant is this, carol? let's go back just to the solman
experience. >> it's different. there he was pulled in or he volunteered to go in and run solman. he was the person on the front line dealing with u.s. attorney and i think that was very close. i think criminal charges would have been just excruciating. the u.s. attorney decided not to go in that direction. so goldman is different because warren isn't running the place. i'm sure he has opinions. i'm sure he'll be telling us about them. it's a different situation. >> right. and right now the justice department is, i guess, considering this criminal investigation or is undergoing a criminal investigation? >> we think it's in a preliminary stage and it may be this is the obvious follow-up they have to do given the s.e.c.
case and that it has been referred. i'm very curious to hear how warren responds to all of this. he's thus far been relatively defensive of goldman sachs and supportive of what they've been doing. i will tell you there are comments this morning that i actually thought really went the opposite way for the first time talking about some of these things had a social utility and whether they were socially appropriate. maybe not illegal. >> that's a casino not just goldman but wall street as well. >> even overnight given the news and e-mails coming in, i don't know if you looked at your inbox some things for tomorrow they are coming if fast related to this subject. >>, you have a question you would like to ask. >> i was going to ask andrew but carol could answer as well. andrew, you know, at times in
the past settling without admitting or denying what has been charged sometimes that works and gets everything off the table and it kind of clear the air. other times i don't know. we hear that there's some thought about whether goldman might do that. what do you think will happen and what do you think should happen? and the same question to carol. >> you know, we have not been -- there was that report in the new york post yesterday or the day before about a poe tetential settlement. you would imagine they would want to go in that direction. given that you might have some sort of criminal probe out there on top of this getting to that settlement may be much tougher now. >> obviously the criminal -- any hint of a criminal action adds a totally new dimension to it. i have thought this case would
get settled. i don't think the s.e.c.'s case is very strong personally. and i don't think that goldman really wants to have this drug through the courts and the press for a long time so i think this is a case that really begs to be settled but you never can tell so here i am on record saying i think this is what will happen. >> carol, you are an expert on somebody who has been watching what happened with derivatives. you have written extensively about it warning about the dangers that come with it and a proponent of additional legislation to come down and really crackdown on the derivatives market overall. berkshire hathaway calls them weapons of mass destruction. they are concerned about the laws being retro active.
how do you take the idea of weapons of mass destruction and the idea that we have some on board that we don't want to post collateral for? how do you put those together? >> i would say that i think that there are some derivatives that are actually useful. the farmer probably really needs to hedge but i'm under the impression that most derivatives are on the casino side of wall street as opposed to the utility side of making the world behave and so i would be happy to see most derivatives go and i think actually that's where charlie munger comes out. charlie may be even more emphatic. most may be too small of a word for him. i would be happy to see us go back to where we were 25 years ago when derivatives except for old ones puts and calls and hedging that farmers did and
some other kind of hedging. i just don't think that we need them frankly. >> andrew? >> i have actually probably am in the same place that carol is. again, the interesting answer is -- the interesting question is how mr. buffet is going to answer the question specifically especially because i think that he actually does believe what carol and i believe about the derivatives longer term and for society and yet he has this business issue which is what do you do about all -- >> how do you unwind -- >> that's a big issue for him and squaring that circle for the audience will be very important. >> i have said in print about warren's derivatives that i don't think he's capable of ignoring mispricings. wherever they exist, he feels hes has to exploit them. he saw mispricing in derivatives. that's how he got into these a
few years ago. he never said that he wouldn't buy any derivatives but now he's got himself in this situation where he has to respond to what's going on in washington. >> why shouldn't any investor have a right to see an equity and then try to capitalize on it? i think you just made the case for why there should be derivative if you see equity in pricing and wherever it is or risk that's misplaced. there's a reason these exist obviously. they wouldn't exist if there wasn't utility in them. >> well, i'm not so sure that that's true of an awful lot of them. many have been created to allow people to tap into a risk they didn't have. >> offload risk. tap into risk. hedge. go against. go for. i was thinking
around the world. calling a casino doesn't mean it's going away. >> it doesn't mean that we need them in the america capital system. that's a real difference from a cow. >> i have to take both sides. i think there's plenty of people on wall street that probably got a great use out of some of this stuff and maybe you want to separate one from the other. >> the issue is separating the speculator -- >> they're tied in with hedgers. they provide liquidity for hedgers. look at the futures market. futures contracts are derivatives. you want to get rid of those? >> joe, it's when you're hedging. it's speculators providing something important when there's a true hedge but too often it feels like there's just two speculators on both side of the transaction.
that's what paeople are focused on. >> and taxpayers are bailing out speculators wrong on it that leads to problems. we'll be back in a moment. see you back here on the stage tomorrow. thank you for joining us. >> wonderful to be here. >> "squawk box" will be right back. camper, boat insurance. nice work, everyone. exec: well, it's easy for him. he's a cute little lizard. gecko: ah, gecko, actually - exec: with all due respect, if i was tiny and green and had a british accent i'd have more folks paying attention to me too... i mean - (faux english accent) "save money! pip pip cheerio!" exec 2: british? i thought you were australian. gecko: well, it's funny you should ask. 'cause actually, i'm from - anncr: geico. fifteen minutes could save you fifteen percent or more on car insurance.
>> this is all of the way from iraq and michael is at his fourth with berkshire hathaway meeting. he tried to give this to me last year. >> liesman is here. he'll be on in a second. welcome back to "squawk box" on cnbc, first in business worldwide. everyone misses you, becky. we feel like we're with you in spirit. i'm joe kernen along with becky quick in omaha this morning. do you know who just defended me to the death about derivatives? my man, liesman. steve. >> are you kidding s inding me? >> you would have to get rid of the future exchanges in chicago. >> they said there are some utilities for them for farmers and some of the companies that
use this to hedge fuel costs. >> that's what they're for. what about options? those are derivatives. you can't get rid of them. maybe we need transparency. >> maybe you need limits on them. >> yeah. let carl levin and his friends decide. any way. you know what he would say. they're all beep. we have -- they're all crappy. can i say crappy? i don't know what i can say now. >> that's good. >> okay. we have two guest hosts. we have mike holland and we have richard smith who agreed to come on and probably is regretting it at this point. parent company of century 21, e.r.a., a monopoly. someone needs to break you up. >> don't use that word. >> becky, who do you have this
hour? >> well, we have plenty of people coming up this hour because again we're at the berkshire hathaway shareholder meeting where warren buffett and charlie munger will take questions from shareholders tomorrow. they expect 40,000 potential share holders to come tomorrow. that would be the most ever. of course burlington northern shareholders are brought into the fold and 50 for 1 stock split which makes berkshire hathaway shares a much more affordable stock so anyone can buy their way in and get a ticket to this show tomorrow. those people will sit in the seats all around us asking questions and as we just heard from carol loomis and andrew ross sorkin, many questions will be centered on the headlines coming out focused on berkshire hathaway news specifically what's going on with goldman sachs and also what's been going on in terms of the derivatives contracts and whether those derivatives contracts will be further monitored and whether
changes that come to that would be retro active and require berkshire and others to post more capital on derivatives out there. this is a huge draw. big names come in every year. we've seen bill miller. john rogers is expected in. there are all kinds of big names that come out and there are all kinds of shareholders you probably don't know that much about. the shareholders flock to omaha from near and far this weekend. one of those shareholders was able to squeeze in a one-on-one meeting with warren buffett yesterday. he's an army specialist back from being overseas serving in afghanistan and iraq. listen in on what mr. buffett had to say to this soldier. >> this is all of the way from iraq. micha michael is at his fourth bi
berkshire hathaway meeting. he tried to give it to me last year and someone stopped him. he wrote me a letter. >> his own private audience before tomorrow's shareholder meeting, 40,000 shareholders expected to be in here. you can imagine how busy mr. buffett's office is leading up to this. all kinds of spectacles that go on. people go to his favorite places to eat. some of the things we'll follow this week. you asked who we have coming up this hour. a hometown favorite today. tdameritrade. we'll talk to joe moglia and how investor confidence is hanging in there and chairman and ceo of enterprise holdings, andy taylor. he'll be our special guest to talk about how this is such a big weekend for car rental
companies, for hotels here, for restaurants here, for airlines. some of them don't behave all that well. they raise prices and do gauging. enterprise is different. we'll tell you why they don't go the same route as some of the others. >> you can't see out of their cars. they got that big sheet over them. people running into -- it's impossible. >> from commercials? >> yeah. how do you see out of one of those. i don't understand. ask that guy. we're three minutes late, becky. i don't know. >> three minutes late? >> somehow. i have to read these headlines. making headlines this morning, shares of goldman expected to open lower following a "wall street journal" report that federal prosecutors in new york began investigating the firm raising the possibility of criminal charge against the company or its employees. however, scott cohn says it is overblown to refer to this as a
criminal investigation. the federal government escalated its response to the spill in the gulf of mexico. the accident after a rig leased by bp exploded and sank last week. investors fear liability and cleanup costs. the white house says no oil drilling in the new areas will go forward until a review of the cause of the spill is completed. euro zone leaders now say the plan to help greece is likely to be unveiled tonight or during the weekend. the imfeu officials are in athens to negotiate the bailout. u.s. equity futures -- unnecessary wallpaper video. s&p futures up 34. do you believe that after 120-point gain yesterday. the u.s. auto industry is showing signs of life and one man that has seen his fair share
of tough times is about to drive off into the sunset. phil lebeau joins us now with a special guest. good morning, phil. >> good morning. we're joined by bob lutz, vice chairman of general motors on his last day at the office. after 47 years, i was telling someone we were doing this story today saying he's like michael in "godfather 3" every time he's out they pull him back in. should we be convinced that this is in fact the end of the road for you when it comes to working with one of the automakers is this. >> i think we can assume that at age 78. i don't think another automobile company will be reaching out to me for yet another ten years. >> i had a chance to talk with some of your colleague over the last many years and all of them believe that if you were asked to name one vehicle that perhaps is your proudest achievement, you might point to the chevy volt and it brings up the question, you have seen the volt and we know it's coming out
later this year, is the volt going to deliver on the promise that we have been led to believe that it's going to be delivering the fuel economy that you've thrown out there as well as the price that people are going to want to pay? >> well, we're not in a position to confirm the price yet. we've always said in the region of around $40,000 which if you deduct the federal incentive to purchase, that's what we've said and we can't confirm anything beyond that today. in terms of the vehicle delivering exactly what we had planned it would deliver, that's on average 40 miles purely electrically and then have the engine driven generator cut in to maintain electric drive for another 250 to 300 miles, yes, it will deliver that. and it will deliver it reliably and it is the only mass produced vehicle in the world that will
deliver all of the benefits of a purely electric vehicle while at the same time giving the customer 250 or 300-mile range which people need. >> you were leaving general motors after a difficult last couple of years. do you believe that this company now that it's out of bankruptcy and now that it has paid off what it had to pay off as part of bankruptcy obligation from the escrow fund, is general motors going to go public before the end of the year? >> i'm not in a position to confirm that either. i know you would like me to. it would make headlines. i can't do that. all i can say is we're preparing for that moment. i think we have the best product line up in the history of the company. maybe arguably the best product line of any high volume manufacturer in the world right now. our sales of all of the new vehicles are doing extremely
well. our financial results i would very cautiously say are very encouraging and if we have even a mild economic upturn or just a fairly good automobile market, that coupled with a good cash flow coupled with good profitability but manically coupled with the awareness in the financial community that we have world class products and will have more world class products coming, those are the facts that people need to know for us to have a successful ipo. now, will that be this year or early next year? we're not at liberty to say yet. the answer obviously is we want to do it as soon as possible because general motors while grateful for federal assistance, we would like to be a privately owned company again. >> michael holland, you have a question for mr. lutz. >> you mentioned a second ago the electric car and warren buffett a little over a year ago
made a successful investment in in area. with your perspective on the industry, could you talk a little bit about china and where it is today and what you expect the impact of china to be in the auto industry over the next several years? >> well, i don't think we can reasonably put any limits on the growth in china. in most of the industrialized world like 600 cars per 1,000 inhabitan inhabitants, in china the figure is 60. it's growing rapidly and as prosperity of that nation moves inland from the coast and of course that's being encouraged by the central government, they are putting in an interstate highway system with a lot of major freeways heading north, south, east and west and with the development of the interior i will tell that you chinese auto market in a few years will be as large as the automobile market in the rest of the world combined and they will have
successful domestic producers. they don't yet. but they will. of course our position in china is very, very strong. we're growing at a compound annual rate this year of 60%. we're always about general motors, always about the largest producer in the chinese market and as everyone knows, buick is an amazingly successful brand in china. we did 500,000 buicks in china last year. >> bob lutz, vice chairman of general motors joining us exclusively on "squawk box" on his last day on the job. bob, i want to see if we can hold you to that promise that you're going to be around but you're not going work for one of the automakers and by the way, bob, we've been holding onto this. you can't see it there but in 1997 when you were at chrysler intro duing the durango, you handed out -- like wheaties only
durangos. i'm going to eat a bowl of 13-year-old durangos. we'll see if we survive. >> we got sued over that by the makers of wheaties? >> i'm sure wheaties is glad to see me wave the box around today. thank you, bob. we appreciate you joining us this morning. >> okay. thanks, phil. >> joe, back to you. >> i think we're going to becky. 78 years old. i want to get a list of what is it? no drinking? no smoking? looks great. we wish him well. becky, what's coming up? >> still to come, omaha is more than just the sight of the berkshire hathaway shareholder meeting. this nebraska city is also home to five fortune 500 companies. tdameritrade is one of them. we have chairman here with us. he's headed to the stage to talk markets, reform, staying competitive.
hathaway company but also to five fortune 500 companies. another four of the fortune 1,000 companies. one of those fortune 500 companies that calls omaha home is td ameritrade. here to join us is joe, ceo. you have a lot of people in town. >> absolutely. people come in and it's a crusade. everyone has to come out and see you. they want to see warren. it's a big deal. as you have already said, there will be 40,000 people here. it's great for omaha. it's fascinating for the people that come. they get a lot out of it. >> they do. this is a bit of a party atmosphere here. let's talk about how retail investors are feeling right now. we've been watching the markets continue to push higher for the most part. volatility has been very low. what does that mean for retail average investor? >> i think for the average
investor it's interesting. about a year ago, our clients had 24% of their assets in cash and they have actually decreased cash holding by 25% in the last 12 months. today that number would be about 17%. they are involved in the equity markets. right now they seem to get more involved with the financial sector as well as technology. >> that's why they feel there's real running room. >> especially when you have news in terms of things going on. so for example when the news was released on goldman sachs, that was a friday. we did 600,000 trades that day. that's nevada been done in the history of mankind. the individual investor is involved. i think they probably feel that the worst is behind us. >> do they get scared off by the hearings that we've been seeing in washington by a lot of the talk coming out of the senate and congress? >> i think they do.
the reason for that is we all know that whenever an individual investor -- doesn't have to be individual investor. can he investor. you have a bit of a cloud over their head. there's not even clarity coming out of washington in terms of what's coming place now. >> there's also a sense that it's been the pros who have been in the market as we have come off the lows and watched this massive return in the stock market better than 70%. has the average investor gotten left behind. are we late to the game or will they be okay? >> they'll be okay. there are a couple parts to this. that's the reason i gave you statistic on the cash. if we decrease cash by 25% in the last 12 months, they are getting involved in the market. also when you think about what happened at the beginning of the
decade and what's taking place in our sector, the markets are overspending in the last couple years and the individual investor can't go through that and not learn a lot. they are far more educated than what they had been a decade ago. >> the industry overall talking about online trading has been a little bit difficult. some competitors have lowered prices as a result. you haven't. how do you -- do you do this by adding new things on the screen? >> it's a matter of value. at the end of the day for td ameritrade, it's for the client. if you want a relationship with a branch, we have that for you. if you want someone else to help manage your money, we have that as well. i think it's not a matter of a dollar cheaper or dollar richer, it's really a matter of what you get for your money and we think we have great value proposition. >> has that paid off even though your competitors have dropped rates and you kept yours the same, you haven't seen a client
walk out the door? >> our market share has only grown. i would really reinforce the point i don't think it's a dollar -- that won't be the reason why someone leaves. they leave because they're unhappy with the experience and for the most part the great majority of our clients are very satisfied. >> when you start looking at the financial regulatory reform that's been proposed, what's good in it and what's bad in it overall? >> i think at the end of the day the whole concept about having more oversight over consumer lending, i think that's a good thing. i think the concept about we need better regulations with regard to derivatives. i think that's a good thing. what i worry about a little bit is that i don't know how much washington really truly understands the nuts and bolts of what's going on on wall street. >> that's the sense we got watching those hearings. >> i think some of the things they're doing are good as long as they don't overdo it. >> we want to mention quickly if you want to take a look across the stadium across the street, college world series stadium,
td ameritrade has the naming rights. when will this open? >> i think it's 2011. for us at least as we started to do better over the span of the decade, it was more important for us to get more involved and identify with our community and about 40% of our employees are here in omaha so for us to be part of omaha and part of td ameritrade park. i think what happens with college world series that last for a full ten days and the berkshire thing is a weekend. >> great to see you. we'll catch up with you again around omaha. when we return, or coming up later in the next half hour, the car rental economy. we'll be talking about that with the ceo of enterprise holdings andy taylor.
come on, guys, sack those unwanted pounds. i'm lawrence taylor. i lost 35 pounds on nutrisystem. give nutrisystem for men a try. losing weight has never been easier. that's me 22 pounds ago, and i'm never going back there again. don't miss our best tv offer: order now and you can get an extra four weeks of meals free. that's right, 140 meals absolutely free! hey, get back in the game like i did. i did...go...all...the...way, whoop! i lost 50 pounds with nutrisystem for men. get off your butt and try it. nutrisystem worked for me, and it can work for you, too. don't miss our best tv offer: order now and you can get an extra four weeks of awesome meals!
moody's downgraded nine greek banks saying it reflects the pressures anticipated stemming from the country's challenged economic prospects. greek bank stocks turning negative in the last hour on that downgrade. they include national bank of greece. next we have breaking news of the day. the first report on gdp for the first quarter.
>> we have numbers and we are going to have first quarter advance gdp. here we go. up 3.2. this is a little bit light on expectation side and it's definitely as we all expected a much smaller picture than we were looking at at the momentum going into the end of the year fourth quarter. 3.6 on consumption is better and well over twice the pace of what we were looking at last quarter. up .9 on the index as expected. still higher than q-4. up .6 on pce q over q. let's look at employment cost index. up .6. let's see how the market looks
at the data. preopening futures up a bit. we see interest rates are slightly elevated to yesterday. they still can't get up to their high levels from monday which weren't that high at 3.80. we're still at 3.74 on a ten-year. down a bit on the week in terms of interest rates and what a weekend it is. we'll be looking at greece. we'll be looking at harriharris pa, as well. back to you. >> okay. thank you, rick. let's get more reaction. senior economics reporter steve liesman is here. our guest host, mike holland. we talk bumpy bottoms. futures barely moved with equities. should this give anyone -- is this a big surprise? >> it's right around in line. you had 3.3 was dow jones
consensus. i don't know what bloomberg was. final sales was 2.2. quite a bit better. the thing that you are looking at here that regardless of what the final number is, the thing they're looking at is mix of growth. fourth quarter of growth was based on inventory rebuild. you build inventories in no sales. if you stock it, they will come. consumer spending number at 3.6 is well over double what it was in the fourth quarter. you had business spending. >> rick is correct? >> i'm with him on that. a surge in durables. investment there. you don't want recovery built only on inventory because that raises the odds or the concern about a double dip if you stock it and then they came and bought it, you're in better shape. >> this is a tough one. there's been a lot of good
research on gdp, how do you look at it? is it really what you think it measures? throwing manufacturing inventory. it's not as easy as it appears. the real question is will we see the numbers a yaer from now on the first quarter of 2011. this is what i want to know. i don't know that's been decided. >> listen. the thing here and what you are just right on with this thing with final demand, everyone is right this morning. you can't build enveinventories keep firing people. people have to manufacture it. that mean more jobs. correlation between a slight improvement in employment and more buying. that goes very tightly. this is a self-reinforced recovery. >> i want to take a second here to talk about the big negatives in the economy. structures. minus 14%. housing investment, still
declining. minus 11%. and then government spending overall is down 1.8% because the federal government increased 1.4. if you ask me what the biggest challenge is to the u.s. economy, it's the economic impact of declines in state and local spending down 3.8%. >> harrisburg, pa, had a payment, a $ 90 million bond. it defaulted for the second time within a month. i don't know how widespread it will be. there are huge challenges to local governments out there and that's going have an economic impact when the stimulus transferred from the federal government runs out. we have to consider that in the forecast. >> it's going to be a slow expansion phase. we're getting less than vigorous recovery. 4% is not a vigorous recovery.
you'll see an expansion. right now what you don't want it to see are more structures being built. you don't want to see more housing investment with now 8%, 9% inventories. sell the existing inventory and then we'll build more houses. equipment and software looks pretty good. capital goods looks good. >> as we talked about, was i right during the break they bought palm for 400 billion and got 400 million in cash on there? all of this money on there that companies will have to decide to do something with or guys like you -- >> record amount of cash in corporate america. >> that's a positive sign for the forecast ahead. there's a separate indicator in here which is called market based deflatodeflator.
the reason why the fed likes this is in the pc are certain prices. they're not market based prices. no actual transactions. the core market priced pce is 0.3%. actual transaction. certain services are imputed price. these are not. it's very low. inflation numbers are going the fed's way here. >> do you call this a goldilocks economy? >> i don't. we need stronger growth relative to the decline we had. we have more ground to make up than we had in a long time. >> were you talking about hp? >> how much was cash? >> about 450 on their books. >> there's a lot of cash. >> chevron indicated higher in the dow. we have earnings from chevron which are well above $2.27 versus expectations of $1.94. the revenue number was below expectations here but it doesn't seem to be affecting what's happening with chevron. they talk about high price of crude as one of the reasons.
exxon was the same thing. hey, rick. i know you're busy down there. we were talking earlier. we had sorkin and carol loomis on. both of them told me that derivatives just -- none of them are worth a darn and they all need to go and they have no social -- i don't know whether you just take chicago off -- >> they are both planning on running for office. >> they are very comfortable -- >> that's the dumbest thing i ever heard in my life. corn futures are derivatives. a derivative is like this all encompassing term that draws value from something else. maybe washington doesn't get it necessarily but i think everybody else i know -- you get it, joe. steve gets it. >> i asked them about it. >> can i just point out that in a lot of the derivatives, there is margin there.
if the value -- >> that's the whole key. you want reform, you nailed it. margin. variation margin. floating margin. margin. margin. margin. >> somebody get me off this business about speculation and gambling. if the red at the roulette reel played two to one, we would take our 401(k)s to the roulette wheel. >> if you buy commodities versus sell, you have rules of the road. the blogs don't have the sound on. they see them going like this and turning it up. there's nothing. it's all love. >> it's all good. it's nice. it's heartwarming. it's friday and everything is good. thank you. >> when he comes around to my way of thinking like that, it's easy. >> when santelli is correct about something -- >> thank you, rick. you are really excited.
let's get back to becky in omaha. we'll remember this day, beck. >> i know we're going to remember this day. all the love on the set back and forth. we like seeing this. up next -- >> you're not here to instigate between these two. >> she calms it. >> that's what it was. that's what it was. any way, next, shareholder are getting around omaha this weekend. they could rent a car and they are likely going to spend $100 to $200 a day. many in vehicles provided by enterprise rent a car. we'll find out how they are staying ahead of the competition. "squawk box" is live from omaha and we'll be right back.
all right. welcome back, everybody. we are live in omaha. getting to omaha is not an easy task. once you're here, it's really difficult to find a room or rent a car because you have 40,000 people that descend on this city for this weekend. check out some of the statistic because when this happens, as you might expect, there is some gauging that takes place. in fact, it's cheaper to fly
from new york to paris than from new york to omaha this weekend. airfare could cost you $839 from new york with one stop. this is a very, very expensive ticket. even more pricey if you go direct. also, take a look at hotels. first of all, if you didn't book one about six months ago, you're not going to get one all of the way to lincoln, nebraska. for hotel rates you see 159 a night other places 254 but prices often are two to three times what they would charge on a regular weekend. car rental same story. some people said they were getting quoted $350 and higher to rent a car for a day. but not every business is operating that way. joining us is andy taylor. you operate enterprise and a number of other major brands you know out there. thank you for joining us today. >> thank you. great to be with you this
morning. >> you have a slightly different take on how do you business when throngs of people come into town. you are making more cars available and keeping rates lower. >> we're large and we have three brands, we see these super dema demand events that occur so we're a part of that but we take a long-term view with customer. we look through their lens. if we took that pricing opportunity way up, i don't think our customers would feel good about it. some say that's a lost opportunity. if they walk away from that transaction saying that was a fair price in the midst of this frenzy, that's a way to build loyalty and that's a long-term view. >> enterprise, national and alamo are huge. for people not paying attention, i'm told it's about a 53% of the
market share. >> it's large. it's been a privilege to grow this business. i was 10 years old when my father started. he came home saying we have seven cars on the street. we now have over 1 million. >> how many do you rent every day? >> well, it varies by the day. a week we went almost 1 million cars a week. every one of those rental is just like when we were back renting ten a week. >> you do this as a private company which is astounding. how did you grow and get this big? >> i think the family has taken a very long-term view of trying to grow a really terrific business. the third generation now works for the business. my father founded it. everyone in the family says we would like to not necessarily monetize this great business but continue running a great private multigenerational family business. it's really been a privilege and just totally fun.
>> would you ever maybe look for any investors to come in or do you want to keep this a private industry? >> we would like to keep it private and family owned. that's how i met mr. buffett. we have to think about -- this is many years ago. we have to think about alternatives because in an asset intense business like ours, we have to have different alternatives available to buy that asset that we will rent for $35 a day and pay it back that way. >> you mentioned something off air. if people aren't thinking about it, you do car rentals but it's way more than just that. you do car sales. you're involved in a lot of different businesses. why don't you lay out those businesses. >> we have some tuck in businesses to use warren's term. medium duty truck rental. we have a we car. we are doing that.
we also have a business of fleet management business where we lease small and medium sized companies vehicles from 10 to 75ish and that was my father's original business when he started the company 53 years ago. >> from all of those perspectives, how is the american consumer faring right now versus where they were a year ago? >> well, what a difference a year makes. i follow your show every morning. you have had people say this over and over again. our perspective is that business started coming back about a year ago. it started improving. our fleet went down 10% at the bottom. what we saw were leisure renters who were going for a deal. >> looking for bargains. >> at a resort or whatever. they came back. then small, medium sized business corporate users started coming back and last to the party are large corporations loosening up purse strings and starting to come back through
our national brand. so we're now lapping a year ago numbers. we're about it. two years ago which was our high. i'm optimistic in that regard. >> that sounds like a v. >> it does. i also worry that our economy is fragile looking at what's going on in the globe affecting us down the line here and all debt you talk about on your terrific shows is a concern. >> andy, thank you very much for your time. we would love to have you back in studio to talk about the trends that you are seeing. >> it's a privilege to be here. >> right now, joe, back to you. >> all right. thanks. coming up, stocks real estate and your investment dollars. we'll be right back. >> announcer: monday on "squawk box," warren buffett live. the legendary investor getting ready to address the berkshire hathaway faithful this weekend and then he's paying "squawk" a visit. a full hour live with buffett. 8:00 to 9:00 a.m. eastern that's
hi, ellen! hi, ellen! hi, ellen! hi, ellen! we're going on a field trip to china! wow. [ chuckles ] when i was a kid, we -- we would just go to the -- the farm. [ cow moos ] [ laughter ] no, seriously, where are you guys going? ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! [ female announcer ] the new classroom. see it. live it. share it. on the human network. cisco.
looking at maybe a 25, 30-point gain. that's paired back a little. maybe a little disappointment with the gdp number. maybe not. our guest, richard smith, ceo of realogy, parent company of century 21, e.r.a., coldwell banker and more. mike continues here. so, the housing market gets totally inflated and you've got all those names. sounds like anyone who's buying a house is dealing with a realtor at one of those companies, it seems like. so, it enclosed the housing market right at the same time you were taken private by leon black and apolapollo. all right, things hit the fan for a while. at one point, there was a very -- i guess out in the open feud with carl icahn, as they had a feud -- that doesn't distinguish you that you've had a feud with carl, but he said there is no way that realogy can remain solvent at one point. but now here we are. we have the benefit of some better numbers. you reported results yesterday.
>> we reported yesterday. it was a very good quarter. >> where's your mike? >> reflected on a -- reflected -- >> you took your mike off so we can't hear -- >> no, i didn't. >> no, no, i'm kidding. >> here we go. there you go. >> matt hates when this happens because he's on camera. he's looking over there. get a good shot of him. >> he looks good. >> he does. he's a great stage hand. so, you actually had positive ebitda. that's how we measure realogy, ebitda. >> ebitda's our measuring stick and we did well yesterday, too. we've been positive throughout this process, important point to make. >> it wasn't easy, though. cost-cutting. >> it wasn't easy. we recognized well in advance back in 2005, so well in advance of being buyed by apollo, we started cutting costs. remember, this happened in 2005, at least for us and the balance of the people we do business with. so we started cutting costs substantially and over the last
three or four years, we've cut $500 billion in costs. >> and how many jobs some. >> about 5 million in jobs, that's tough. >> but you say visibility is getting more positive. >> we did all that in preparation for what we thoiugh was on the horizon. so we're very well positioned to capitalize on the up side. >> you're starting to see up side? >> our heavy lifting is behind us. the up side right now is in the way of futures. if you think about futures, we have open contracts. an open contract is open. it's not yet closed, but it gives you great visibility into the next 90 days. >> so, you will be ebitda positive -- you're normally the most in the first quarter, but you were because of cost-cutting? >> the first quarter in this industry is not our best season. typically, we lose money in the first quarter. >> but for the year you expect to be ebitda positive? >> absolutely, and we have throughout. >> would anyone at this point still say there are solvency issues for realogy? >> carl wouldn't because he's probably not interested as he used to be -- >> because he sold? >> yeah. he's out for the most part. >> did he make money? >> i think he did quite well, actually. our senior in the capital
structure -- >> 20 to 90? >> yeah, they were trading around $20, $21 a year ago. they're in the '$92, $93 -- >> they're almost at par. >> from $28 a year ago. >> so, yeah, we haven't heard carl yelling about that. >> he's got capital gains problems now. >> listen, we are extremely well positioned to capitalize in this up side. >> and it sounds like you're going to be capitalized. >> yeah, and let's talk about that for a moment much t. the open contract visibility in the next quarter is very strong. we saw that the same in the closed contracts in the first quarter, but the open contracts for the next 90 days are very impressive. so, i would think we may be a little low on our gdp estimates going forward. as an example, nrt, our brokerage company that owns and operates in 34 major markets, we're seeing in the neighborhood of 38% up on sales volume. two-thirds of that is size, units, a third of that is in price. now those will close generally in the second quarter. >> that is in the national -- >> that is in the 34 markets in
which the nrt company-owned stores operate. but our franchise side, which operates in all 50 states, is seeing very similar trends and open contracts. so we think -- now, what is that attributed to? is that attributed to the tax credit which expires today? is it attributed to a number of other issues in the general economy? we think it's a combination of both. clearly, the tax credit's had some impact, certainly had a big impact in the fourth quarter and it's abating today. so, now we have to have the momentum in the economy to carry us forward. 43% of our sales right now are in the higher mortgage rate -- >> hikemike's house. >> mike's house as an example. so we're -- trends are indicating that the higher end is carrying. there's a lot of momentum there. >> "squawk box" will be right back.
all right, remember, don't forget, people, on monday, coming up, we will have a live interview with warren buffett starting at 8:00 a.m. eastern time. that's right after he talks to all of the shareholders here in the qwest center. that's starting tomorrow. by the way, joe, from here, we're headed over to talk to charlie myunger. you saw the comments he already made today about how wall street is a big casino? we're going to hear more about what he thinks about goldman sachs and derivatives.
we'll have those comments for you today starting in "power lunch." joe, back to you. >> thank you, becky. we look forward to it. we miss you. >> miss you. >> have a great weekend. eat a lot of steak. >> you, too. i will. >> our thanks to mike holland and richard smith. say hi to warren, too. thank you, richard, thank you, mike holland. make sure you join us on monday. "squawk on the street" is coming up next. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. >> and i am erin burnett. happy friday. >> yes, indeed. >> and we've got some happy news in terms of gdp. the u.s. economy grew 3.2% in the first quarter, third straight quarter of growth. teeny bit shy of expectations, but you look in that number, mark, and there were a lot of plus signs. >> we'll take it.
>> yes. >> the white house says there will be no new offshore drilling projects until investigations are completed in the gulf of mexico incident, which i think fairly could be called a disaster now. this oil spill may now eclipse the damage done by the exxon valdez in 1989. and shares of goldman sachs also on the move today. they fell little bit after hours, and yes, as you can see, you're going to have a drop of about $9. there's a report saying a criminal investigation is under way. interesting, though, the firm is has sort of indicated that they've always been looking into it from this side. this wouldn't be new, and scott cohn says it's overblown to refer to it as a formal criminal investigation. nonetheless, this goes right to heart of the whole issue with goldman, mark, which, of course, is that there was a civil complaint filed, and usually on the same day you get a criminal, and we didn't.