Skip to main content

tv   Squawk Box  CNBC  February 29, 2012 6:00am-9:00am EST

6:00 am
good morning, everybody. welcome to "squawk box" on cnc. i'm becky quick along with joe and andrew. the dow finally pushes above that level, ending the day there yesterday at 13,005. u.s. equity futures this morning if you take a look after -- sounds like a small push, but we had been looking for that for over a week. you can see the dow futures by 23 points. we do have a few key economic reports. at 8:30, gdp. 9:45 chicago pmi and at 2:00 the fed beige books. >> wells fargo and goldman sachs receiving wells notice. two firms may face federal enforcement reaction related to
6:01 am
backed securities. they continue to investigate its practices, including whether it broke any laws or risks. meantime goldman sachs, underwritten by the firm in late 2006. $1.3 billion in sub prime mortgage-backed securities. we'll have to keep an eye on both of these investigations because i tlink was a sense after that all of these problems might have gone away. >> i wonder how investors have priced that into the stock if investors thought these all were gone as you suggest at this point or if this is a continue yas how investors will feel about that. >> one of the big questions is whether the government could come back $500 billion. i think there could be additional settlements in the offering. >> how confusing is it that
6:02 am
wells fargo is getting a wells notice? it is confusing. >> isn't it? >> you thinks they could come up with another name. >> especially on the 29th of february, too much for you. >> you want to see overseas stuff? >> i'd be curious. >> the european central bank is launching its latest cheap loan offer. banks took 530 billion euros at the ecb's second-ever offering. it's essentially in line with where market expectations were. time for the global markets report. for that we go to the dash iing- we don't play that music if it's not you, ross, because it almost sounds like you. you drive an aston martin.
6:03 am
>> three years. you only came out with the number, 5.25. bigger than the consensus numbers, bigger than last time around. there's a number that markets would have been comfortable with. the re, a first of all, we've come down now, we've come down from where we were earlier. ftse 100 has been flat. cac quarante has been up. a short while ago we were up. what we did see we've got more meet on the bone. commerce bank up. the portuguese banks are higher as well. they have large peripheral debt have been getting a boost from these number. we've seen bond yields come down. we saw the shorter dated yields with it will i and spain getting a boost but spanish tenure debt,
6:04 am
4.98%. we were yielding just over 5% before that figure came out. ten-year gdp's yielding below 5.3%. we were on that mark. 5.3 and aa above ahead of the results. you have to remember before the first ltro operation back in december, ten-year italian debt was yielding 7 .3%. take yourself back to november. two years. we're up near 8%. take a look at where we stand today. that has been a success of the cheap funding out of the ecb. whether it gets translated into the real economy is a big question. one other statistic, 800 banks took part compared to 523 the last time around. the hope will be if you had smaller banks participating this, maybe some of this money might start leaking into the real economy. back to you guys. >> all right, ross. thank you very muff. in the meantime back here in the
6:05 am
united states mitt romney sweeping yesterday's two contests in the state of arizona and key state of michigan sniet was just a week ago that the pundits and the pollsters were ready to count us out but across michigan and arizona i kept on meeting moms and dads and students and grandparents and they were concerned about what's happening with this great country of ours and i was confident we could come together today and take a giant step toward a brighter future, so tonight their efforts have brought our cause a great victory and we celebrate with people across these states. thank you. >> today romney and rick santorum are in ohio. that is the next big prize as we approach super tuesday. our chief washington correspondent john harwood joins us from detroit. john, does he have what it takes or do we move on to the next
6:06 am
test? >> he's solidified his grip on the front-runner, the likely nominee of the party. i think he was likely to have been the nominee, even if he had lost michigan, but this is a step forward for him. it would have been a great embarrassment to him and great an excite to those across the state. they may have wochb more congressional districts than mitt romney and taken on more delegates. that will be interesting to see. one district was too close to call overnight when i got this note from the santorum campaign at 2:00 a.m. >> on that point, is the republican establishment sorry for the way that they have broken up and changed the rules this time around and let not be a winner take all game. >> certainly it accelerates the
6:07 am
verdict and had they recognized this was going to be such a difficult nominating process that was not going to produce clear outcomes that the super pacs were going to even able people like newt gingrich to stay in. he's gotten a new infusion this week. they might have thought of this differently. i talked with one consultant yesterday who says every day this goes on it diminishes republican chances in the november election because of the nature of this contest, the nature of how tay're peeli-- th appealing. rick santorum is going to fight on and his campaign as i mentioned, they may win more delegates. newt gingrich is on the air in seven states through his super pac. so this is going to keep going. >> nine months is a long way off, number one, and today --
6:08 am
it's not march yet. our prediction was march. so we've got another tay and we're looking good. on in-trade -- we're looking good. in-trade is back at 82% for rom to get the nomination. nine months is such a long time. i believe the polls that we saw from "usa today" republicans probably aren't going to worry. within three months i think a lot of this will be forgotten. where is rick santorum's chance to pull off another win. i believe the inevitability of romney will dom the floor. what's his next chance? remember the one he won in iowa, he stayed two years, he stayed in 1,400 bed and breakfasts. he spent the night there. >> his next best chance which
6:09 am
will come next tuesday is the state of ohio. large state, big delegate hall. it's a critical swing state in the general election and rick santorum has been leading in the polls. the pattern by mitt romney is when he focuses on a state and an opponent, he can grind them down and through his sue pew yo superior organization he can win. but rick santorum has been fairly resilient. and this race has been more or less momentum-proof. he still is the likely nominee, but there are still ups and downs. >> has anyone made the point -- you know how republicans have gotten more conservative that mitt romney is not their cup of tea, has anyone made the point
6:10 am
that maybe the last three yeas s has made more of the country move a little more right. did you see the last gallup tracking poll? 43. 40, approval, 53, disapproval. >> i did see and hear about that gallup daley tracking last night. if you average all the polls together, obama's between 46% and 50%. he's doing a -- >> let's talk about this one at 43%. >> i uchbs. >> you can look at historically and see it. and this is nine months away it's going to be a difficult election, no doubt about it. independents over the past
6:11 am
couple of months have moved other toward obama from republicans. republicans are concerned about that. they geevgt time if they can mount a strong campaign, but the question is go to be whether or not they can unite the party and build some energy. u talked with a veteran congressman last night who said mitt romney right now is fighting for the votes of republicans that we sear to get in november. he's in more difficulty as a likely nominee since gerald ford, so that is a challenge for mitt recommendny to co mitt romney to put together. >> what is going to take for newt gingrich to drop out? when is the tipping point? >> when sheldon adelson stops righting big checks. what we've seen that's different
6:12 am
in this cycle, they usual run out of momentum. here with this system where wealthy individuals are financing the super pacs, the decision by a single person who's got the resources to give a large amount of money can allow somebody to defy the forces of gravity. if this campaign were in 1996, gingrich would be gone because he would be out of gas. he wouldn't have any gas. he's got some gas through sheldon adelson who wrote a big check the other day. >> do you see this turning into a situation where you play spoiler where you pay money to weaken the other candidates? i can see you pick the other sides and say i want them to stay in the rags. >> that's how the democrats
6:13 am
voted. >> there were a lot of them that went to vote with zeal in michigan and romney still won. >> there's always talks about missed voting by the party whose contest it isn't. the exit poll indicates that democrats were about 9% of the vote. that vote was strongly for santorum. some of it was santorum sought it and some because they were trying to make trouble. you may remember why mitt romney voted for paul songas in 1992. he was the strongest to might week weaker for the republicans. >> what do you think when you go to the convention and there's no nominee. >> i think the odds of that are
6:14 am
low. i think when we get through this in june, get through the primaries, mitt romney will either have the majority of the delegates in happened or be close enough to that majority that the other candidatings in essence will not formally with draw, he'll watch? >> wishy washy. just watching you dance around and change your wishy washy -- >> >> get a spine, would you? your time is not up yet. >> it is february right now. >> right. be a man. you said march. >> he's nominee in february. >> you said march, you know. stick with that.
6:15 am
grow a spine. >> no. i do thing we'll know. what i'm saying is i don't think -- i think this thing is going to go on. becky was asking me about whether we could have a brokered -- >> you were right. accept it. i'm trying to complement you. we're both right on, that john. nice work. >> thanks, bro. >> all right, bro. >> bipartisan. i like that. don't tase me, bro. do you remember that? you remember that. don't tase me, bro. >> what's from that? what movie. >> it was from a guy. they taped it again and again and again. it's been seen 14 trillion times. >> i've been living under a rock. >> people who are old, you and i can say we both know this well. >> it was a year ago. >> he sold off the last.
6:16 am
entered the net gain of tax pairs. the last sale was to credit suisse. more securities acquired in the government's 2008 investment of ai gi. he saw that to goldman sachs and there was a bit of conversation about that. joe? general motors is likely to spend more than 500 million dollars on employee bonuses and profit sharing. this is based on the company's performance. gm will pay bonuses of at least 82 million dollar to engineers, car designers and car designers. they already agreeded to pay factory workers about 330 million dollars. this is separate, this is different. >> when they got the money. >> they got it because they don't pay any taxes. now, you were outraged yesterday
6:17 am
about aig. >> normally if they go bankrupt they're not allowed to keep it going forward. aig got it. >> and citigroup. >> but the good thing about gm is they're such a big owner they get it of not paying taxes and then they get to give it right back to the democratic party. this is a great system. >> i want you to know. i'm just as outraged. i'm just as outrageous by the net operating losses. >> on the principle of gm and across the board. they should not have been able to keep it carrying forward. >> did you read the last line of the editorial? >> no. >> we would be interesting no knowing how gm's is in line with
6:18 am
warren buffett. >> they got put. that doesn't include the 18 billion. meanwhile alan mulally is there saying, i'm at such a disadvantage. he's at his desk, his hair is up like this, he's trying to do everything he can because he didn't have to take the bailout and now he's got dom pete. >> it's bad enough when you go and say we want them to get the bailout but to have that kind of advantage for the next bailout. >> these are all the reasons why even in detroit, even in michigan, they -- >> it wasn't detroit. >> in michigan. >> only four out of -- >> only four out of ten approved of the bailout which is more than approved of obama care. at least it's a little better. >> you're funny this morning, bro. >> don't tase me, bro. >> all right. when we come back, is dow's 13,000 just a start for the
6:19 am
bulls? we're going to ask right after this break. then a cnbc exclusive. a first ever interview with facebook co-founder eduardo saverin. >> that's so cool. carfirmation.
6:20 am
only hertz gives you a carfirmation. hey. this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz.
6:21 am
6:22 am
welcome back to "squawk box" on this wednesday morning. a big mixed. opened about eight points higher. now it was a little down. you can see it's pretty marginal across the board. some news this morning apple's owners arguing for the right to use it. the court began a crucial hearing today that could result in sales that could be halted throughout the chinese mainland. separate from this story, we've been watching. the shares crossing the cap when it hit $536 and 27 cents. we're going to be hearing about it.
6:23 am
>> i've marked the calendar already. >> if you were single -- >> it's different. it's an old irish tradition on someone just asked me to marry you. >> on leap year women can ask. they're allowed to pick. there was a movie just out with amy what's her name who got to ask. this is a sadie hawkins thing. i get to ask who i want. >> i get to convert to a mormon. then she says be nice to andrew today. to ask me to marry her and then -- >> if she gets to marry you, she's going to start calling the shots. >> just for today. i'm going to do it. >> we'll call it opposite day. >> i do remember that. it was really called the bizarro world. instead of jerry -- >> i was hoping we'd get seinfeld music. i would say because we didn't that means la front -- lafonte
6:24 am
is not here. what about cricket? [ playing "seinfeld" music". >> let's get to weather. scott joins us from the weather channel. scott. >> good morning, drew. good morning, guys. mother nature not taking a break on this leap day. we're looking at severe weather across parts of the southeast and winter weather toward the northeast. so pack patience if you have travel plans. minneapolis, major airport delays. boston, later on today, we're looking at snowfall. take a look at advisories for new england. that does not include you. that does not include you around the new york city area. we're going to find rainfall. 6 to 10 inches likely and look at boston. we could be looking at half a foot or more of snow. i hope you enjoyed yesterday,
6:25 am
new york city, because today, pack patience and rain gear. that rain will be moving in by madeday into the and and evening. boston, he's your forecast. 35 degrees by 8:00 a.m. that snowfall moving in later on this afternoon. boston's logan, laguardia, newark, we're looking at travel headaches later on this afternoon and this evening. toward parts of the upper midwest, winter weather advisories and blizzard warnings posted here. heavy snow expected in places like duluth and also as we move to marquette michigan. and then that severe weather threat across parts of the southeast. we'll continue with tornados. guys, back to you. >> why are you back the last two days, scott? >> why have you been gone, more appropriately? >> i've been here. i've been here. >> you haven't been on this show. who made the decision that we start doing weather again. >> who made the decision that it
6:26 am
went away? >> is that it? >> you tell me. >> you don't know? >> well, we missed you. >> you're so nice. >> i missed you guys too. >> i'm going to get to the bottom of this. i love when people are like, they're really there, management, i know how do this, bring the weather back. anyway, the market story of the morning, dow 13,000. joining us now, lee yeo growhowski. what are you laughing. >> just funny. >> b.n. mellon chief financial investment officer. here's my question. i have seen a positive that any expansions made this year will have to be multiple expansions because the big gains we've seen in profits and the percentage gains might moderate a little compared to cent years but that doesn't mean the market goes up. it mean we get better valuation. is that what you think or will we see big gains in earnings per share in terms of percentages?
6:27 am
>> well, joe, we haven't changed for a number of months. our earnings per share expectations, at least for the s&p. we're sort of expecting a range of 100 to $105 in earnings. what's happened is consensus has surely come down following first quarter earnings and think it's going to be one of those years where you do have an adjustment where -- in valuation. but i still say the market is not demandingly valued here. i think with ten-year treasuries at let's call it inflation running at two to three. markets historically don't trade at 14 times the earnings which is sort of where we are. i think this is an adjustment to a more reasonable level valuation, but we do think the gains are going to get harder to come by given that the markets are not as outstandingly valued as it was late last year. >> what are we worried about in terms of corporate profits right
6:28 am
now anyway. commodities are on the radar screen. it hurts the margin. the customers have less disposable income. is that something to be concerned with? >> yeah, sure. i think, look, energy at 106, you know, begins to look punitive for a lot of consumers who are still going through a deleveraging process. so i think while consumer spending and consumer confidence in yesterday's numbers has certainly been on a positive trend, i think, you know, we're looking for 2% to 3% gdp growth in the u.s. this year and globally 3%. thing one thing that's changed is, you know, any significant delinking from the developing world to the developed world, think some have had to ratchet down their expectations for the emerging markets quite a bit so that's why you're seeing earnings estimates come in a
6:29 am
little. >> normally with medias where they are long term and, you know, we have this opportunity of knowing what the fed's thinking, so you could essentially plan, 2013, maybe at the end we get the increase, but with as low as rates are, why aren't multiples higher in the stock market? because there's no alternatives? you can get 4% in a dividend. is it because people either don't -- it's not naturally at 2% tenure? it's orchestrated by the fed or do people not expect it to stay easy that long? >> i think there's a couple of things. i think there's a concern that, you know, maybe not in 2012, maybe not even in 2013, but when we think out three to five years, it's hard to believe that inflation and interest rates are going to stay as low as they are if the fed is successful. that's one reason. i think the second is the biggest. it's the supply any equities.
6:30 am
i think investors expect a version back to those levels are probably being unrealistic. a bigger picture reason there why i don't expect multiples to get back to the historical norm of the last 30 years, let's say. all right, leo, thank you. >> thanks. >> so it was -- there was a storm yesterday someti. sometimes you don't -- >> yesterday scott started the weather in michigan because it was related to the primary. >> here's my question. last year was unbelievable. it was like hundreds of inches of snow. >> have you been running? i've been out in the park running. are you ready to sign on to this new normal. if you could do it, are we sure we don't want this climate changing to the way it is right
6:31 am
now? >> if we get into a climate change conversation -- >> no, no. i know how you feel. you know how i feel. >> the weather is nice. >> do you really not want south carolina weather in new york? i -- >> is it that bad? driving these little -- >> i thought some of the snow stuff was fun. >> go out to colorado then. >> i want the kids to go out sledding. i remember great show, i have to add mitt, a great show, i don't know if you remember this back in the day. it was snowing crazy -- crazy sn snow. only you could get here. carl had to walk physically to 30 rock. they beamed him in. >> but he's soft. >> i remember that show. i remember being at home. everyone was huddled at home in
6:32 am
the cold watching you and carl. >> i don't miss that. i thought it was a great show. >> i like not wearing a jacket on weekends. i haven't worn my snow boots once, i think, all winter. >> i'm ready to check, check mark, do it, change it. let's keep it like this. do you know how many municipalities are -- a lot of dispensaries. >> do you know what it means to utilities and energy companies? they're losing like $10 million a month that they're losing. >> you can also flip it around. >> the municipalities are saving money. >> because they're not making as much money, maybe there's not as much tax revenue. it would be interesting to see how much of that revenue offsets the lost -- >> gm is making everything up in
6:33 am
taxes that they're not getting from the energy company. >> when we come back, facebook co-founder eduardo saverin. this is a cnbc exclusive. first before we head to break, let's take a look at yesterday's winners and losers.
6:34 am
with a new view of the market, you could see an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world, as well as what over a million fidelity customers
6:35 am
are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons. our ipad app can help refine your strategy or even find a new one. i'm velia carboni, and i helped create fidelity's next generation ipad app. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades and explore your next investing idea. the employee of the month is...
6:36 am
spark card from capital one. spark cash gives me the most rewards of any small business credit card. it's hard for my crew to keep up with 2% cash back on every purchase, every day. 2% cash back. that's setting the bar pretty high. thanks to spark, owning my own business has never been more rewarding. [ male announcer ] introducing spark the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day.
6:37 am
what's in your wallet? this guy's amazing. making headlines, boeing handing over the first passenger version of its upgraded 747 to a secret v.i.p. customer. >> who do you think it is? middle east? russia? >> how do you keep a 747 secret? hide it in your backyard? >> i know someone who would take a helicopter to his 747 if he was family. it's likely it was the state of -- how do you say that?
6:38 am
>> qatar. qatar. >> you say qatar for 50 years. after 50 years it goes from qatar to qatar. whatever. gadhafi, is it "k"? is it "q"? is there a "u"? that's one of the few words, though, without a "u." "q"s without "u." >> qantas, but that stands for something. >> you're right. >> you know that. the 747 is the rj last commercial airliner. there was a development delay of more than a year. >> and we now have an unbelievable cnbc exclusive this morning. it was very exciting for those of you who watched the social network, facebook.
6:39 am
eduardo saverin has just spoken with us. it happened at the ypo global leadership conference in singapore. the they just launched an exclusive partnership. ypo is made up of 19,000 business executives on the front lines of the economy from 190 countries. the company generated $6 trillion. that's with a "t." brian williams is live in singapore. brian. >> reporter: it's such a big deal i'm actually the 747 customer. i wanted to reveal that. i bought it to fly myself over here. anyway, this is a big deal. you've got about 2,000 business leaders and eduardo salverin wh now lives in sin a president obama had a fireside chachlt i quoted him for what he says is his first ever television interview. he's a shy guy, unassuming guy,
6:40 am
obviously, you know, a billionaire, going to be one if he's not already. pulled him aside, put him in front of a camera exclusive to cnbc and i began by asking him a question on everybody's mind, a question is how big can facebook really be? >> i think you can really be as big as you can imagine. really if you look at the company itself and the space, it's in very early beginnings and there's a lot of things to get done. what facebook has done today is it allowed us to have identity on the web. now there's our passport and that includes a bunch of digit things we do, the social graph, things we like, and there's a lot more to do. >> is goipgt to come from user growth? come from getting more of each of the current 800 million users or both? >> i think both will take place. it's going to expand in terms of user growth but really one of the things that's fairly unique
6:41 am
is we've just touched the surface on what types of uses they can help with. >> reporter: you know, he said as big as they want to be. i did press him and ask if he would be bigger than apple when he goes public. he would not touch that one. said, okay, you're 29 years old, yu ooher a billionaire, what's your next act? what's the next big thing for eduardo saverin. here's what he said. >> you've been big in computer apps, juvio, quickie, why are you going so heavy on the consumer side of the web and apps? >> because i think right now it's truly lacking. even though facebook has grown this big, in terms of the use that you can go and take your friends with you or you can take your interests with you and make that efficient, it's just in the very early beginnings so there's a lot that has to be done. in terms of jumio you have to
6:42 am
think of it in terms of fraud and the facilities in terms of paying. in terms of shop savvy, you need to commerce between the brick and mortar sites and -- >> reporter: there grow, guys. eduardo, very nice guy, very unassuming. as i said, that's first television interview he's ever given. joe, know you have to look up from farmville. i literally took a tramp steamer from englewood cliffs to singapore just to get that interview and just for "squawk box." but only for becky, because really andrew and joe -- >> i heard he was meeting with advertisers, trying to get advertising money for facebook. he's still setting up all those meetings -- no, that's -- >> reporter: the andrew sorkin fan page. >> i had never seen him. i had no idea what he looked
6:43 am
like. >> andrew garfield who's playing spider-man in the next -- >> reporter: guys, i know my time is up. i'll tell you this much. eduardo was nice as can be, shy, kind of quiet. the movie made him out to be a bit of a hard-charging guy. you know, didn't see it. i appreciate him talking to cnbc. he said he's a big fan of becky quick. so i was his vehicle to becky. >> that's no what e h said. smart or lucky? >> we're talking about you. >> no, no, are you kidding. i run through walls, beatmy head on cinder bloc. it's all luck. i'm irish. >> what did you think about him? smart or lucky? >> you know, thing the gi think very smart. he's an economics guy, been
6:44 am
involved in other things but thing time is important. i'm not going to call that luck. we talked about it in a fireside off-camera group, the discussion at the ypo meeting, which was how did you know when you had it, when it was a big thing. they sendsed it when basically, get this, they hat 60% of harvard sign up for the facebook in 12 hours and i think part of being lucky is knowing, oh, my gosh we're onto something we've got hit it with everything we've got. it may be not lucky. it's not being lazy. how about that. >> good description. >> when we ran into somers, i didn't even ask him about dollar policy. i wanted to know how much of the dialogue that was in the movie was accurate. did you ask saverin anything? i can thing of about 10 questions. some of them not for air that i would have asked him about. was he really soaking wet out in
6:45 am
san francisco and they blew him off and didn't pick him up and he walked in and justin timberlake was there, looking at him like he was a fool? did any of that happen to you? >> he did confirm that justin timberlake was not there. >> okay. >> he did say that. you know, but listen -- >> i beg to differ. >> we had a chance to meet. we had a chance to meet yesterday. that's sort of -- we got to know each other. listen. we talked about a lot of stuff. the reality is this. it's a movie. i'm just going to leave it at that. it was a movie. the guy, literally, a 29-year-old billionaire, nice as can be, unassuming, joe, you guys, andy, becky, most guys have a bit of a swagger. nicest guys in the world, no handl
6:46 am
handler, a couple of his buddies around. it was nice. >> we've got to get mark. >> or jesse. >> i see mark zuckerberg -- i would prefer him in an interv w interview. i see mark zuckerberg. >> we haven't had timberlake on yet. >> no. jesse is better than mark zucker berg than mark zucker berg. i'd rather interview him in character. >> and liam neeson is a better joe kernen than joe kernen. >> he's better than nick leeson. >> ask eduardo about the bathroom stalls. >> that's exactly what i was talking about. >> mr. mile-high club. nigh u yo were going to be in the bathroom stall except for
6:47 am
normal places. >> we're going to see brian again in the next hour. that was great. by the way, if you have any comments or questions go ahead and e-mail us. still to come, a trifecta of news maker. at 7:00 eastern former ceo of bear stearns, alan schwartz. then rep jeb hensarling and then martin heldstein. stay with us. "squawk box" will be right back. [ female announcer ] goodnight gluttony,
6:48 am
a farewell long awaited. goodnight, stuffy. goodnight, outdated. goodnight old luxury and all of your wares. goodnight bygones everywhere. [ engine turns over ] good morning, illumination.
6:49 am
good morning, innovation. good morning unequaled inspiration. [ male announcer ] the audi a8, chosen by car & driver as the best luxury sedan in a recent comparison test.
6:50 am
6:51 am
welcome back, everybody. as you can see, the dow futures are indicated higher, up by almost 15 points. after the dow finally pushed above 13,000 yesterday, closing at 13,005. it's a target the bulls had been running at for the last week or so. in the headlines, microsoft will unveil a test version of windows 8 today. it's the first microsoft operating system compatible with low-power microprocessors designed by amd holdings. still to come, guest host allen schwartz, the former bear stearns ceo and current gugenheim executive chairman. and "squawk's" all-star line-up of guests continues.
6:52 am
tomorrow we'll be joined by former governors george pataki and ed rendell. and larry bossty, he was the boss before the boss was the boss. and the famed venture capitalist, mark andreson. facebook, on the board of hp. >> you're going to see him somewhere, right? >> i think he'll be beaming in to us. >> "squawk box" will be right back.
6:53 am
6:54 am
are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers.
6:55 am
6:56 am
coming up, allen schwartz, first he was the ceo of bear stearns, now he helps run gugenheim partners and today he becomes a "squawk box" guest host. plus house financial services vice chairman, jeb hensarling, he'll help grill fed chairman, ben bernanke. stay tuned for a very big two hours. the world needs more energy. where's it going to come from? ♪ that's why right here, in australia, chevron is building one of the biggest natural gas projects in the world. enough power for a city the size of singapore for 50 years. what's it going to do to the planet? natural gas is the cleanest conventional fuel there is. we've got to be smart about this. it's a smart way to go. ♪
6:57 am
how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪ only hertz gives you a carfirmation. hey. this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land.
6:58 am
it's just another way you'll be traveling at the speed of hertz. in the works package, we change the oil we change the filter... tire rotation, suspension, we make suspension checks... what we have here is the multi-point inspection. every time a vehicle comes into a ford dealership you'll be presented with one of these. we check the belts, hoses... brakes. tires and the pressures... battery, all your fluids... exhaust system, transmission... we inspect your air filter... it gets done,it gets done quickly and it gets done correctly. the works. oil change, tire rotation and more: $29.95 or less after rebate - at your ford dealer. you're a doctor... you're a car doctor. maybe a car doctor...
6:59 am
the state of the financials, four years later, former bear stearns ceo allen schwartz is looking ahead to what's next for
7:00 am
america's big banks. is our guest host for the next two hours. surging tide, the dow finally finishing above the key psychological mark of 13,000. where the dow jones industrial average will be heading next, market watcher jim paulson is crunching the numbers. heading to the hill -- fed chairman ben bernanke talking monetary policy. we'll get a preview from the house financial services chairman, jeb hensarling. it's leap day. >> i'm about to do something really crazy. >> the second hour of "squawk box" begins right now. ♪ ♪ good morning, everybody, welcome to "squawk box" on cnbc, i'm becky quick, along with joe
7:01 am
kernen and andrew ross sorkin. the dow coming off its first close above 13,000 since may of 2008. and the bulls can only hope that today's leap day trading is nothing like the last one. last time around stocks tumbled during the last february 29th, 2008. with the dow falling more than 315 points, about 2.7%. the other major averages talking up similar losses. by the way, art carbon just pointing out to us, things a little spooky. yesterday the s&p closed at 13,072. the last leap year, the s&p closed at 1367. so right within the striking range. fed chairman ben bernanke is spending leap day on capitol hill. he'll give us his economic testimony before the house financial services committee at 10:00 p.m. eastern, you can see it live on cnbc. and we're watching cost ko, reporting fiscal second quarter profit of 90 cents a share, three cents better than street expected.
7:02 am
revenue rising by 10% to $23 billion, slightly better thatten consensus. the futures are indicating as po tiff open at the start. right now the dow futures up by 25.5 points. the s&ps up by three points. it's been four years since bear stearns was sold to jp morgan chase, one of the high-profile events of the financial crisis. joining us for a rare public appearance is former bear stearns ceo and current executive chairman of gugenheim executive partners, allen schwartz on the set. great to have you here. >> nice to be here. >> we appreciate you being here. thinking back four years, we were two weeks away in march? we would be four years -- >> from that day, you do -- you don't stop to think about it a lot. i'm curious, when you think about what's happened over the past four years and you look at where wall street is today. how much has changed and looking forward, whether we're in a
7:03 am
cyclical or secular downturn, if you will. jamie diamond just yesterday during their investor day, said this is cyclical, not secular. do you agree with him? >> well i think it depends on what is "this." let me go back a second, you mentioned bear stearns, i do think about it a lot. those of us responsible for the firm were supposed to keep it out of trouble, we didn't. we have to live with that every day. on the other hand, the people at bear stearns were great and if you look at what's happened over those years, to see so many bear stearns people at very senior positions leading major firms is rewarding to know that at least the people have gone on. in terms of your question about is this secular or cyclical. there's a lot of change going on that will be secular. but in terms of will the investment banks be back? will they be profitable? will the ones that have positioned themselves properly for the environment, jp morgan being one of them? absolutely. >> i'm curious, when you think
7:04 am
back, the last time you were on, you were on with david favorite. when you think back to that period, and you said you do think about it a lot, is there anything you would have done differently in retrospect? with four years of distance? >> i've thought about that a lot. the answer is actually not much. you know, once the markets froze, i mean you can go back and say, should we have done some things differently leading up to the environment we got in. you know, you can always say that. hindsight is 20/20. once the markets froze, there was really very little we could do. the liquidity environment is what pushed us over the cliff. and in retrospect, i don't think there's a lot that any one player could have done about that. >> it's both the event itself and the aftermath are, are almost black swans, they're so rare. because i was reminded, i used to work at lehman brothers as retail broker. and every sing the person that we would cold call, we would send out a book called the merchant bankers. and we would say, are you
7:05 am
familiar with lehman brothers? the oldest investment bank in the country and we'd send out this book that showed when it was founded with the rothschild's. it's gone. it's so weird that something that was founded in 1850 or whatever, lehman brothers, that was such a major break in 2008. such a huge -- which i think must give you a little bit of solace, maybe there isn't -- anything that you did to cause it. >> a little bit. >> it would have been very hard to prevent it. >> it was our job to keep it from happening. we didn't do that. when you say i could have done this, i could have done that. there's nothing that stands out. i think that you know, when the repo markets dry up, when you build your business around this collateral is what i'll borrow against -- you don't think of the event. >> are there things you wish you said or didn't say? >> no. >> no? >> what about the idea of leverage on wall street? we spoke yesterday with steve crawford, who said that's the one thing that needs to change. not these thousands of pages of
7:06 am
regulation. but the leverage be tightly controlled. >> i think you have to be careful about how you define leverage. i think there's a lot of misunderstandings about that. i think some of the institutions that got in the worst trouble were 13 times healevered. if the leverage ratio tells you about risk, that would have been the other way around. having said that, we had an environment that the regulators, and participants thought that increasing leverage was actually creating more safety. which sounds paradoxical. you have to remember that's the reason that securitized financing started in the first place. the whole idea was having the top tier of risk in your assets was way less risky than having the bottom tier. so if you just take dollar to dollar, how much leverage should you put against quote the aaa stack, versus how much leverage should you put against the equity piece of a loan, that's
7:07 am
what drove gross leverage ratios to the ratios they got. the problem of the whole system was once the securitized market froze up and became you know, as we called it at the time, the mad cow disease market, once you knew that some aaa's were sick and you didn't want to eat from the herd. once you did not know what anybody owned and the rating didn't mean anything, all of the capital requirements, all of the way regulators looked at balance sheets, was based on ratings. >> bassed to the secular/cyclical thing. the point i was making earlier, the remnants of bear stearns being at jp morgan is a lot different than having bear stearns, which used to be a real force, a niche force. and that's gone. who do you have left? nobody is left. >> we've seen that before, when i started at rw press wich company, run by ken langen. we had hundreds in business.
7:08 am
you run into a cycle, it will be consolidation, and gugliottaen him will be one of the people years from now that people will say this was a firm that was created and grew. >> when you look at the new regulations that have been prosed, developed on the books, some are still in comment periods, do you think that any of them would have changed the scenario four years ago? >> no. i think that you know, you always look backwards with regulation. i think there's some good things coming out of regulation. but i think they're over complicating it. i've never been a fan of the volcker rule. i'm a big fan of paul volcker. i'm not a big fan of the rule. even if i like the rule the way it's written, i think it will create all sorts of problems if it goes through. >> having sat in the seat thaw did. if you could have rewritten the rules, rules that you think would have ultimately protected bear and lehman, what would the rules have been? >> the main thing we have to try to get is more transparency in
7:09 am
the markets. it was lack of transparency. the opaque nature of everybody's balance sheet that killed things that comes from a variety, too much reliance on ratings. and too much reliance on custom-tailored instruments, right? that gets into the derivatives on bilateral and a bunch of securities that nobody knows -- >> do you think more trance parens would have changed some of the decisions you made at the time? >> it would have changed the way the markets functioned. take repo, repo is one of the markets, i think the thrust of regulation, which they first talked about, was to get more things on to exchanges and things where you can clearly understand what the instruments are, and you don't worry about who the counterparty is who put that instrument into the exchange. you just worry -- that's what the people behind the curtain are supposed to do. and to me, the one that calls out for that the moment is the repo market, right? if i'm sitting there with collateral like a fannie mae
7:10 am
5.25 and everyone here is sitting with the same collateral, if somebody is lending against that instrument, why not put them all into an exchange and let the lenders and borrowers get together, let somebody else set the margin requirements that you have on that. instead, we had bilateral repo all over the place and people basically said -- well why should i borrow against that person's collateral? why don't i borrow against that person's collateral? that created tremendous problems, illiquidity in the market and still is today. >> you mentioned aaa and credit ratings. i'm curious how much of that played a part and how you would fix the credit ratings situation. was there ever a time that you sat around and looked at this stuff and said this is aaa, and this is just crazy, it shouldn't be. >> not too often. i said what was interesting about it is that securitized aaa, if one looked at the books, securitized tripaaa was not def as being the same as a corporate aaa. if you look at what they say was
7:11 am
securitized aaa. i wondered in my mind, what would happen if instead of using aaa and double aa, they would have used securitized one and securitized two, which is basically the same as saying we don't have the same history as we do with these instruments. instinct it still would have worked out the same way. the global savings glut, talked about bernanke and greenspan at the time, they didn't talk about what caused it. this huge wave of globalization, which was unprecedented in financial history. created enormous liquidity. looking for a home. and there was no place to go. we actually had less aaa securities out at that point in time. when you had this enormous demand for aaa securities to park in. something was going to fill that gap. in the united states was mortgage-related paper. in europe, it was peripheral sovereigns and they all, we had to create fake aaas for the
7:12 am
market, nature abhors a vacuum. >> you were hungry for paulson to take the other side of the trade. thought he was a mooch. they were dying. that's why it was so ridiculous. in hindsight we look at him like he knew exactly what was happening and put, loaded it up with -- those banks over in europe were like give me more, give me more, i want more. >> but that's about what you talk about the regulators. the banks over there were basically saying i have no capital charge, as long as it's a aaa. so i can make a high return. and you know, so -- >> do you think everybody was looking for that. >> do you think people believe that aig, that the you know, the stamp of their insurance was actually good? >> sure. >> so they didn't know they weren't reserving anything? >> how would you know? in other words, there's no transparency. when you say, how would you know between any two companies' balance sheets, i have this many aaas.
7:13 am
clearly we did not at bear stearns, we did not have any subprime exposure. the hedge funds did, but the firm didn't. on the other hand, we had all day exposurexposure. you thought you knew the difference. subprime looked bad, all-day it looked okay, it turned out they were both bad. >> you yourself didn't know what was going to happen with that stuff. >> right, yet, i would say i still believe to this day, there are balance sheet from a solvency point of view is in better shape than lots of other financial institutions. i think that brofd out to be the case. but you could not tell from the outside, even then, when the fed took on the securities they took on during the jp morgan deal, people said oh my gosh, that stuff was automobile. we only took stuff that was current pay. nobody could know from the outside, that stuff turned out to be worth more than par. they made money in the trade, you couldn't tell the difference. >> i've heard it said if hank greenberg had still been there with his risk, you know, the --
7:14 am
he built it that way. if he had been there, if somebody -- something about the attorney general that ousted him. i'm not going to because i don't want to be inflammatory. if he would not have been removed, maybe he would have been more on top of that. a 300-man unit in connecticut that just -- >> why don't we slip in a break and ask that question to allen. >> and maybe we'll get to the future. >> we've got to talk about what's going on now in the world. >> we'll have more, we will, you want to ask that question? we'll do it when we get back. >> you raised it, we might as well. >> allen schwartz, former bear stearns. >> how come you didn't? >> because we're going to a commercial. >> sort of an anti-spitzer. >> when i was on with david that fateful morning, just as i'm about to answer a question with him and i need to get a message out. that's big voice, i think it was aaron burnett, david, david, i have to interrupt, eliot spitzer
7:15 am
has just resigned. >> the other name is familiar, aaron -- maybe not. former bear stearns ceo allen schwartz will be with us, executive chairman from gugenheim. up next, the dow is now alive and well. how much room is there to run? now you can follow "squawk" on twitter. becky's handle, beckyquick@cnbc. show updates, breaking news and guest info, share your thoughts and submit questions.
7:16 am
7:17 am
7:18 am
they refill all my prescriptions. call now to receive a diabetic cookbook free. call to receive your free meter and find out why 230,000 u.s. doctors and over a million people with diabetes trust liberty medical. liberty, we deliver better health. call now. call liberty medical at the number on your screen. as you know, by now, the dow and s&p both closing at the best levels since 2008. the futures are indicating a little bit higher. consolidating some of yesterday's gains, we finally got above 13,000. tracking the markets, jim paulson, chief investment
7:19 am
strategist at wells capital management. in the past you've talked about some of the phases of bull markets, starting with i don't know, disbelief and then you worry that train has left the station. and usually ends with -- pretty big bang as it draws everyone in. where are we here, do you think? well, i think we're somewhere between you know, sort of disbelief and then starting a little bit creeping in am i missing out sort of starting to come in, joe. i think you know, breaking 13,000, the national discussion is starting to change a little bit. you know, what it's been for three years, is are you being conservative enough. are you prepared for the next crisis. are you sufficiently diversified. do you have enough you know, risk off exposure. now it's starting to change a little bit. looking at boy, we maybe we could reach a new all-time high, are you missing out.
7:20 am
are you sitting too much in cash and bonds and not enough in risk on assets. so i think we're still early in that psychological psych that you describe. we're not in the initial stages any longer. but we're still probably in the early innings. >> this year, jim, i'm going to return to some of the questions i asked our last market guest. do you expect corporate profits to continue to pace gains in the averages? or will it be more multiple expansion? and do we deserve multiple expansion if the fed is orchestrating these low rates and they're not real and they could go up at any time if the fed were to you know, pull back? >> i think it's going to be some of both. this year i really think, joe, is more about multiple expansion. i think we're reversing the decline in the multiple that we had last year. we started 2011 at about 15 times earnings and we ended last year at about 13 times.
7:21 am
and the reason for that is the two breakout of big fears of u.s. recession and europe was going to blow up. and now what we're doing is re-evaluating those fears and we're starting to calm down about them. and you already the multiple has gone from 13 to 14. i think it's going to go up to 15 times this year. sort of return fully from where it was at the start of last year before those fears broke out. and if we do that on a round $100 earnings, you've got a $1500 target. longer-term, i would like to point out, joe, that i think multiple expansion is a big potential catalyst for this stock market. not just this year, but for the next several years. one thing i've just put out is we've had three major bull markets since 1900. the 20's, the 50's, 60s, the 20s, the 80s, the 90s, interest
7:22 am
rates fell causing multiples to rise. the 50s-60s bowl occurred while interest rates rose throughout the entire period and even though they did, so did price-earnings multiples. you had bull market predicated, not upon interest rates, but upon confidence resurrecting. confidence was destroyed after the depression and world war ii. and then what we did for the '50s '60s was we slowly rebuilt confidence and valuations on equities rose. i would say we're in the same place today. we had record low interest rates, which is what we had in 1950. we have confidence that's been destroyed in the lost decade here of the last ten years from 9/11 and iraq war and the great 2008 crisis. and now what we have is the potential to slowly rebuild confidence and take the multiple in the stock market from 14, maybe back to 18 or 19 times earnings over the next several years. >> i thought we made our dues
7:23 am
for ten, 12 years. and i, you know i just hope i'm alive to see the next move like we had in 1981. for the next 20 years. we always, we don't appreciate it the first time around. that's why i said, why can't we have 30%. we had three years in a row of 30%, we paid our dues. are still people say these are 16-year cycles and we've only done 11 or 12, so we're stuck with 2% gdp for the next four or five years and 5% to 6% stock market gains. still hear that all the time. maybe that's one of the things you're talking about that we always hear. >> it is, the fact that we still have that thought process in place, which kind of goes to your first question, where we are in that psychological cycle, joe, is still one of the things that leaves a lot on the table. if people were, if everyone agreed right now that we were through the full 16 years and headed for buy and hold, the multiple would already be 18 or 19. >> you're right. >> i think there's some good possibilities yet, not only this
7:24 am
year, but down the road. >> allen schwartz has a question. >> jim, allen schwartz, good morning. in addition to the two fears you mentioned that we're leaning on the market, late last year, double dip in europe, i believe there was a third one leaning on market, which was hard landing in china. and do you you have a point of view as to where that is and what impact, what's happening in china has on the risk markets. >> that's a good question. personally, me, i've been more concerned about the emerging world risk than i was about europe. i think that if the emerging world were to fall into recession, the global recovery is over, in my view. every day that goes by, it looks better and better. i guess the thing that gives me the greatest optimism there, is that over the last 90 days or more now, you've got almost every emerging policy official now easing fairly aggressively.
7:25 am
not just in china, but in other emerging markets as well. and i think there's more and more evidence from the data in those regions, including china, that those economies look like they're bottoming out. and i think with the lagged impact of the new policy stimulus, they're likely to reaccelerate in the second half. and you know, if you look around the globe, we've got reaccelerating growth in the u.s. we've got growth in canada, growth in the uk. i think germany is going to continue to grow. japan, aussie. and then if we could reaccelerate the emerging world, i think there's going to be plenty of growth, even if the most of the eurozone is in recession. >> all right. jim paulsen, wells capital management thank you for your time. we've got until 7:27. >> what do you think about the china situation? what does your gut tell you? >> my gut, i think what actually started to happen in the markets is there were these three fears and while the headline stayed with europe every day, two of the three fears got better.
7:26 am
which is double-dip sort of went away and then i think hard landing is kind of going away. i think that they're engineering a soft landing. and i think more importantly something jim said, you know, think scott minerd was on yesterday, our c.i.o., our outlook is similar to his, which is a good thing, because he's been more right than anybody i know. think what we have falling into place is monetary policy is moving globally towards easing. we had eased policy in the u.s., but we had tight tollcy in europe and tight policy in china. that was the highest-risk phase, is will policy be too tight. we've moved to ease in europe and we've moved, we're moving to easing monetary policy in china. buns you see them easing, you think the risk of them actually crashing goes down. and that liquidity response that's now global is opposed to localized, i think is what's underlying the rise. >> you think you should have a
7:27 am
c.i.o. that could rip you limb from limb, snap your arm in half? that scott minerd is the man -- >> this is a management issue. >> if he gets to buy a bus, what happens to the bus? >> we got ten seconds. >> all right. we're going to have more in just a moment with our guest host, former bear stearns ceo, allen schwartz, now with gulen him partners. if you have comments or questions about anything you see here. write us, our address is, you can also follow us at twitter, @"squawk" is our handle. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪
7:28 am
is now within your grasp with the all-new e-trade 360 investing dashboard. e-trade 360 is the world's first investing homepage that shows you where all your investments are and what they're doing with free streaming quotes, news, analysis and even your trade ticket. everything exactly the way you want it, all on one page. transform your investing with the all-new e-trade 360 investing dashboard. dave, i've downloaded a virus. yeah. ♪ dave, where are we on the new laptop? it's so slow! i'm calling dave. [ telephone rings ] [ sighs ] i need a new i.t. guy. [ male announcer ] in a small business, technology is all you. staples easy tech experts are here to help. you must be... ...dave. [ male announcer ] with everything from new computers, to set-ups, to tune-ups. stapes. that was easy.
7:29 am
7:30 am
welcome back to "squawk" on this wednesday morning, leap day. among the stories we're following, the euro moving lower after the central bank gave out nearly 530 billion euros and cheap three-year loans. the ecb is not disclosing the identities of the banks that took part in the long-term rescue operation, known as ltro. we've watching shares of apple, it exceeded the $530 billion market cap in after-hours trading yesterday.
7:31 am
that will be the case as long as apple shares stay above $536.20 per share. and facebook's co-fourder eduardo saverin says the giant has more growth ahead. >> i think you be can as big as we can imagine. there's, if you look at the company itself and the space, it's in the very early beginnings, there's a lot of things to get done. what facebook had really done today is it allowed us to have identity on the web. now, there's our passport and that includes a bunch of different things that we do, such as our social graph that people around us, the things that we look and there's a lot more to do. >> is it going to come from user growth, or getting more from each of the current 800 million users or a combination of both? >> in terms of user growth, you have the limit of the world's population, think both will take place, i think it's going to expand in terms of user growth. but one of the things that's fairly unique, is we touched the
7:32 am
surface, in what types of uses and applications and graphs and what facebook can help with. >> saverin talked to cnbc on the sidelines of the ypo global leadership summit in singapore. the federal reserve chairman, ben bernanke, will be delivering his semi annual testimony this morning to the house financial services committee. joining us now with a preview is congressman jeb hensarling, the chairman of the house republican conference and the vice chair of the financial services committee. congressman, good morning, it's great to see you. today you have bernanke coming on. what's the question that you most want to ask him? >> well what i really want to ask him is when there's going to be a realization that to some extent we're at the limit of what monetary policy can do. we're in the midst of the slowest, weakest recovery in the post-war era. yet we seeing the most accommodative monetary policy that we've ever seen. what i hope to see is a greater recognition that the true challenges are on the fiscal side.
7:33 am
unsustainable debt. our health care cost. the regulatory burden, threatened tax increases is really what is dampening this recovery. and so many of us are concerned that a very accommodative monetary policy, frankly was one of the but for causes, as we all know that greenspan put to the housing debacle that we had in 2008. we hope we're not fueling another inflationary asset bubble so those are some of the questions that i would like to ask the chairman. >> the fed has said that it does not plan at this point at least to raise rates before 2014. would you like to see rates raised before that period? >> well again, even though i'm somewhat sit on the sidelines and wonder about monetary policy, i think what would be worse is at 535 individual members of congress conduct monetary policy. again i think there needs to be a recognition that there are limits of what, of what monetary
7:34 am
policy can achieve. i got to tell you as i talk to business people throughout dallas texas and east texas that i reb in congress, no the to mention fortune 50 ceos, it's not a lack of capital that the economy is suffering from. frankly it's a lack of confidence. and again, that all dates back, it frankly harkins back to a lot of the president policies in threatening the single-largest tax increase in american history. the burden of his health care plan. the uncertainty surrounding the dodd-frank plan. the solution has to come there. you know whether we do qe1, qe2, qe3, qe4, at some point monetary policy has its limits. >> i'm not sure you heard the conversation we were having before the break. allen schwartz is our guest host and he laid out the idea that for a while the united states had a very easy monetary policy. until very recently we were pushing against very constrained
7:35 am
monetary policy from asia and from europe. that's changed. and if you look at this as a global economy, that could be that global easy economic monetary policy could be the reason we didn't see a double dip. what do you think of that idea? >> i'm somewhat uncertain of that. again, i do believe that fundamentally, it's not a lack of capital in 2012, it's not the same as 2008. i would almost add, that on a consolidated basis, that our debt-to-gdp ratio is worse in the u.s. than it is in the eu. so again i'm somewhat fearful of even, until we get our fiscal house in order and do something about our long-term structural debt, i fear that a further easing of monetary policy, again the fed has tripled its balance sheet. i think again, plant the seeds of a larger inflationary asset
7:36 am
bubble and ultimately do more harm than good. >> in terms of looking at that deficit. do you think anything can get done this year in an election year it try to tackle the deficit? >> well, becky, unfortunately i'm somewhat pessimistic there. i would say that unfortunately congress is perhaps 0-3, and that was in a nonelection year. as you may know i served on the so-called supercommittee as a very conservative republican. i was willing to step forward and put tax revenue on the table. although i don't believe the economy needs tax increases, unfortunately i didn't see the other side, my democratic colleagues come forward with anything that would begin to address our entitlement spending crisis. and everybody knows that you cannot deal with america's structural debt until you deal with entitlements spending. so unfortunately i'm somewhat pessimistic about our ability to do that in this congress. but hey, hope springs eternal. i couldn't be a member of
7:37 am
congress if i wasn't an optimist. >> jim, oh no, it's jeb. i always bring that up to the president called -- the president called you jeb. i'm like gayle colin, i can write about the dog on the roof 10,000 times and i still think i'm clever. your editor just lets her write it every time to try to subvert romney's anyway, whatever. we had someone on the other day who said we can't sit around waiting for the sequester and waiting for the bush tax cuts to expire. i mean you got to admit. if both of those things happen, our deficit problem would really shrink quite a bit. a lot of people don't want those tax cuts to expire for anyone. but what type of legislation could democrats and republicans agree on, in terms of you say it's going to be the biggest tax hike in history. i know you're including the bush tax cuts expiration.
7:38 am
>> correct. >> how do we not just let that happen? what could these two pell arized sides come up with so that that's not the end result? >> well, again, that's going to be very difficult question to, to answer. what can be accomplished between the two parties. you know we've had the talks with the president, they were the biden talks, there were the supercommittee. frankly, i'm very happy to say that i don't know the answer to the question. but i do think it's important to point out that again, you could give the president every single tax increase that he has requested. i think we're up to now $1.9 trillion. that's roughly about 17% to 18% of the additional debt that he has proposed adding to the national debt on top of the $5 trillion to $6 trillion that's already been added. in many respects the talks of tax increase in diversionary to the actual problem. and that is even the president
7:39 am
has said that medicare and medicaid and health care are driving our structural debt. nothing else comes close. but unfortunately, there are no actions taken by the president that does anything about this. so until we have the other side of the aisle as we say in washington, ready to deal with the key drivers of our fiscal insolvency, all of these talks of tax increases are not only dampening what adam smith might call the animal spirits within our economy, frankly it's just diversionary to the two crises. >> jeb, earlier this week, we're about out of time. earlier this week we had warren buffett on our air and he said that he would like to see very much, a vote of what had happened with simpson-bowles, he would like to see a straight-up vote to congress. would you like to see that, too? >> i served on simpson-bowles commission, a lot of great work was done but unfortunately at the end of the day,
7:40 am
simpson-bowles, because it came in right after the passage of the president's health care plan, fundamentally avoided dealing with the driver of the problem. i don't want to take away from the great work that was done by senator simpson, by erskine bowles. that kicked the can down the road on health care. there was no structural reforms in medicare. there was simply frankly no dealing with the president's health care plan. which is a key division in washington. and so that in and of itself, i don't believe gets the job done. you know, to the extent it would help jump-start the process -- fine, bring it up for vote. until we deal with the key driver, which unfortunately simpson-bowles didn't, i'm afraid it just doesn't solve the problem. >> congressman hensarling, it's great seeing you this morning. >> thank you for having me. oil backing off recent highs, but prices at the pump still affecting millions across the country, where oil and gasoline prices will be going,
7:41 am
coming up just ahead. as we head to a break. take look at the futures right now. i love this song, by the way. dow would open up about 22 points higher. "squawk" coming back right after the break.
7:42 am
7:43 am
7:44 am
we're pack, oil closing lower over the past couple of days. but the crude reality remains prices are on steroids. john kingston follows the energy market for plasm. it's great to have you on the show. it has come down, are we going to continue or is it going to turn around? >> there's a lot of speculative money in there, there's no doubt there's hot money in the market right now. there are a lot of things on the edge that are kind of indicating there might be some fundamental tightness. you've got countries like syria off the market. countries like sudan effectively off the market.
7:45 am
we just got some report overnight about iraqi production. it declined. and you're starting to see these things here and there, all the focus is on iran. but there's some signs of some tightening fundamentals on the edges that i think are starting to make me think that maybe this is not all just a speculative rush as related to iran. the u.s. is doing its part quite frankly, production continues to rise. demand continues to drop. there's going to be numbers out today that i think are going to show u.s. import dependence probably dropping a little bit from where it's been. and you know, you can't cite the u.s. as the cause for this. but the iranian situation is significant, it's both speculative and fundamental. the sanctions are biting far harder than i think anybody really thought. and the issue here is not just, not just the concern of the europeans not buying crude. but the shipping has really hit the iranians hard, they're not able to get the ships to put on new markets. >> i'm struck by a comment you made about production in the
7:46 am
u.s. you said it's up. i'm sure you've seen republicans for the past several weeks say that when obama is production up, it's not true. you disagree? >> well, it's not true. i mean production is way up. but it has nothing to do with president obama. the explosion in supply is primarily out of north dakota, out of the bakkan formation and out of the gulf of mexico for deposits that were explored and bid on years before mr. obama came to office. those are the reasons. mr. obama, the president is taking claim for an oil explosion that quite frankly he had nothing to do with. but the republicans are wrong in trying to say that there's no rise in production. we know that the statistics are there. >> john, real quick, handicap it for us, memorial weekend when the driving season begins -- oil will be where? >> i don't think this is seasonal and i think everybody, i've gotten that question a lot recently. i think that the reasons that prices are higher, have a lot to do with geopolitics and some fundamentals, so i don't really see that we're going to get any kind of a summer surge.
7:47 am
i think we're at a pretty healthy level right now. it may be higher. i'm just not a really big believer in the whole summer surge thing. i think it might be a little bit higher. i'm not expecting some big driving season jump in prices. >> john, we're going to leave it there, we appreciate your perspective this morning. all right. when we take a look at the futures, you're going to see that we are indicated slightly higher this morning. up about 21 points, even after the dow closed above 13,000 yesterday for the first time ever trying to make it there for better than a week. when we come back, we have more from our guest host today, allen schwar schwartz, and still to come in the next hour of "squawk box," former council of economic advisers, chairman martin feldstein is our guest. in the we the oil we change the filter... tire rotation, suspension, we make suspension checks... what we have here is the multi-point inspection. every time a vehicle comes into a ford dealership
7:48 am
you'll be presented with one of these. we check the belts, hoses... brakes. tires and the pressures... battery, all your fluids... exhaust system, transmission... we inspect your air filter... it gets done,it gets done quickly and it gets done correctly. the works. oil change, tire rotation and more: $29.95 or less after rebate - at your ford dealer. you're a doctor... you're a car doctor. maybe a car doctor... all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at my high school science teacher made me what i am today. our science teacher helped us build it. ♪ now i'm a geologist at chevron,
7:49 am
and i get to help science teachers. it has four servo motors and a wireless microcontroller. over the last three years we've put nearly 100 million dollars into american education. that's thousands of kids learning to love science. ♪ isn't that cool? and that's pretty cool. ♪
7:50 am
we're speaking to former bear stearns ceo and current chairman of gugenheim partners. i didn't believe that if hank greenberg would have been at aig, i didn't think one man could have stopped the entire crisis. i wonder whether you think aig truly was sort of a lynchpin, without the insurance, without moody's and s&p would not have rated everything -- if he hadn't
7:51 am
seen these guys, if he hadn't been run out of town for political expediency. for someone who had ambition to be governor and meet even more girls, i guess, if he hadn't been run out of town on a rail, could he have changed the entire scenario? you think somebody else -- >> i think any one player was going it change the whole world. you talk about aig, was insuring a lot. there was a lot of monoline insurers, it never made sense to me to take insurance from a monoline. >> they weren't taking credit default swaps? >> they went from munis to all of these other stuff. >> could they have -- >> they had it reserve, reserves are an estimate, not -- >> you're still coming back to this was kind of a mass hysteria? >> it was a mass -- global, global excess liquidity, pours into places that create asset bubbles, it's been going on for long time. we may be in the beginnings of
7:52 am
one now. >> i still have arguments with people that try to blame bankers. and or capitalists. and i say, what do you think bankers are supposed to do? what do you think capitalists are supposed to do? you're always the profit incentive is something that it can cut either way. >> profits and safety are supposed to be balanced. they weren't. >> but they, they somehow thought that they were, no one wants -- you didn't want -- >> you, none of you guys wanted this to happen. >> we're human. >> you're like the pilot. no pilot wants the plane -- you don't have to worry about the pilot's interesting aligned with yours when you're on a plane. >> and the idea that there was moral hazard, it was built up and that these guys knew that they would be bailed out -- they lost everything. you lost all your money in the stock market. you lost your reputation, a lot of guys. no one did this -- >> no one wanted it. you thought you had the safety, you thought you had provided it.
7:53 am
>> i want to hear about, he's gotten back on the horse. >> good. >> he's at gugenheim. >> scott minerd. which is a hard guy to manage, i'm sure. you're trying to build a firm all over again. i'm curious, what you think gugenheim, what gugenheim is supposed to be and how that compares frankly to what was bear stearns. >> well i think you know, things change all the time. fundamentally our industry changes all the time. but certain principles stay the same. so the principles of having really bright people, client-motivated, entrepreneurial, with strong values, those are the things that have built great firms over time. i was fortunate enough when i was thinking about where i was going to get back on the horse to meet a group of people that met all of those characteristics, it's a great partnership. a great group of people. extremely talented, very high values, very -- >> it's a private partnership? >> it's a private partnership.
7:54 am
>> is it a firm you would ever want to take public? the reason i ask is so many people look at the public model, if you will and say that actually was what was fundamentally broken. and that's what allowed things to go off the skids. >> i don't think that's right. i think that very large financial institutions can't be private partnerships. so there's a size issue and there's an excess to capital issue in that. we don't have that consideration right now. being private is better for us at this stage of our development and i think for a long time into the future. but i'm not going to look way into the future. >> if you were going to put yourself in a category, who do you think of as your competitors right now? >> i think that we're actually different. we're unique. >> do you say we're in the business with evercore, we an advisory component. we have an asset management -- do you think of goldman sachs in your -- >> no, i don't think that goldman spent a lot of time thinking about the threat from gugenheim, right. i think that if you see we have a consolidation in our industry, whenever you get that, there's
7:55 am
an opportunity to reinvent the new model. in the middle. and i think we don't look at the model that a lot of others are taking and good for them, of being monolines, of being in a particular business line and sticking with that we believe there's value in being a diversified financial services firm. >> do the new regulations help you in that respect? >> yes, they do. >> how so? >> i think that you know, the more restraint you put on companies, they're changing their business model. i said they'll come out of it. the more they change their business model, the more opportunities there are to hire talented people. the more focus they have to have on what washington wants. the more focus we can have on what we're doing every day in our business model. >> we hear all the time that wall street is not going to be the same. it's never going to be the same. that things have changed. where do you see the big opportunities? specifically a few examples. >> wall street changes all the time. it's never the same as it was. so when people say it will never be the same, they're really
7:56 am
looking at a small period of time that was euphoria, and saying we're never going to go back to that euphoric time when everybody was earning in excess of 20% in the industry. you're right you don't go back to that very often. think what we're seeing is an opportunity. asset management in securities are good businesses to have together in the same firm, we have that, we have $125 billion under asset management. we have wealth management. we have life insurance, institutional finance. then what we're building what i think is different, is we're taking our securities firm and instead of being a credit firm or an equity firm or an m&a boutique, we're building a full-service securities firm out of that. and we're making a lot of progress. i think we've hired round numbers, 150, to 200 professionals in the last 18 months and we'll tell you, we have, we have origination or underwriting, research sales and trading and -- >> it's the full monty. >> in all of the areas of the
7:57 am
securities business. and i think that's a differentiated model. >> we're going to slip in another break and continue talking to allen. squawk master and harvard economics professor, martin feldstein will be our special guest coming up. ♪
7:58 am
our machines help identify early stages of cancer and it's something that we're extremely proud of. you see someone who is saved because of this technology, you know that the things that you do in your life, matter. if i did have an opportunity to meet a cancer survivor, i'm sure i could take something positive away from that. [ jocelyn ] my name is jocelyn, and i'm a cancer survivor. [ mimi ] i had cancer. i have no evidence of disease now. [ erica ] i would love to meet the people that made the machines. i had such an amazing group of doctors and nurses, it would just make such a complete picture of why i'm sitting here today. ♪ [ herb ] from the moment we walked in the front door, just to see me -- not as a cancer patient, but as a person that had been helped by their work,
7:59 am
i was just blown away. life's been good to me. i feel like one of the luckiest guys in the world. ♪ only hertz gives you a carfirmation. hey. this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz.
8:00 am
the dow closing above 13,000 for the first time since the financial crisis. the "squawk" master sounds off on the markets and the economy. martin feldstein, harvard economics professor and former head of president reagan's council of economic advisers. easing pain at the pump. >> look at this! what's the matter with these cans? >> representative tom graves will join us with his plan to lower the gas tax. and breaking economic data -- [ sirens ] >> fourth quarter gdp numbers do it, 8:30 eastern. happy leap day, everybody. >> we're bringing bucket of sweets. >> the third hour of "squawk box" begins right now. ♪ ♪ welcome back to "squawk box" here on cnbc, first in business
8:01 am
world wooird. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host is allen schwartz, executive financial chairman of guggenheim partners and former ceo of bear stearns. that's why this implied percentage open tells us so much. it's up .7%. we're watching shares of apple today. the company crossing the $500 billion market cap. in after-hours trading. that will be the case as long as apple shares stay above $536.27 a share. yeah. so we're watching this very closely. right now at $538.02. apple's lawyers are arguing for the right to use the ipad trademark in china. a court there began a crucial hearing that could result in the sales of tablet computer being halted throughout the chinese mainland. mitt romney sweeping
8:02 am
yesterday's two nominating contests in arizona and in the key state of michigan. >> a week ago, it was just a week ago, the pundits and the pollsters were ready to count us out. but across michigan and arizona, i kept on meeting moms and dads and students and grandparents and they were concerned about what's happening to this great country of ours and i was confident that we could come together today and take a giant step toward a brighter future. so tonight, their efforts have brought our cause a great victory and we celebrate with people across these states. thank you. >> romney and rival, rick santorum are campaigning in ohio today. that's ahead of next week's super tuesday. that's when ten states will vote for a gop candidate. romney has the lead in delegates so far, there are 419 delegates at stake in next tuesday's contest. in europe, the ecb launching the latest cheap loan offer. banks took -- what are you laughing about, joe? >> you're eating.
8:03 am
>> i was eating a banana. >> i didn't think i was going to be talking at the moment. banks took $530 billion euros at the ecb. it's essentially in line with market expectations. european equities at this hour take a quick look. you'll see that we are looking for the most part actually up though, it's well, i would call it almost hunch. thank you, joe, for pointing out -- >> you're welcome. our next guest is the squawk master of the market, his council is well regarded from washington to the ivy league, martin feldstein is the george f. baker professor of economics at harvard university. professor emeritus of the national bureau of economic research. doctor, it's great to see you. i want to ask you first about something we talked about earlier. would it be the end of the world if -- i'm not optimistic about you know, washington doing anything in the next year. let's say this sequester goes in and the bush tax cuts expire. is that a net positive if that
8:04 am
were to happen for the deficit? or do we absolutely need new legislation to figure out the tax system? >> i think that would be a terrible outcome. and it's not an outcome that i'm expecting. i think the economy is not strong enough to take that. i think what's important is that after the election, the two parties get together and recognize they have to make some changes. >> after the election. >> nothing is going to happen before the election. everybody is dug in with their positions, they want them to be crystal clear to the voters. after the election, i think we'll see compromise. >> so you think we ought to reform taxes on both the individual and corporate level? that's what we need? >> that's certainly what i've been saying for years and it's never been more true than it is today. >> what do you make of the president's plan to go to 28% and to go to 25 on manufacturing? is that good start? or just -- political move before the election? >> well taken by itself, it's a
8:05 am
move in the right direction. the trouble is, that he has combined it with penalizing companies that produce abroad. that are part of multinational u.s. corporations, that create jobs in the united states by having subsidiaries abroad. that market their products. so he just didn't get the message that every other country but the united states has what's called a territorial tax system for its multiple national corporations. which gives them a real advantage over ours. >> what should we do on the individual side of things? >> well i think we need to take a hard look at the tax expenditures. over the years, the congress has decided that the way to spend money is to change the tax law. and to build those incentives into the tax law for spending. whether it's for mortgage debt or for solar panels or -- you name it and they have found a
8:06 am
way to use the tax law to spend money. so i think we've got to go after those tax expenditures. if we do that, we can bring down personal rates. >> who is right, doctor, about how we increase what the government has to spend? do we do it through pro growth initiatives that eventually the revenues go up? or do we do it just simply from raising taxes? >> we want to get the growth up. and if we get the growth up, that will produce additional revenue. there are all kinds of spending programs, of the sort i just have been describing. spending programs that are built into the tax code. that we ought to be cutting back. if they were listed as, as outlays, there would be strong support from republicans, for cutting them back. because they come through the tax code and raise revenue, there's confusion about just what they are. but they are spending done through the tax code and we ought to cut that spending so we can bring down tax rates.
8:07 am
>> hi, marty, it's allen schwartz. couldn't we bring down rates on all side if we just basically eliminate, you know, really broaden the base and tried not to distinguish which behaviors the government would like to encourage and which discourage and let the market decide that? couldn't we get growth and revenue increases at the same time? >> yes, absolutely. i think that's what i meant when i said there are all of these so-called tax expenditures in the tax code, broaden the base, put cap on those. don't let people have unlimited amounts of employer-financed health insurance or so many of the other things where as you say, the government is trying to manipulate the economy through tax incentives to increase spending on this or that. so we ought to get rid of some of those and cap others. >> but your mba hat back on, what are we going to do this year on gdp?
8:08 am
do we need the fed training wheels beyond to the extent that they're on? >> i'm concerned about the pace of activity this year. forget the nbr and its business cycle. dating just my personal view is that we're not going to see the kind of 3% gdp growth that some people are calling for. i think we'll be lucky if we have 2%. there are strong headwinds. it's going to be hard to maintain exports. consumption got boosted last year. because people cut their saving rate sharply. i don't think that's going to happen again. we've got higher oil prices. so it's going to be a tough year. and being under 2%, which is where we were last year, i think is more likely then higher rates. >> dr. feldstein, does that put you in consensus with the fed, which is now saying we shouldn't expect to see higher interest rates until 2014? >> 2014 to me is a long way off in the future. i don't read the fed's message
8:09 am
as a commitment. to keep them that low. i think they're saying if necessary, they would keep them that low. that's okay. but it will be a big mistake to say that no matter what happens in the economy, we're going to keep short-term rates close to 0. >> are we really at 8.3 on unemployment? have we been making strides? or do the people that talk about participation rate, are they on to something? or -- >> they sure are. that is over the last year, the unemployment rate has come down by more than a full percentage point. but about half of that is because people have stopped looking for work. or haven't even started looking for work. young people coming out of school and saying well, no point in looking for a job, i'll continue in school. so we haven't seen the improvements in the labor market that the unemployment rate suggests. >> do you see anything at this point, doctor, on to worry about
8:10 am
on the inflation front? i mean oil is eventually filters into everything. but the fed's okay there, aren't they? >> i don't see any short-term inflation problems. by short-term, i mean this year, next year. it's hard to believe that in this economy, we're going to see significant inflation problems. but i think further down the road, the fed going to have to find ways of unwinding its very large balance sheet without allowing that to turn into inflation. >> what about china or europe? anything thaw want to weigh in on either area? >> well, europe, europe, there isn't a europe. there are a bunch of different countries in very different economic positions. greece is a basket case. they've now just about formally defaulted. i think they will make that a formal default, we will see the credit default swaps triggered. i think greece would be better off in the rest of europe would be better off, if greece just
8:11 am
took a leave of absence and said -- we've got to go back to the drachma, we've got to fix our economy, we've got to devalue and we'll see whether we can be back into the euro a few years from now. for the rest of europe, things are going much better than some of the pessimists thought just a few months ago. and you see that in what's happened to the interest rates on italian bonds, and on spanish bonds. they've come down from 7%-plus, down into the mid 5's. so i think those countries are making progress. and i think it's important for that to be recognized, instead of being lumped in with greece. >> are there ten countries in europe that can have the same currency and the same interest rates and behave themselves? can you count ten? >> well, they can do it, but they're going to pay a price for it. i mean, i've been saying that since they first started talking about the euro.
8:12 am
that if you try to squeeze ten or 17 heterogenous countries into the same currency, you'll find things you don't like. >> lots of sun, nobody is working. >> some people are beginning to say, you know, obviously credit crieses in the past have been dealt with through devaluation, this isn't available to some of these weaker countries. some people are saying they're seeing signs like out of italy that will finally underline some of their problems, do you think that's possible, long-term? >> certainly is. i mean italy is in many ways a vibrant economy. again, they really are two italys, there's northern italy. a big exporting manufacturing, vibrant economy. and there's the area south of rome, which is in a different world.
8:13 am
>> it's like a microcosm of what we're talking about. you want to go down to the amalfi coast most of the time. my last question, so there's all of these structural problems that italy has and that europe has with labor and you know, they're well documented how they sort of got off-track. are they learning a lesson and headed back the other way as we're moving towards them, in your view? >> i hope we're not moving towards them. although from time to time it sure looks like this administration is pushing us in that direction. i think the italians are learning that lesson. when mario monti was appointed as prime minister, he said look, the pension system in this country is just too expensive. we've got to slow it down. we're going to have delays in retirement. we're going to have a change in the inflation indexing. and the public accepted it. there was one three-hour strike. well, for etly. that's hardly anything. so it was clear recognition on
8:14 am
the part of the public that changes need to be made to keep the, the debt-to-gdp ratio, the government debt-to-gdp ratio from rising. and to turn it down. they're going to be on a course over the next four to five years that will bring the ratio down. >> we would like you to come down here and guest host for an hour or so. we had no winter. boston hasn't been quite as nice, we're like the southern u.s. here now. >> it's like the amalfi coast. >> not quite. there's no place -- i don't care if anyone works or pays taxes there. i just want to hang out in an olive grove. we would make the trip down here and we have a longer interview, if we could. all right, when we come back, we'll have more from our guest host today, allen schwartz, the executive chairman of guggenheim partners, the former ceo of bear stearns. still ahead this morning, easing the pain at the pump. georgia congressman tom graves will talk to us about his plan it try to lower the gas tax.
8:15 am
also, we've had a big "squawk box" line-up this week. it continues tomorrow. that's when we have our squawk state house. former governors of new york and pennsylvania, and the current governor of virginia will all be here in-house and on friday our guest host will be former honeywell chairman, larry bossity. we were just driving along,er comin' back from the lake,ng. and all of a sudden, ka-plam. it blindsided us. what is it? our college savings account. how do you think it happened? not sure. i think something we bought a while ago turned out to be something else, annnnnd, i remember a lot of other stuff in there had the word "aggressive" in it. is everyone okay? well, now, yeah. who knows later. ♪
8:16 am
8:17 am
8:18 am
welcome back to "squawk." making headlines, widely-used cholesterol-lowering drugs, such as lipitor, will soon have new warnings on their labels. the fda said the drugs may raise levels of blood sugar, could cause memory loss. goldman sachs managing director, david lobe is being investigated by federal authorities. "the wall street journal" reporting this morning that it's part an insider trading probe focusing on technology stocks and the company's hedge fund clients. let's get more thoughts if our guest host today, allen schwartz, is the head of guggenheim partners. we've talked a lot about where wall street is today. in our last discussion you were laying out a little bit about how your firm is different. can you talk to us just about
8:19 am
wall street and where you really see the opportunities today? what's, going to be the wall street of the future? >> again, i think that look, we've crossed the rubicon on universal banks, right? if you think about what the u.s. used to be, we had investment banks separate from commercial bangs, the rest of the world had universal banks, we've crossed that. there's clearly going to be number of universal banks we're going to use their balance sheets and lending operations to be significant players in the investment side of the business. sales trading, underwriting, et cetera. they're clearly going to have a major market share, right? what you always have an industry that consolidates is an opportunity to counter-program, and you say what are the gaps that scale players leave open for other players? i think that's a wide-open field. i think we at guggenheim have our model of how to fill that. others have their model. and there will be, as there always have been, successful
8:20 am
firms that get created to deal with the opportunities that exist today. >> aside from just how the firms are set up, though, it used to be mortgage-backed securities were the hot and heavy places where everyone was running. where's the new -- class of asset? >> i think that you know, mortgage-backed securities were one aspect of this. that was one, you no, ten or 15-year run, right? whether or not you know, i still think, i think actually securitized finance is going to be a big, big area of opportunity. if you think about it, we have with the baby boomers retiring, the global savings glut. you have a tremendous amount of capital looking for fixed income return. a away from the treasury as an issuer. you don't have a lot of demand for corporate credit. corporate balance sheets are in great shape. so you have this mismatch. again you have a lot of demand for fixed income. you have, you have a need for some supply. so you're going to have to come up with instruments, the mortgage market made it too easy. there was this view that you know, the home prices would go
8:21 am
up forever. so you didn't have to worry about it. but there are other revenue streams that are stable that can be put into a fixed income return, and that might be a lower cost to capital than what those income streams are getting today. >> what are some of those? >> i think you see it in credit cards and auto loans. and i think you're going to see it in other things, oil and gas royalties. can you see it in small business loans. and you know, the world gets creative. things come out that you never would have dreamed. it's really, what you really have to do is not say where are the big opportunities going to come from. you have to say, how do i position myself with all of the sectors, with a team-oriented group of people that are entrepreneurial and let them find the opportunities. that's been true in our business forever. >> you know, if you were a graduate of harvard business school looking to figure out what you wanted to do next -- >> i'm not that smart. >> it used to be at least, if you wanted to go make a great fortune, you'd go and work on wall street. can you still do that? or do you now go to facebook?
8:22 am
>> absolutely. >> that's a big debate going on in the marketplace now. >> the answer to that is yes, and yes. right? so first of all, too much emphasis is put on where's the hot area for the first ten years when i get out of school. the reality is, if you're thinking about a career, you should say, my sweet spot is probably going to be 25 or 30 years from now where i'm a senior person in my industry and nobody, but nobody knows what the hot area is going to be 25 or 30 years from now. so the opportunity is, go, go do something you love. because if you love it, you're going to be doing it for the next 30 years. >> you think compensation is going to go back to the levels that they used to be? >> i think that the compensation era, we had a bubble, right? so does compensation have to go back to that level to be attractive? you know, look how many people are really going to go and earn multiseven-figure every year for the rest of their lives? trying to say which areas will
8:23 am
provide that in large numbers is silly, right? it's just really where can you have really strong-paying jobs? financial services are going to be one of them. part of the reason is you have to look at the areas. and this global economy, you have to look at the areas where our talent base and the way we do things can really have an impact on the, on the rest of the world. financial services is still one of those where we are a leader. >> all right. allen is going to be with us for the rest of the program. he is our guest host today. >> coming up, more of today's top headlines. i would like to do some bottom headlines. they never do, do we? >> it's called shares. >> we have a segment with animation, where we all working around looking totally contrived. and fourth quarter gdp data is due at 8:30 eastern. the number and instant reaction. and we're going to have, the 29th, we'll have delayed reaction, too, "squawk box" is coming right back. still to come -- rising oil prices. and, pain at the pump.
8:24 am
congressman tom graves will join us with his plan to lower the gas tax.
8:25 am
tdd# 1-800-345-2550 checking the charts. tdd# 1-800-345-2550 looking for support, tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself. tdd# 1-800-345-2550 that's how i trade. tdd# 1-800-345-2550 and i do it all with charles schwab, tdd# 1-800-345-2550 because their streetsmart edge platform tdd# 1-800-345-2550 helps me trade quickly, intuitively. tdd# 1-800-345-2550 staying on top of the market is key! tdd# 1-800-345-2550 and the momentum tool, tdd# 1-800-345-2550 it lets me do it at a glance, tdd# 1-800-345-2550 so when things shift, i'm ready. tdd# 1-800-345-2550 then to track the stocks i have my eye on, tdd# 1-800-345-2550 i turn to schwab's high/low ticker. tdd# 1-800-345-2550 so i can spot a potential breakout tdd# 1-800-345-2550 before it breaks out. tdd# 1-800-345-2550 and get this...i can even trade, tdd# 1-800-345-2550 change my orders or check out my positions tdd# 1-800-345-2550 right on my chart. tdd# 1-800-345-2550 my system works for me. tdd# 1-800-345-2550 does yours work for you? tdd# 1-800-345-2550 get streetsmart edge tdd# 1-800-345-2550 from charles schwab for $8.95 a trade. tdd# 1-800-345-2550 open an account and trade up tdd# 1-800-345-2550 to 6 months commission-free.
8:26 am
tdd# 1-800-345-2550 call 1-877-430-4570 tdd# 1-800-345-2550 and get started today. we're going to get the government's latest data on economic growth. fourth quarter gdp numbers that just a few minutes away. as we head to a break. take a look at the dow futures ahead of that data. "squawk" is coming back with the numbers. [ male announcer ] let's level the playing field.
8:27 am
8:28 am
take the privileged investing tools of wall street and make them simple, intuitive, and available to all. distill all that data. make information instinctual, visual. introducing trade architect, td ameritrade's empowering web-based trading platform. take control of your portfolio today. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.
8:29 am
we're back on this, can i call it a leap wednesday? is that what you would describe it as? >> yeah. >> we're talking golf during the break. >> this is ryder cup -- this is rare, this is rare.
8:30 am
it's like a presidential election. >> we're about to get a rare number. we are just seconds away from fourth quarter gdp data. rick santelli standing by at the cme in chicago. rick, the numbers, please? >> well this is our second tour around the block on fourth quarter gdp and it is upgraded, welcome to the three-handle. it's now 3.0. 3%, originally released up 2.8. psychologically don't dismiss the three-handle. 2.1 is the consumption, that's improved by .1. if you look at the price index, that's almost doubled. originally reported at up .4. it's now just shy of 1%. at up .9. the personal consumption expenditure quarter over quarter. some people tell me this is one of the preferred ways the fed likes to look at higher prices. this sup 1.3. now, granted, it's not near 2%. but it was originally released at up 1.1. and you know, many are going to
8:31 am
continue to -- not only look at that metric, but many other metrics out there. many other move every day like oil and energy prices. the aftermath of this isn't much. but we did see a bit of an improvement on the -- stock side preopening, albeit small. we did see a bit of a selloff in treasury, albeit small. i guess the best market to handicap the ltro, which came in on size estimates about where it should have. more banks participated but the amount wasn't significantly larger than the first one. our boon yields which dipped under 180. some will tell you that the futures hit a new price high and that's true. but if you look at yield, the futures markets have a security that's deliverable. but the cash markets have an historical continuity. it wasn't the all time hn time low-closing yield. but you get the point, anyway.
8:32 am
>> our guest host is allen schwartz, executive cham of guggenheim partners. allen, when you look at a number like that and you talk about confidence, increasing confidence. when we first met, you were still just an m&a banker, not just an m&a banker, but you were advising people in m&a. i think of the deal business as a great barometer of confidence. and then you look at a number like that. how do you square what's going on in terms of the confidence that the gdp number might want to bring you and what's actually happening in the m&a world right now? >> i've never been just an m&a -- >> an advisory, to some of the biggest deals that happened over the past couple of decades. >> i think first of all, you know, not too many people look in the rear-view mirror. figuring out exactly how much gdp grew on a statistical basis back in the fourth quarter is not much of an impact on people
8:33 am
running a business today. people look at business, they look at their order book and what's happening with their customer base. and i think they've been getting better signals. i agree with scott minimumyard on this, that we're in a self-reinforcing phase of the recovery. because i think employment data, we're finally at a point where private-sector employment is offsetting the drag from public-sector decline. and i think actually having more people go back to work is a very positive sign. so i think i think there's a lot of cash on company balance sheets. you know, i think that was -- >> why is it not being put to work? you spen spend a lot of time in board rooms, whispering in the ears of some of the nation's biggest ceos? >> we don't whisper in ears, but we do talk. initially it was a fear factor, when we had all of these black swan events, when you say i better hold on to the reserve.
8:34 am
that's what's been happening in the market. secondly where are the good uses of capital. why kind of passed the stage where just acquiring a company and putting them together and capturing the synergies, i think that's mostly over. we have profit margins at all-time highs. pretty close or at all-time highs. and so, that the believability that you can just take two companies, put them together and take out a lot of costs, therefore the profit margins will go even higher, i don't think there's a lot of belief in that. >> does that mean we won't be seeing big m&a? >> i think we'll see big m&a. i think one, the commodity sector is the, is the one area where you can still see a lot of consolidation in the commodity sector. i have believed for a while and i think we see signs of it is that more m&a is about extending capabilities. i think we see more vertical type of m&a than horizontal type. we don't just get two companies doing the same thing. business is changing. business models are changing because of new technologies.
8:35 am
and i think more and more companies are sitting there saying, here's what we do well. here's what the market is demanding. there may be holes in what we do well versus what the total bundle has to be to the customer. so i think we're going to see more m&a built around enhancing capabilities and filling in the portfolio. rather than just bagging the company. >> do you think we'll see more m&a or do you think a lot of the cash will go towards buy-backs. >> i think the cash will go towards buy-backs, too. >> is that the right use of capital? historically it has not been. but right now we're seeing a number of big buy-backs. >> right. my own view when i talk to boards is point number one, if you have more capital than you see investing in your business -- and that's what we have, because we have a low investment rate in our economy. i think it should be returning capital to shareholders. i think that more and more companies are going to shift towards increasing their dividends. and less towards stock
8:36 am
buy-backs, that's our message to companies. and part of it is what we talked about earlier. baby boomers retiring, looking for yield assets in a low-yield environment. stable and growing dividends is a category. we've seen a lot of capital flowing into. so i think there's an incentive for companies doing more dividend raise and a little less stock buy-back. but they'll do both. >> we still have more to talk about, including linsanity, you're on the board of madison square garden, we've got to talk knicks for little bit. when we come back, we'll also talk about mitigating the pain at the pump. congressman tom graves joins us with his plan of trying to ease the burden of high gas prices for americans, "squawk box" will be right back. you position yourself how? >> by having a claim on the upside, and having downside protection or tail hedges on the downside. you don't stick in the middle. there you're in the muddled middle and you'll get nothing at all. >> a lot of news on apple.
8:37 am
looking for a better place to put your cash? here's one you may not have thought of: fidelity. now you don't have to go to a bank to get the things you want from a bank. like no-fee atms -- all over the world. free checkwriting and mobile deposits. now, depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity. without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity. [ ron ] when i was a kid i wanted to work with my hands, that was my thing.
8:38 am
i really enjoy building turbines. it's nice to know that what you're building is gonna do something for the world. when people think of ge, they typically don't think about beer. a lot of people may not realize that the power needed to keep their budweiser cold and even to make their beer comes from turbines made right here. wait, so you guys make the beer? no, we make the power that makes the beer. so without you there'd be no bud? that's right. well, we like you. [ laughter ] ♪  in the works package, we change the oil we change the filter... tire rotation, suspension, we make suspension checks... what we have here is the multi-point inspection. every time a vehicle comes into a ford dealership you'll be presented with one of these. we check the belts, hoses... brakes. tires and the pressures... battery, all your fluids... exhaust system, transmission... we inspect your air filter... it gets done,it gets done quickly and it gets done correctly. the works. oil change, tire rotation and more: $29.95 or less after rebate - at your ford dealer. you're a doctor... you're a car doctor. maybe a car doctor... only hertz gives you a carfirmation.
8:39 am
hey. this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. the problem is -- welcome back to "squawk box." the futures now are a little bit better than they were before we got the gdp number. up about 20 points or so on the dow. which is about .15%.
8:40 am
making headlines, these are, i assume the top headlines, wall street cash bonuses declining 14% to 19.7 billion. during this year bonus season. the figures released minutes ago by the new york state controller thomas denapoli and becky is going to talk about federal gas tax coming under scrutiny. it is coming under scrutiny. it's coming under attack. it's not surprising, given where gas prices have been headed. joining us to talk about a plan to try to lower the tax is kongman tom graves, a member of the appropriations financial services a services. thank you for being here today. why don't we talk about this plan to lower the gas tax that you've put forward. you want to describe it for us? >> sure, absolutely. right now we're dealing with high gas prices. we're talking now about high gas taxes. and the federal government for a long time has been charging an excise tax on fuel. every time consumer goes to the pump, puts a gallon of gas in their tank, they're paying 18.4
8:41 am
cents to the federal government. but there's so many states like georgia, where all of this tax dollars are going to the federal government and they're getting a terrible return. they're actually losing 11% or more in some cases every year, that's the ka is in georgia we're saying hey, let's devolve this back to the states. the excise tax. the purpose of it is being complete. it was established in 1956 to build the interstate system. let's say mission complete and move it back to the states and empower the states and we know it can be done more efficient. it can be done at less of a cost and the priorities can be focused on from the state levelen stead of mandated from the federal government. >> the national highway system has been built, but i would hardly say mission accomplished if you take a look at the fixes and the upgrades that are constantly needing to be done, sir. how would you handle those additions, if you didn't have that fund? >> well, they, all those things will be done within the states. and if we empower the states and get the federal government out of the way, we wouldn't have all of these problems.
8:42 am
i mean the state of georgia where i hail from is one of those states that has been giving over $ 800 million away, taken away from georgia taxpayers and given to other states. why not empower the states that have been robbed from over the last five, ten years and empower them to build the infrastructure that is most important to them. then you wouldn't have the problems that you're describing. right now we just have a bureaucracy in the way that's we're paying $400 million a year to fund and yet we still have the problems you just described. >> i can understand your frustration at paying in more than you get out. but isn't that the entire point of a, the federal government? i mean, you don't get to take out exactly what you want. that's almost an argument about not putting any money for any taxes that go towards the federal government. >> well if people believe that you shouldn't get the government you pay for, yeah, you would certainly line up with that argument. i believe you empower the taxpayer, empower the states. the model that the federal
8:43 am
government has used for far too long has not been working. we've empowered the wrong group of folks, let's empower the taxpayer and empower the states. >> do you have a view-point congressman on whether taxes on gasoline are good? like, there are people -- >> smart people that say, crank it up there. my great people to smaller cars, you can find something to, let's keep it in the states. you find states could find something to spend the money on. you could get people driving smaller cars, and that get 50 miles to the gallon. and maybe use the, i don't know, use the taxes for schools or fixing roads in your own state. is that something that makes sense? >> i believe it should reside within the states and allow the states to make that decision. what the rate should be. what the tax is on. >> this is a federalist thing to you, it has nothing to do with whether gas taxes are a positive or a negative. you don't have a feeling? >> right. under the model that it's under right now, it's taken away from
8:44 am
the taxpayers in any state is turned over to the federal government. and the federal government mandates how it's spent. so 50% of it right now is only going to roads and bridges. the other 50% is going to mandates from the federal government. bike paths or walking paths or planting bushes. is that the most important point in moving freight? i don't think so. >> it's obviously something that takes on a lot more urgency when you take a look at how quickly gas prices are rising right now. what support do you have in the congress? >> we've had more co-sponsors for our model than the current highway proposal that's going through the house right now. we've had a tremendous amount of support. there's a simple reason for it, it's a 21st century solution to a 20th century problem. it's time to move on and apply a different solution to an old problem that we've had. >> would you be okay with the tax remaining a federal tax if there were ways to strip out all the waste you just talked about. about the 50% that goes to
8:45 am
things that are not for the national highway system? >> that sounds great. but you know, history is on our side, that never happens in the federal government. i'm for, let's just push it back to the states. where it belongs, and allow the states to determine what they're spending priorities are and what their tax rates should be. >> congressman graves, thank you for your time today. thank you. >> coming up, more of cnbc's exclusive interview with facebook co-founder, eduardo saverin. he's going to talk about how big facebook could get. he wanted to sell advertising for $1 million, when it wouldn't have been cool. so uh this is my friend frank and his, uh, retirement plan. one golden crown. come on frank how long have we known each other? go to e-trade. they got killer tools man. they'll help you nail a retirement plan that's fierce. two golden crowns.
8:46 am
you realize the odds of winning are the same as being mauled by a polar bear and a regular bear in the same day? frank! oh wow, you didn't win? i wanna show you something... it's my shocked face. [ gasps ] ♪ [ male announcer ] get a retirement plan that works at e-trade.
8:47 am
8:48 am
welcome back to "squawk box." rlier this morning, cnbc's brian sullivan caught up with facebook co-founder eduardo saverin at the young president's organization global leadership summit in singapore and in an exclusive interview, brian asked him how big can facebook get. >> i think you can really be as
8:49 am
big as we can imagine. there's really, if you look at the company and the space, it's in the very early beginnings and there's just a lot of things to get done. what facebook had really done today is it allowed us to have identity on the web. now there's our passport and that includes a bunch of different things that we do, such as our social graph that people around us, things that we like and there's a lot more to do. >> is it going to come from user growth? meaning 800 million up? or getting more from each of the current 800 million users? or a combination of both? >> in temperatures of user growth, you have the limit of the world's population. i think both will take place, i think it's going to expand in terms of user growth. one of the things that's fairly unique. is we just touched the surface in terms of what types of applications and uses the sobol graph and what facebook has done can help with. let's get down to the new york stock exchange. carl, melissa and jim join us now. you know what i think we should do, now that we've gone above 13,000, i think we ought to
8:50 am
watch to see if it goes below. what if it stays below! >> should we count for dow 12 k at this >> i don't know how we do it. i'm trying to deal with the letdown of now being above it. what should we do? what do you think? >> joe, does it really matter about the dow when apple is all that really we're focused on? shouldn't we be like -- yeah, apple, dow, s&p, nasdaq? >> that's right -- that's an idea. >> i like what the "new york post" did today. the last time we were at this level, the top movie in 2008 was "no country for old men." 30-year fixed was at 6.56 and jobless was at 5.4%. >> better rates, incredible, right? "no country for old men" an interesting way to kill people, joe. >> i know. i love that thing.
8:51 am
people thought that he had asthma as he was walking around with it. next thing you know, they had a bullet hole with no bullet in it. what did our caption say abthat -- >> the last time there was a leap year, if you looked at the s&p 500, it was something like 1,368. >> the dow was down 315. you remember how bad early '08 was. we're also going to try to see if we can go three hours without saying the words ltro. >> ltro ltro. >> is there an easier way to say it rather than ltro? >> low cost loan program, lclp. >> i'm asking everybody on the twitter. >> cramer, you look like you're
8:52 am
at an uncomfortable function where you have to wear a jacket. >> it's true. >> i thought they relaxed those rules down there. i remember our -- some of the ladies down there don't have to wear a jacket anymore. do you guys really have to wear those, do you know? >> that's what we're told. but if you'd like to say something to somebody -- >> i feel like i'm a partner somewhere. >> are your sleeves rolled up under there, jim? >> this is such an uncomfortable outfit for me. how did you nail it? i feel like, geez, who am i. >> you're fidgeting around. >> i know! >> alan schwartz has a question? >> if you feel like a partner, would you join a partnership that would have you as a partner? >> why would i join that club? i miss you, alan. >> that was good, jim. that was good.
8:53 am
coming up, we'll get some final thoughts from alan schwartz. "squawk" is coming right back. tomorrow, the statehouse comes to "squawk box." our guest host will be former new york governor george pitaki. we'll talk politics with ed rendell and we'll check in with virginia governor bob mcdonnell. and our special extended interview with venture capitalist mark andresin. "squawk box" will be right back. look at all this stuff for coffee. oh there's tons. french presses, espresso tampers, filters. it can get really complicated. not nearly as complicated as shipping it though. i mean shipping is a hassle. not with priority mail flat rate boxes from the postal service. if it fits it ships, anywhere in the country for a low flat rate. that is easy. best news i've heard all day! i'm soooo amped! i mean not amped. excited. well, sort of amped. really kind of in between. have you ever thought about decaf? do you think that would help? yeah.
8:54 am
priority mail flat rate shipping starts at just $5.15, only from the postal service. a simpler way to ship. ♪
8:55 am
♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh (
8:56 am
now, the moment you've been waiting for -- the stock of the day. >> stock of the day is first solar. the company's quarterly results missing the street. the company also trimming its forecast for full-year sales. shares dropping on the news. i saw something fascinating on wapner's show yesterday on the "halftime report." they had a great analyst on who's been flagging this stock for months and months and months. i don't want to paraphrase what he said. but something about the panels themselves. anyway, 163 was the high on that
8:57 am
little buly. now changing hands down at 34. our guest host today has been alan schwartz, the executive chairman. he's back on the horse of guggenheim trying to build the next new big wall street firm. but i wanted to ask you a different question. philanthropy you're on the board of robin hood. it's always given and raised an enormous amount of money. but given where wall street is, i'm curious, what do you think happens to philanthropies like robin hood? >> robin hood is in a class of its own. it's one of the most effective poverty-fighting organizations in the world and certainly an important part of the new york community. i think what's been amazing is if you go back to '08-'09, we've been raising record amounts of money, some of it being driven by people who stepped up and were willing to make challenge grants to get people to give. what's been amazing is people in
8:58 am
the financial community have been digging deeper and giving more money even as they've been making less because they really, truly do care about -- they understand the implications that are going on in the streets, which are continuing. we may get a recovery in the market but you're not getting the recovery in the conditions on the streets of new york. >> right. i want to go back to banking for a second. you know a lot of the players who run these firms. you ran one of the biggest and are now trying to build one that may hopefully get there at some point. >> we're diversified. we're asset management, too. >> before you took that job, there were a lot of people who wanted your services. and you got to study a lot of these different businesses and business models. >> right. >> is there one ceo or one firm right now that you say, they've figured it out? i'm impressed with what they're doing right now. >> i don't think there's on "it." i don't think you figure it out. different firms have to figure out where they fit into the landscape and what is their way
8:59 am
of participating. i don't think there's any one particular business model that works. clearly jamie dimon's done a terrific job. by the way, one thing i want to say, in our dealings with jpmorgan, jamie dimon made a number of commitments that weren't contractual, they were just his word, as to how he would treat people at bear stearns. and as the environment turned a lot more hostile, he never backed away from one commitment he made. his word was at least as important if not more important than a contract. but there were other great ceos. lloyd does a great job and doesn't get as much credit for it. there's a lot of very talented people out there. >> we have literally 20 seconds for this. somebody e-mailed and asked, what was it like when you heard two dollars was going to be the number? >> i'd say it was a sick feeling in my stomach. but i would say the most important thing at that point was frankly we wanted to get the best price we could but the most


info Stream Only

Uploaded by TV Archive on