tv Squawk on the Street CNBC April 25, 2012 9:00am-12:00pm EDT
>> we want to give our thanks to mario g a belli. it's been a pleasure having you. >> we're going to have to talk about love making in the corporate world another time. >> we'll see you next thursday. >> that's true. >> right now, it's time for the "squawk on the street." ♪ >> good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla along with jim cramer, david faber live at the nyse. melissa lee is off. march durable goods orders hosting their biggest drop in three years. but the markets are looking at earnings front and center. take a look at futures. dow looking to open up about 56 points. surging on apple's blockbuster numbers from last night. we'll get more on that coming up later this morning. as for europe, looking at green arrow webs as well, except for the ftse. got some uk gdp numbers that show the british kingdom is now officially joining spain in
recession. it is one packed road map this morning. apple, of course, is the lead. a massive beat last night on profits, on revenue, margins, iphones. but is it enough to move back into the stock? you will not believe some of these new analyst price targets. >> and caterpillar posting better than expected profits. but it did miss on revenue profits and said while north america is improving, china and brazil slowing. what does that mean overall for industrials? >> and it is fed day, the central bank issues its statement host ago press briefing that will happen this afternoon. some economists predicting it will lower its rate. >> and as the inquiry into news cor corp.'s hacking scandal continues. first, of course, it is a blowout march kwashger for apple.
earnings, 1230 a share, more than $2 above estimates. revenues beat forecasts, rising to $39.2 billion. apple says it sold more than 35 million iphones and almost 12 million ipads in the second quarter. and it took them nearly two decades so sell that can maces. >> this is a remarkable quarter. that number, earnings, it could have been 13. that's what they would have been able to do had they been able to get all the ipads. these guys are brilliant. let's give he them that. steve jobs, no longer with us on earth, but he gave us a group of people who have his same biting sense of humor. this sardonic theme and it basically is you idiot analysts, you have no idea wa you're about. we sell things in our stores. we sell china. you don't understand china. will you stop trying to
constrain us by the four walls of your morotic canvas because we are not going to be constrained by your traditional metrics. i love them. new price target and this has been called a gimmick this morning. $1,111. >> the action in topeka in the santa fe is the north railroad. >> 35.1 million aye phones. >> we heard that from jeffries yesterday, and they know more than apple, don't they? >> we seem to still be focused on this domestic market. and that is a mistake, clearly, verizon and at&t. yesterday we were sitting here
and questioning will it be there in terms of the growth rate they anticipate or the number they anticipate? and, of course, it's a global story. but i need to know what china is doing with apple. intel switched in china and intel became the largest market. all the analyst were trying to decide how many chips dell was ordering. in the meantime, there was a gigantic country, a lot of eyeballs, a lot of fingers, a lot of hands, a lot of dollars. that's what determined intel's equaler. some of the upgraits grades, whether or not you would want to buy the price target count on a contact with china mobile which has 600 million subs. >> right, right. a lot of people. >> is that all?
>> yes. they only have 600 million subscribers. >> now, here is the then i want you to talk about that i think you ought to know about apple. they have 363 stores. one-third are outside of our country. they can handle, i believe, ten times the number of scores. $4.4 billion of the sales were from the stores. 23% same store sale growth. i mean, hello. chi poltly only had 12 and that was the highest i've seen. >> then there's margins, right, david? 47.4 from 41.4. >> what do you look at in this store to start raises questions? >> oh, channel fill.
>> why are people even having that conversation? why aren't they having the conversation of 12 to 16 times? why does this thing continue to come in in the multiple that we would have assigned to slow growing industrial countries smp. >> for the same reason this stom stock was able to be in free fall for how many days before it? there's people who look at a $500 stock, a $600 stock and say, wow, it has to be more expensive than a $60 stock. i'm not kidding. it lil literally is some sort of a mistake of arithmetic that has dogged this company. this is an unbelievable company. people talk about maybe ipad is going to start cannibalizing iphone. you're not going to convert the toaster with a refrigerator. there was a great life. these guys are saying, listen, will you please think bigger? >> that was a shot at microsoft to a certain extent, and this idea that you would combine. >> so what if i put a gun to
your head and said build a better case now? >> get that gun away from my head. >> that's it? >> yeah. >> i mean, you -- >> once the gun is away from my head, i can think more clearly. >> you went to law school. you know how to build armies even if you don't necessarily agree with them. >> okay. i'll give you a bear case. in the end, samsung has -- decides in its infinite wisdom, we're going to lose money, we're going to give away the bone, we're going to go to all the companies that subsidize apple and say we will pay you, reverse the model, in order to make it so that apple doesn't -- total anti-trust, anti-justice department that's over there, it doesn't matter. we will pay you not to sell apple phones. and there are enough telco companies out there that would take that deal. but it would say samsung to do it because it has that firepower. and i'm not sure that would be
enough. in china, status is so important. you have this growing middle class that constantly wants to reach. you just wonder, something will come. it always does. >> militarily, they could do a pull out that the military likes this, corporate education. china loves it, obviously. one of the things, the continual themes throughout the country is, hey, guys, listen, we have the ones they want. i don't care about verizon. and stop trying to game us by looking at our suppliers. the reason why they did badly is because there's too much flash down there, which is why the margin went up. they basically said, to the stop trying to game us by using your fusion methods because you don't know what you're doing. you fools, go back to business school. >> can we just not refer to apple every morning? has it renewed your faith in the broad comes? >> yes. there's another one, another great member of the call.
hey, you know, worry aware that qualcomm says they're supply constrained. by the way, there are other suppliers than qualcomm. and what apple is saying, apple is kind of like written in the 1700s. it's an empire. this suspect is a ka lossace and people want to view it as another company. it is not that kind of a company. >> it's four products, five products, that's it. >> the defense rests. >> i don't know what they're going to do with that $ 110 billion. >> that would have raised rates. >> 74 billion of it is overseas. >> the single biggest story, i know we have to chatter about it, but the only thing i care about, i want interest rates to
go up because then i'm going to have to take apple higher. >> and dow component caterpil r rpillar, reporting first quarter earnings, $2.37 a share. that was ahead of estimates by as much as 24 cents. but revenue a bit light. 16.2 billion. analysts have been expecting caterpillar would actually have higher revenues and raise its full year outlook. which it did. all right. we've been talking a lot about industrial companies. cat had been a strong performer. what do you make of the quarter, guys? >> i didn't. i didn't like the revenue. this is like the wrong part of the as many cycle for them. i didn't like the china and brazil call out in slow. i expected more from prosecute caterpillar. i felt that this was a quarter where they would be able to say, united states is on fire and be able to offset everything. we're from united reynolds. we have a lot of industrial companies saying, listen, we are doing much better than you
think. caterpillar did not say that. >> china not only slowing in q1, but in their words, likely down for the fiscal year. what should that be about? >> okay. i've got one for you. china is going from a construction capital goods economy to a consumer economy. for everything that apple picked up in china, it seems like caterpillar lost. it's like their communists over there pap command chinese communist economy. there's a group of guys in a room and they say, here is the deal. we are no longer going to buy cranes and earth movers. we can put the money in people's hands and they are going to go buy apple. >> you are having a collapse to a certain extent in china. we don't talk about it as much but it is significant. and we know they've tamped down. they've increased cal capital balances. they've forced the banks to slow lending and so you're not getting as much development.
>> brazil. >> i've visited the busiest caterpillar franchise in the world, which is in brazil, as you might imagine, leader in producing things like soybeans. i don't know what to make about it, though. >> really quickly, coke had a two for one buyback. >> if they watch this show, they take action. i appreciate that. >> why do two for one at 74 bucks? >> they used to do a three for one back in the 80s when it com got to three for one. i'll tell you one of the things, remember, google did that split. it's hope it's not a google-like split where they're trying to trench monies. >> no, i don't think it is. there's no nonvoting share classes. probably they have done studs in the 30s and 40s and they like that for their shareholder base in terms of a price.
we'll see. >> yesterday we had the ibm news at 9:30. one of the things that try toes capture people at home, there is a lot going on and a lot of it is different from the durable goods numbers that you hear. a lot of it is different from what better fanky -- we don't trade better fanky. we don't trade commerce numbers. and these companies have figured out exactly what we talk about all the time. and they say, listen, we are fought going to fall prey to being in weaker markets. you look at coca-cola, 80 on% of their business is overseas and it is smoking. they're not going to be constrained by the united states. those trench warfare, coke, pepsi, a gingerale, vernon's ging gingerale, they got this much. >> from cat to boeing, this increasing commercial airplane deliveries, boosting the bottom line. coke says it earn dollars $1.22
in the first quarter estimates. although, again, keeping their promises for the full year is relatively muted. >> here is where where i'm going to take issue with their negativity. when you have a backlog of $380 billion to $356 billion, you're talking about what david dave cody -- he's my neighbor. but it's not about making friends, it's about making money. alcoa talks about an eight-year cycle and dave says it's an eight-year cycle. alcoa says blank, eight-year cycle. this is a remarkable number. i need to see the dividend boost. that would cinch it for me. my travel trust owns it. >> there is an unwillingness on the part of management, it seems, that so many of these companies to get overly excited. >> and don't you think that's because they have their head -- >> absolutely. and even a year ago, they remember coming out of a first quarter that looked pretty good
and running into the headwinds of europe and that crisis. but the question is, does it just keep their comments from being modest or does it prevent them from doing certain things they might otherwise do? >> i think on the m&a side, it keeps them -- >> no dow, but even on capital expenditures and making a bigger bet, so to speak. >> but i will tell you these kinds of earnings and these kind of outlooks are spectacular. what we pay for the future and i come back and say, do not be fooled by their conservativism. this order book is too strong. you'll have to have lehman -- >> i don't know about that. >> all right. one lehman is enough. how about a couple of washington mutuals? >> there you go. okay. >> this morning on "squawk on the street," we're going back to goldman sachs where we've been granted special access to the
firm. our capital markets editor gary kaminsky is outside of the headquarters in new york with more on what we can expect today. morning, gary. >> good morning, carl, jim and david. we are back here and covering the gsam global growth conference today. i have some exciting news. right at the top of the 11:00 a.m. hour, i'll be able to bring something very unique. we're going to sit down with chairman and ceo lloyd blank fine and we'll talk about many of the issues you guys were just scussing, europe, capital markets, m&a, we'll talk a little bit about op eds. at the top of the hour, lloyd blankfeil will joins, it should be a unique opportunity to hear from the boss of goldman sachs. >> in television, gary, that's what we call a big guest. in addition, you'll talk to jim o'neill and a few others about what goldman sees for the economy, too, right? >> absolutely.
g-sam is here and we will talk to jim o'neill. he's been very right on the equity markets. did turn a bit kauch cautious last week. he still is concerned given the great earnings that we've had. we'll talk to john bynum because, obviously, it's been a difficult time for people investing into the bond market to get any kind of a year. it's a great couple of hours coming up. again, we're very excited to have this unique opportunity, carl. it should be at the very least great information and i encoura encourage everybody to pay attention. we want to hear what lloyd has to say about this business, the investment banking world ahead. >> thank you very much. it's a big deal because there are so many questions, guys, about goldman not just from the openette in the papers to the broader market. >> it's the kremlin.
we're hoping the darkest times may be over and we get some sunlight. >> i wouldn't bank on it, but it will be interesting, no doubt. and goldman actually has not performed well. the stocks and earnings in contrast to other financials, morgan stanley in terms of the numbers they put up, questions about market share. are they losing some clients? i think that's a fair question to ask on the investment banking front. a a and, of course, we have not talked about that in some sometime. >> rupert murdoch being grilled over his phone hacking scandal. we'll go live to london for that. and as you just heard from gary, he'll talk to lloyd blankfein at goldman 11:00 a.m. eastern time today. one more look at futures in just a moment.
morning's question and answer session with the statement that he believes the abuse of media power goes beyond the phone hacking scandal and especially piggy backing off of yesterday's testimony by james murdoch, his son. indicating that there was a back channel between news corporation and david cameron's government here in the uk over the takeover of bskyb. the aid to the politician that was sent to have orchestrated that back channel, his aide resigned this morning. but hunt saying in a statement to parliament that the idea that there was a back channel between the government and news corporation is categorically incorrect. this is metaphorically important, though, because it seems as though rupert murdoch in today's performance is distancing himself from the government that they are alleging that he was actually
very cozy with. but as far as the politics of it all, he says his interapgz actions with politicians were nothing out of the ordinary. >> it is only natural for politicians to reach out to et tors and sometimes propry tors to explain what they're doing and hoping that makes an impression. but i was only one of several. i've never asked a prime minister for anything. >> today's inquiry has taken particular interest in rupert murdoch's relationship with former prime minister margaret thatcher. and the way that he builds his media empire here in the uk with the purchase of the times of london and the sunday times taking particular interest with murdoch's relationship with former prime minister tony blair. now, he and blair had a very interesting relationship not
always on the same side, but rupert did side more for him when blair appeared to be standing against the adoption of a euro or a single currency. but interestingly enough, when they were asking whether rupert murdoch's papers had ever sided with a idea who was not a winning candidate, he couldn't think of a single example in the uk but i cited "the wall street journal" and the 2008 in 2008 note side, obama. he said all properties operate with the same principles and we are all one company. >> kayla, we'll come back to you later on today. thank you so much. which stock is cramer about to highlight on the big screen? we're going to find out. and later, gary kaminsky's interview with ceo lloyd blankfein. there's a look at futures getting improve here as we are now just 5:30 away from the opening bell.
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he's putting on his jacket once again. the apple derivative plays will get a lot of attention. >> yes. apple is his large position. it's been for some time. he's a tremendous investor. i am not kidding. he's made a fortune in apple, red fu, marty rock. world come, that had been down for days upon days, 30% of its business is apple. i think we get a snap bam back here. qualcomm. everybody was worried about supply constraints, everyone it seems other than apple. i'm not that worried about
qualcomm. let's not forget, arm holdings yesterday. they had some lines about flatness and youtube. armed holings is a big supplier. they have that chip that did not burn a lot of energy. i know intel is trying to get into that business, too. do not count intel out as a big supplier of apple by q4 because of this rivalry with samsung. finally, sky worst solutions, i believe they'll be a big winner in the apple iphone 5. a lot of people don't think so, swks. but apple is your single most important player if you're in tech. if you don't have apple, it's just have/have not and this quarter last night makes me feel even stronger about that. >> can you prioritize any of those names? >> well, i think the problem is that qualcomm should be the one that would be up eight, but they particularly indicated a supply problem. so you can't pick your numbers up. world come has been indicated down, down, down, because people felt they were going to have to say, listen, things aren't so good with apple. but i think qualcomm has
tremendous exposure. this arm holdings were supported yesterday so i can't get as excited with it as i would have. today themselves, they have water on the electric blanket which is a nasty thing to do. >> david, i don't know if you would call it a head fake or not, but clearly, focusing on at&t was not the right move. and i wonder if we'll learn that next quarter or the quarter after that. >> one would hope that next quarter when we go in and we have estimates of iphone sales that we don't just look at the penetration numbers in terms of new activations that verizon, at&t or sprint which activated $1.5 million. >> david, it's a traditional offer. you get it wrong like that and you could lose your job, right? >> yeah, well, no. it's not like china and apple suddenly just occurred. >> they can be wrong all they want. >> let us get to the opening bell on this wednesday.
off to interesting action. there's a look at the s&p 500 at the top of your screen. at the big board, here is a good one. etd ameritrade. we'll talk to the ceo in just a few minutes. and over at the naz dak, envivio, a provider of network innovative technology celebrating its ipo today. >> internet video networking. i'll take that. doesn't matter, look at those buzz words. >> speaking of ipos, you had some thoughts on facebook last night. you like it. >> right. i think that, look, anybody can hurt the market by bringing in a company at a far too higher price. but i don't think they realize how hard it is to get to a billion in sales. they can turn on profitable if
they wish. the next thing you know, it's like, but, wait a second. let's pull what's left of print and go on facebook. >> a lot of earnings that we have not touched on and may not get to at this hour. guidance for shipments later this year. >> i think like polaris, these are companies that -- you say, wait a second, how is it possible that people are buying these? and the answer is, there's a cohort in this country that's not struggling, it's spending. and it's a cohort that has a lot of money. i see it in housing. you see a lot of people spending money on their houses. >> and with warm weather, even more reason to go out and get one if you're going to get one. >> warm weather is -- it was all -- it's been an asterisk year frankly. we keep thinking that we borrowed. we can borrow all year and maybe just have a darn good year. >> that's true.
>> durables, we glossed over, worst in three years, so they say. you think the economic data is not matching the corporate data. >> i can't use these pieces of index. those are misdirection plans. those are fake left, go right and i want to go right. >> norfolk southern, 11 cents above. even with coal, jim, intermodal continues to offset. >> i was amazed. coal down big was not enough to offset the basic shipment of everything but coal. they do a lot of auto. auto is a continual theme. i am so very proud of the fact that gourd got those ratings.
that's going to help their numbers. norfolk southern is a story, carl, about how the rest of the country is booming. even as coal is a problem. by way, if you look at caterpillar's negativity. a lot of that comes down to the fact that there is a lot of drilling. a lot of construction in caterpillar. >> interesting. bob is on the floor. morning, guys. >> earnings, baby. >> and they keep getting better. enough about apple already. we have 15 major companies. we track it every day. that's above normal. we've got 188 companies reporting in the s&p 500. so almost 40% have reported. 77% beat expectations so far. that's a lot. normally, the average is about 60%. so we're above the numbers here. the earnings growth on the s&p today, 6.3%.
yesterday, it was 4.9%. two weeks ago, it was one -- >> apple helped out a lot. >> apple helped out a lot last night. but every single day, i've been putting this number up now 6.3%. remember, just is % two weeks ago, apple was all panicked. >> we've had double digit earnings growth for the last couple of years. but the point is, everyone said it's slowing down dramatically, but it's coming up here. guidance has been very light. with only 36 companies, guidance, they've been conservative. i'm not surprised. allel did exactly the same thing. >> they do it every time. >> by the way, have you noticed dupont raised the dividend? we've had a couple other coaches. this has been a big quarter for earnings, a big four months. 30%. 150 companies in the s&p 500, 30% have raised their dividend in the first four months of the year. that is the best four months for dividend raises that we've seen
to 2005. they're giving money back to companies, to the investors. now, of course, you could say, gee, why aren't they doing more m&a activities. investors are getting a bigger share of the corporate profits. if google paid any kind of dividend, tech would be the biggest out there. >> it would. dividends are hot right now. i don't know what the heck happened with durable goods this morning. i'm not an economist. boy, did the bodies drop this morning when that number came out. right across the board, look at this, david.
computers down, machinery down, motor vehicle parts is basically flat. these are all choppy numbers with durable goods. can i just mention mario draghi? mario has just come out and said we need a growth contact in addition to an austerity compact. and that's basically his way of saying we have to find a way to get more growth over there. how do you do it? you're going to have a financial transaction packet, you're going to have euro bonds. what are you going to do at this point? now you'll see all sorts of tax themes that come out to start paying for this new growth plan. >> bob pasani, as always. jim cramer, over to you. dividends going up, as bob said. multiples low. what's going on? >> hey, i think it sounds like you should buy. but then again, i'm basing it on the fact that those only fit the negative story. let's shift to bonds.
then look at what it's doing to the ten-year bund yield. and even though it would make sense to try and tie this to the fed activities of the day, it's hard to do so based on what europe is doing. of course, not to dismiss the notion that would suggest ending in june and the next meeting not until the 19th and 20th of june on this floor look to see if there's any hints of operation
twist. carl, back to you. shares of amtd up 70% so far this year. fred, why the move? >> we've been talking with the new york stock exchange for a while and we've been partnering with them on a number of things, whether it's market structure issues and how we look out for the retail investor and having a very good dialogue. we part with them on the options exchange. we just decided, this was the right time and that the partnerships develop to that point and we decided to move our list postponing kind of like living together. >> we got to know each forea while. we dated for a couple of years and got to like each other. >> i'm trying to figure out a big puzzle. i think you can shed light on it. we have remarkable earnings,
companies giving dividends to reinvest. we've had a red hot stock market and yet i see each month these numbers which tell me individuals are going away, less money in the stock market. this is wrong. why is it happening? >> you know, i described the retail investor last week when we did our earnings as interested, but cautious. is he sheer logging in. they're opening new accounts and the ones under advisories, they have moved into the market and take advantage of the rally. the people that are more active have been in the market, but there's no volatility. we've seen very low picks, very low intra day volatility and with the vix coming up yesterday, but in our view it has to go and get higher. lastly, if you have a long-term investor, they are receipt sent and cautious. you can see that in mutual fund flows. and not into equities despite a nice rally so far this year.
is there going to away change? and too often it happens that they're a market top 3/ they've seen that and saw it come unglued in the summertime and late spring. they're waiting to see that this is for real. is it for real this time? >> we've sheen some ipos that have caught fire in the early days of trading.
we have facebook coming this spring. we'll see exactly when. do you think it can be something as simple as that, a household name that goes public or does it need to be more? >> i think it has to be more. i think in their daily lives, they need to see the u.s. economy getting better. all those things. it's about unemployment, the deficit. they're worried about gas prices. >> i think unfortunately you worry about it because if they're going into bond funds thinking it's going to be there -- >> i agree. we need to do a better job of
explaining that. i think it's going to be catastrophe potential. >> maybe if you had more enthusiasm, jim. >> you watch the show. you know what we do. it's driving me crazy. how can they not own coca-cola? they're in cds. >> you're getting a better yield on a stock right now. >> fred, welcome to the house. you're welcome any time. >> thank you. fred thompson, joining us from td ameritrade. we want to check in with gary kaminsky with a lot coming up today. gary. >> carl, good morning again. it's almost been about two years to the day that lloyd flank fine had a lasted interview on cnbc. obviously, so much has changed in the business of investment banking in the last few years. we're going to talk about the business. goldman, investment banking,
we'll talk about europe, we'll talk about the m&a world and we'll certainly talk about op-ed and how the new business model of goldman sachs should be able to reward shareholders in the future. it's clearly a lot different than it was four years ago and definitely a lot different than it was two years ago. >> where exactly are you right now, gary? they are going to let you in the building, right? >> i am going to go into the building and, carl, i'm not exactly sure. we've had very beautiful weather here in new york, as you know. it's almost like every day i come down here, it's cold and windy. i'm right across downtown manhattan. i'm going to walk into the building. we'll see you in a few minutes with jim o'neill and then again at the top at 11:00 a.m. with lloyd blankfein. >> gary, will you pick up the next big merger opportunity or will they discuss it over a berger? >> say again, jim. >> i'm trying to figure out whether that's a good place to
get a little 10-beef-5 information. >> jim, i am going to promise you, i know you've got a lot of questions. i'm going to promise you i'll get you all the answers you want at the top of that hour. >> gary, i can't wait. thanks so much, gary kaminsky, our capital markets editor. it's never been more truer than today. when we come back, profits and tower an exclusive. as we go to break on a busy wednesday, take a look at this morning's early movers. dow is up 80. between listening to the numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.
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between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. take a look at the nas. that is where the action will be this morning. up 62 points. that is the biggest one-day gain since december 20th and the fallout from apple will drive that story today. >> i was thinking about fred thompson in that interview. how painful it is to watch, your kids have five or six devices
and you don't have apple? come on, this is an investment. don't abandon ship. >> we want to move on to another telecom provider, not nearly the likes of verizon or at&at&t. worth mentioning more than 1.5 million activations for iphones. perhaps less perilous than we had that happen thought. as you take a look at iphone activations overall, very picky in terms of the quarter for that. the key for sprint investors are probably going on be what we thought adjusted or operating income for depreciation and amortization because it was up 44% to 1.2 billion, well above what had been anticipated. there it is, it gives you a sense there a to why the stock was up including the likes of craig moffett who had been saying, bankruptcy is still a
possibility. maybe saying not so much, guys, even though what is an enormous debt load. >> you're saying that -- >> they produced a lot more than had been anticipated. >> that means they would have to do what you remember, they were saying the disagreement on -- >> well, they did. we'll see. the key, jim, was average revenue peruser, growth with 6.9% as you take a look at where they came in. again, above estimates. and that drove it. you know, they continue to get rid of nextel subs, but they kept a lot of those, converted them to sprint subs and at a much higher average revenue peruser. and you see it there. that droes that ebidta and ultimately, you know, we'll keep watching the company, but the bonds i haven't gotten to check on. maybe the impact even better, as well. >> beat the common there, please, people.
>> you've got an 8 billion market value. >> southern com reduced energy sales stemming from the warmer weather. everyone knows that. that's what moves sometimes these utilities. the air-conditioning season is just around the corner, though. what do the utility companies see ahead? tom fanning is the company's president and ceo. he joins us for an exclusive krn interview. >> jim, good to see you again. >> there is something happening in this country industrialwise that is not constrained. you can't look at these durable goods numbers. business is too strong. talk to me about what you're seeing. >> jim, injury dead on. start with the headlights of our economy. we've seen a 36% pick up in new announcements in the industrial sector on employment and over a 50% pick up on capital investment. our industrial sales are well
above what we thought they would be for the first quarter, over a percent and a half. and for that sector, that's a big move. industrial employment is up over 1%. we're seeing a broad base recovery in industrial. anything to do with natural gas, primary metals, automotive transportation, it's gone pretty well. >> yesterday we had a case-shiller analyst talking about the weakness and how in the southeast. i come back, i read your -- i read through what you're saying. i believe household information might be coming back and we might see a bottom in your area. >> jim, this is a new trend. we've been expecting this for some time. we've seen flat residential growth for about two or three years during the downturn. what we have seen notably this quarter is 15,000 new customers mostly in the residential sector. in fact, what we're seeing in the housing sector is kind of firming prices, increased
traffic for new homes, increased positive sentiment among brokers and builders. i think we're on a track back to recovery. >> avoid, i wish people would listen to you, tom. they read the papers and it's just bad, bad, bad, industrial, bad, bad, bad. is there anyone that would have a better pulse of their region than you given the fact that everybody has to have electricity? >> i think record sales are a terrific economic indicator, especially given the fact industrial development activity is the leading indicator of all. industrial sales, lead residential and finally flagging would be commercial. and we're seeing a pretty positive story. >> now, with ongoing story here, coal being just out moded by the price of nat gas. do you see your prestige of power coming from nat gas and nuke and coal declining out five years from now? >> jim, you're dead on. we talked about it before on your show, but it's really
interesting stuff. southern company has prided itself on being a portfolio company. therefore, whatever the fuel markets are at the time, we can deliver the cheapest energy to our customer. five years ago, we delivered 70% of our energy from coal, only about 12 from gas. in today's market with $2 per million btu natural gas, that number has gloen grown for natural gas production to 47%. coal has dropped by half from 70% to 35%. nuclear remains competent. >> tom, one last question just on weather patterns. we all know to expect the unexpected certainly having gone through the winter here in the northeast. any indication as to what the summer is going to look like? >> the only thing we know is that weather is unpredictable and it changes. this last winter was the warmest winter in 20 years. interestingly, two years ago we had the coldest winter we had in 20 years. who knows. we'll see. we'll be prepared whatever it is. >> wow, i have to tell you, people have to listen to tom
about these commerce numbers, great yield. continuing dividend razor, made a lot of money for people. thank you so much for coming on the show. >> great being with you. >> this is between tom vickram. >> want more "squawk on the street"? still ahead. don't go away. we'll get 6 and 60 with jim. and lloyd blankfein at 11:00 a.m. eastern.
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time for six in six. six stocks in 60 seconds. >> ball bearings. this is the best beat so far this quarter. >> juniper. >> be careful. they announced their ownerings on the website. busch league, my friend. >> panera. >> we were shorting the stock because chipotle allegedly disappointed. do not get in front of panera. >> diebold. >> unbelievable. banks are spending on atm machines. >> ethan allen upgraded to buy.
>> this is a company that is in -- to the stock market. when the earnings are good in the stock market and the stocks go up, people shop there. >> coastco. >> i need to ask you, ski saw the disk and it is an unbelieve special. will they be the hidden winner of wall smart? >> i mean, look, i think costco to bj's -- sorry, costco to sam's club. that is their archrival. i think what happened against walmart in mexico is the advantage to costco. >> my understanding is the costco ethics is the number one things more important than earnings. >> they had a chance to go into china in a big way. when they found out about some of the property issues, they said we want no mart of it. >> tomorrow night, you'll see a company that is not really a company. it is a dream, right? >> it is. tomorrow night, 9:00 p.m. on this network.
mean what time, the 500,000th twitter follower for jim. you're not saying who it was? >> no. it's st sill to be picked. the sweepstakes goes on all weekend. thank you very much for mentioning it. >>@j >>@jimcramer. >> maybe they should hang with you and me. i know you'll be on my show tomorrow night. i can't wait. >> thank you so much, jim. have a great day. when we come back, david faber. we'll talk with gary at 11:00 a.m. eastern with lloyd blankfein. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine.
and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. [ kareem ] i was fascinated by balsa wood airplanes since i was a kid. [ mike ] i always wondered how did an airplane get in the air. at ge aviation, we build jet engines. we lift people up off the ground to 35 thousand feet. these engines are built by hand with very precise assembly techniques. [ mike ] it's going to fly people around the world. safely and better than it's ever done before. it would be a real treat to hear this monster fire up. [ jaronda ] i think a lot of people, when they look at a jet engine, they see a big hunk of metal. but when i look at it, i see seth, mark, tom, and people like that who work on engines every day. [ tom ] i would love to see this thing fly. [ kareem ] it's a dream, honestly.
there it is. oh, wow. that's so cool! yeah, that was awesome! [ cheering ] [ tom ] i wanna see that again. ♪ ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ between listening to the numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions.
duff & phelps financial advisory and investment banking services. very big hour starting here on "squawk on the street." let's get to the road map here today. all eyes are on apple's blowout quarter. we'll read through the tea leaves. could hit 1650, and i don't mean $16 by the year 2015. >> wow, gary kaminsky will join us live from inside goldman sachs. jim o'neill in advance of lloyd
blankfein joining us at 11:00 a.m. eastern. >> everything from the fed to housing to europe and even apple. >> and we're talking live to a member of the british parliament who was personally hacked by murdoch's nuts of the world pap big day for murdoch in london. >> coca-cola giving the okay to its first stock split in over 15 years. planning to issue a two for one spot. this would clock in as the 11th time in the 92-year history of the dow component splitting its stock. >> the uk has slid back into recession for the second time since the financial crisis after first quarter gdp unexpectedly fell .2% in the fourth quarter of 2011. >> we have a fed meeting and indeed a news conference for ben bernanke this afternoon. let's touch on where we were with ten-year yields to stop rally. you've seen the yield come back. we will talk more about that.
we have a special half hour hosted by brian sullivan beginning at 12:15. interest rate, analysis from growth and ken volper and charles ryanhart. i guess given the new transparency that we have from the feds here is that you get -- even if you don't want it as a whole, some of the members may start accelerating forward their forecast of when rates may rise. even if they don't want to signal that to the markets b, that's what they may take away. >> and we'll get the fed issuing its economic projections. it might be complicated if they do that while in the statement making any references to the fact that they're worried about growth slowing. it will be one of these where between the statements, the press conference, there will be a lot of conflicting information. >> we will hear from bernanke and see what answers he has.
so much of it is nuance, as well. >> one final thing. ian shepherd says the fed may take their interest rate year-end sergeant to 7.9%. >> but the fed's forecast is so lagging, they hold a contrary indicator. now they have to do is reverse. it would be nice to see and you might hope that they have information that everyone else doesn't. >> presumably, if they're going to do that, they could do it now in advance of the elections. >> in good time rather than -- >> right. if we had an unemployment rate with the seven in front of it, it would be good news for president obama. >> the big question on everybody's mind will be, of course, what happens if we get this period of weakness in the market, will the fed try to come in before that or wait until after the fact. and where does that leave us? it's the same discussion we've been having for years. >> another discussion we've been having for a while, apple up about 10% this morning after
reporting, as you probably know by now, a blowout second quarter. want to get to a shareholder's take on the results. recently made a big kaup call on apple, talked about it on this program. saying it will hit 1650 in a few years. erica, good to have you back. >> good to be here. >> did you have -- dow says they are going through these last few weeks? >> well, i think, like everybody, i was watching the u.s. activations in verizon and at&t. you know, the numbers can jump around quarter to quarter. so i was expecting a low 30 million pp iphone number. so they obviously handily beat that. i think the big thing i underestimated and the rest of the street was obviously the importance of international growth. >> so does it reaffirm your view of 1650? does it make you think you could be more aggressive? and you're talking about a couple years down the line. >> yeah.
i'm not going to up my target here by $101 or whatever. but, no, it absolutely said into the view that this is a company that is growing, you know, in function fashion. i think we all, as humans and especially on wall street were wired to expect linear growth. and we haven't had linear growth at apple for a long time. and i think that brings out the skeptics. but there's a huge transformation going on. this is, really, i think a once in a 60-year business event happening with this country and we have a front row seat. so we should sit back and watch. >> eric, even though they're up 150% year on year, if apple were just an iphone company, how disappointing would that have been? >> you know with obviously, the new ipad was introduced two of thirds away in the quarter. i think tim cook made a point of that last night as saying, there
might have been some people holding off and jumping back in in the last month of the quarter. we'll see. as the year continues to roll out. i think what's most exciting is, really, just how the ipad adds another product in the portfolio. that increase's people's likelihood of wanting to own multiple apple products. one of the big numbers coming out of the call was this $125 million icloud subscribers. that is a staggering number. those are people that are not going to be switch switching out iphone for android anytime soon. >> what about the sheer trading of the stock? so much has been spoken about, so many different opinions. where do you think the stock will trade over the next month or three months? >> i think the last time i was on here a few weeks ago, when the stock was trading 620ish, i said i thought it would see 500
before it hits 700. we got down to 555 yesterday. and we're probably not going to see 500 now. i think, you know, there is a point, you make a good point. this is not a straight line to 1650. it's not unusual when you go back and you look at apple's chart that it could have an explosive growth chart like it has had since november, followed up by basically six months of flat returns. we'll have to see. obviously, iphone five is coming in the fall. it could very well stay in a trading range until then. >> yeah. well, the law of large numbers has yet to catch up with it, eric. talking about numbers, even at 12 sometimes times what are probably conservative estimates forever this year, you still get to $725 stock price. >> yeah. i think that's the biggest thing that, you know, the worry warts on apple miss is that this is not cisco in 1999/2,000. this is not a stock where the mblth cap is disconnected from the operating performance. this is an elephant that is
dancing. you know, it seems like every quarter, we come on here and say they can't grow 90% year over year their earnings and yet they come back and deliver another stunner. >> how much do you think pivots around china? a lot of discussion for a new opportunity in china down the road. is that a big part of your story? >> it's a huge part that is still to come, it's still to play out. there's still a lot of head room, cook's words last night. five x growth in china year over year in the most recent quarter. 20% of apple's overall revenues and, yes, they're just getting started. i he guess one of the big criticisms against apple is how are they going to sell more iphones and ipads in places like china, india and brazil where
when the average sales price is so high. and we see no evidence so far that those people in the upper middle classes are holding back from wanting to own these devices. >> eric, always good to talk to you. thanks for the time today. >> after this break, we are going to take you live inside the doors of goldman sachs. take a look at gary kaminsky talking with jim o'neill, the chairman of goldman sachs asset management. and later, gary kaminsky's interview with lloyd blankfein, that from the headquarters building where it appears that they have given interest to mr. kaminsky.
into let's give you a few stocks to watch. aflange topping earnings estimates in its fourth quarter. the insurance giant boosting its outlook for japan, which is basically a lot of its business and, therefore, its revenues. buy due issuing a second quarter revenue forecast. first quarter results in line with estimates that chinese company taking a hit, as you see right there. and eli lilly beating first quarter estimates, helped by strong sales of its antidepressant simbalta. i want to head back to
gather kaminsky. over to you. >> thank you, carl. and i am joined by jim o'neill, the chairman of the goldman sachs here at the headquarters. jim, why are you here in new york? tell us about this conference. and the message most importantly that you delivered this morning to the g-sam clients. >> i'm here to host this conference. it's called the growth market summit. it's the second year we've done it and it's right at the core of how i'm trike to lead the plans around the world in this amazingly exciting and rapid world. my message is the world is different, particularly people from our generation. the world is not the same in which we grew up in. the countries that are driving the world growth, it's what i call the growth market economies. >> and, again, obviously, very
famous for creating that terms, the brics. you used to call them emerging markets and informally you said they're growth markets. is that because that's where the global growth is coming from whereas in the u.s. and europe we're not going to see the growth in the next decades? >> well, at the core and very much linked to my new role, it's been 18 months now, but there are many, many plans we have them today in this event who are exceptionally long-term in nature and quite conservative. many pension fund investors from here until the u.s., included. a source of risk very difficult to understand and, therefore, stay away from them. and i think part of my job is to try and help people realize the scale at which the world is changing. and one of the things is to not think of some of them, especially china, as a traditional emerging market. >> yeah, you know, i don't want to make this about apple, but you had some interesting
observations as relate to the apple earnings last night and what the significance of these so-called growth markets meant for apple and what it may mean for other companies that are participating in the growth markets. >> well, you look at the earnings results. i've only seen a snapshot of what i've been getting through some stuff this morning. but i think their sales and -- sorry, their revenues tripled for china the past few months. and now 20% of what they're getting is coming from china. how can you call that a traditional emerging market is in the? it doesn't make sense. >> but in terms of making this an investable thing, if traditional pension funds, institutions would look to an allocation of 20% in the portfolio of the emerging growth markets, it sounds to me like you think the strength would have a much higher growth assets in this market. how do you create a constructive portfolio to participate in these growth markets?
>> well, the second part of my time on the podium was exactly on this. both fixed income and equities. if you're a conventional guide, the mutual allocation is actually a bit less than that. if you want a gdp from an equity of a fixed income perspective, you need to put 30% of it into the bric and the other four countries, mexico, indonesia, turkey, korea. i think in equities, it's tricky because apple, bmw are doing some of the work for you. so we've created what i think is a pretty simple but sophisticated beach. we call it giby which is a passive index in which it allows equity investors to have not quite that exposure, but probably close to double what they would normally have to the growth markets. but, actually, with less volatility. standing for global intrinsic value index.
we're having this discussion and meeting at a time where you've got all these developed countries, especially europe under pressure with their debt to gdp ratios. six of these eight growth market economies could walk into the monetary union tomorrow. and so it's not just relevant for equities. it's relevant for fixed income, too. >> and you've made the point about some of the problems in europe. if you look at some of the growth in those growth markets, you made the point many times about this growth is so much more important than the shrink we have in those other economies. but investing in these markets will create a lot more volatility in a portfolio. so when you think about making an appropriate for the next decade, what kind of volatility would you expect? you tell the glients will happen as a result of this allocation to these markets. >> in some ways, i think people should think about it the same way as they do about investing
in a hedge fund. it might be more than that particular country is in a portfolio. this is the beauty of the givi type approach. you'll get less. so it's sort of like, for me, we're sort of discovering the holy grail of modern invest heing, you get more exposure to the parts of the world that are driving growth. >> right. >> but because they could late so much less with themselves than with others, in a global sense, you get less volatility. so you're getting more exposure to where the growth is coming from with less portfolio volatility. what more kooupt? >> let's look at the u.s. markets. you came into the -- at the end of the last year, you were one of the more optimistic strategists out there in terms of the overall allocation to u.s. equity markets. we have this huge move. the last couple of weeks, you became a bit more cautious in terms of the u.s. equity markets. clarify for us where you stand, expectations for this u.s. equity market the rest of the year. >> well, i sometimes worry that maybe i'm also a creature of
some habits, even though i've just been talking about how we all have to change. it's always mindful of this sell in may and go away thing. we're creeping up to may. we have a blowout first quarter. everything i thought kind of happened. and so i'm looking around for things that might cause us to trade a bit sideways or lower for a while. out of the blue, we have a couple of weeks of u.s. data that has been a bit on the disappointing side. it doesn't sprieft me that we got into a bit of a choppier market. when you look to all i do about the u.s. markets just since i've been getting here, i think the growth story isn't in touch in the u.s. i still think it's not in the year before the year is over. 1500 or higher for the s&p. slam dunk for me. i'm not sure we'll see it in this quarter, but before the year is over, we're up for that. >> the clients are still in the field today. you mentioned many of them have
been concerned, maybe not having the right allocation to the global markets. was going to change? you've had the conversations with them last night, the morning. what's going to make this huge move into equities that many have suggested was going to happen for the better part of the year here? >> i think it's just the does she it's just time and price. i think so many people -- and here it's true all over the world, heavily conditioned in their minds by what happened in '08 that the first sign of anything going wrong anywhere, it immediately is a good excuse for everybody to be cautious. and so i think what we're going to need is, frankly, more time to show that the world is coping. ala what are our thoughts with apple earlier, with all these complexes going on around the world and equity markets continuing to do better than they did through that horrible period in sort of a late '07 through to the combination of early '09. as time passes, i think portfolio managers have got no
choice but to get more involved. >> so it's a strange phenomenon. the fact that equity markets go higher, that those that are paid to manage money feel more comfortable allocating money in stocks as they watch stocks go higher. is that what you're saying? >> well, i guess it boils down to a pity human instinct sort of greed and fear. and the two constantly clashing with each other. generally speaking, as they always have done and constantly will. not everybody is a technical analyst, but confirmation is a pretty powerful, pure zasive instrument, i think. >> jim, before we wrap up here, politics, presidential election in the united states, will that have any impact in terms of how you see the world? >> yeah, i think the key thing that i would look from it is -- and, again, in some ways, the apple thing is a perfect illustration. whoever wins has to continue to provided over open and free markets for the world.
because if they don't and the u.s. goes down this occasional route that it talks about of trying to protect itself, how is the u.s. going to get itself out of the challenges? apple and many others will be reporting in coming days and will show more and more in coming years. that's the future for the u.s., to be more engaged with the consumers around the rest of the world. and you don't have to have a leader that doesn't recognize that. >> jim, thanks very much. carl, throw it back to you. obviously, i've learned something, as i always do. we're not going to call them emerging markets any more. these are the growth markets. i will tell you off camera some of the things jim said about those nongrowth markets, what we may call them. but we'll do that off camera. >> thanks, gary. great stuff. cnbc will be hosting its second alpha conference on july 18th. jim o'neill, one of the advisory board members for that event. still to come in six minutes
time, we'll have breaking news on crude oil inventories. we just heard from wall street power player jim o'neill. we'll tail you back inside cold goldman's doors to sit down with jonathan beinnor. and still to come, lloyd blankfein, line from inside goldman's headquarters. now, that's a guest only on cnbc. [ male announcer ] you are a business pro.
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♪ whenever i want you, all i have to do is... ♪ [ female announcer ] introducing xfinity streampix. stream your favorite movies and full seasons of shows instantly on any screen. find out more online. ♪ ♪ and it is quite a journey do the down side here with the realtime flash, brian sullivan, a story in the "new york times" about allegedly aggressive debt collection tactics at hospitals. according to the report, they put representatives in hospitals who would basically go after patients to pay before they actually left the hospital, carl. not the quite of story you want and accetive health taking a
hit. this was a $28 stock two months ago. >> brian, thanks very much. still to come, gary kaminsky's live interview with lloyd blankfein. how did we do it last time? i don't know... i forget. feeding your lawn need not be so difficult neighbors. get a load of this bad boy. whoa. this snap spreader system from scotts is snap-crackin' simple -- just snap, lock, and go. [ scott ] feed your lawn. feed it!
million barrels. the increase of 4 million barrels, we saw a little bit of a dip in food prices. basically, they are trading now where they were. they're up about 19 cents or so above $103 a barrel. meanwhi meanwhile, gasoline inventories fell by 2.2 million barrels. gasoline inventories down by .2 million barrels. finally, this was fuel supplies down by 3.1 million barrels, down by 3.1 million barrels and, david, this is different from what analysts were anticipating, as well. they were expecting to see a small build in additional fuel supplies. and those futures are declining. back to you. >> let's take a look at shares of apple, shall we? one hour into trade, there you see it. 9.3%. 934 million shares outstanding, i believe, roughly.
so we're talking about a $48 billion addition to market value, give or take, 100 million here or there. at one point, it was as much as 50 billion. clearly, not many companies are in a position to add 50 billion in market cap in one day. it gives you a sense to the size of the company in terms of its market value. >> it's volatility. it trades like a small cap. it has incredible volatility, still around its earnings releases. as far as as big as apple is, these gyrations are quite normal. >> it would be like creating a starbucks roughly from scratch the just today. >> today. we tend to focus on it, but for the right reasons. we're talking about a $70 billion for market reactions. it has been higher. has it eclipsed 600 billion? >> yeah. it also, i just want to mention, even though it continues to climb, we saw that big pullback.
whether you get exposed to apple now because you want to hit that $1,0001650 price target at jackson house or whether you want to look at some of the broader -- >> and apple suppliers, skyworks, broad come, all of them up. >> it's difficult to diversify weight from apple. if we look at where we were, the headlines on the section now about an hour performance into trade. >> it's a phenomenal move there with intech. we showed you the suppliers doing well, western digital have all done extremely well, as well. and in chemicals, dupont higher. let's look at the breath of the move today very much to the upside. it is a broad based move.
we want to bring in steve liesman with a preview on what to expect. steve, what's going to be the headline this afternoon? >> there's plenty to watch today and the markets are tightly wound. i think the open market committee is going to be very careful in its statement. not going to tip its hand from what i think is a reveiling method. it's not that bad right now. i see the fed right now in a bit of a stalemate. the data does suggest a slowdown. we'll look at that in just a second. but not so slow as to profit more easing. not with unemployment above 8%. here are the numbers i think the fed is going to look at. actual fourth quarter growth came in at 3%. we thought there was going to be a slowdown in the first quarter. it didn't really happen. we thought there would be a slowdown in the second quarter. still, a modest decline. look at what the fed average forecast is for 2012.
2.45. we're running above that. let's assume the fed continues to characterize this economy as it did in january. one of the keys is watching this new round of forecasts at 2:00. this would be only the second time that officials have published their forecast to pass the fed funds rate. let's look at what they said the last time. this is going to be a critical key here. watch what 2013 and 2012, six members of the fomc says the first hike would come in 2013 or '1. nine since 2014 and later. remember, the separate policy guidance says late 2014. so we're going to see if any of those guys in '5end up in 2013 or 2012. that's going to give the guys a market a hint there may be early tightening. other indications to look for, unemployment is above the current rate, so they could project a lower jobless rate. inflation, over the forecast. that could rise. take those two together and the conclusion is easy.
less unemployment and higher inflation forecast all point to a fed that right now will be on hold. >> that will be a busy day for you, steve. quick programming note, as well. special half hour hosted by brian sullivan. a very busy brian sullivan. we'll have the fed's decision on rates, instant analysis. and then at 2:15, of course, the fed chief himself holds a news conference. coverage on that begins on street signs, 2:00 p.m. eastern here on cnbc. laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks.
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first time you've ever been to the new york stock exchange. >> i walked in and i thought there must be other rooms. >> there are. they're back that way. you're at the heart of the action here. at 12:30, we'll be at the heart of the action at the fed. we'll hear from are bernanke. what are your expect ages that some members will say, hey, we see the potential rise of rates coming within the next year? >> that wouldn't be anything new. the fed is a place of confusion these days. they're trying to be transparent and they're trying to give clarity, yet they say ben bernanke, the chairman, and the vice chairman says we're going to keep rates at zero, basically, until the end of 2014. yet there are three fed governs that say they thought rates should go up this year. then there's another half dozen or so that say early in 2014. but it seems to me that there is
no way that the fed is going to raise interest rates as long as inflation is a theoretical possibility as opposed to an actuality. >> why? >> well, the debt of the united states is so high at about 15 trillion, some of that is government owns part of the debt. so it's left outstanding in the float. but at $15 trillion, the only thing it's saving us in terms of not having an even worse budget problem, as it's pretty bad already, is that the interest rates is so low. a few years back, the average interest rate on treasuries was six and now it's about 2 1/2. just imagine if the interest rates were to rise back to, say, 6, 6.5% or so. we would have another $6 billion of interest suspension it's all off. >> and in items of our revenue, how much has to go to that? >> right. in the old days, under volker, they used to have preemptive strikes against inflation. if the money supply was growing or if a nominal gdp got up to
about 5% or 6% or so, they would raise interest rates to ward off inflation. that is skirchlly not going to happen right now. can you imagine -- >> you really believe bernanke is focused on the fact that our budget, our inability to with stand higher interest costs for that debt is one reason why they have to keep interest rates down? >> i'm certain that he's aware of that. he's a smart guy. he can do basic arithmetic. you can't imagine raising the cost of the debt, busting the budget by another few hundred billion dollars. and get this, think about it, an intentional attempt to suppress national income. bus that's what a preemptism strike against inflation is. it is an attempt to stop nominal gdp from growth too much. >> and we keep having a slow growth economy for all these years in order to with stand what might be precious -- >> all i'm saying is that you are not going to get interest rate hikes by the fed unless
inflag, i think, goes up to 4% or something on the cpi. it's already above the 2% target even though the fed talks like it is. they keep saying inflation is temporarily elevated when oil and gas prices go up, yet it never goes back down. inflation is there in necessity types of products, food and milk and gasoline and things like that. but the overall inflation rate comes out on the cpi, both headline and core rate, and on the personal consumption expenditure deflators, the fed likes to look at, it's just a little over 2%. i don't think they're going to raise interest rates unless that goes up for real into the 4% or 5% category. >> jeffrey, do you think inflation will accept rate from where it is now? you're carefully not saying that. >> i don't think inflation is going to accelerate in the two areas that really it's needed, in wages and in housing. you have inflation in things that are global commodity driven. i mean, there are ebbs and
flows. >> i understand that. but if you can't pass price increases through wages, you don't get to same inflation rates. >> right. i don't think we have a huge inflation problem in the united states. frankly, a lot of things that we have in terms of the budget finances, they are so bad would be helped by some innation. the great solution to our economic problems would be if we get nominal gdp somehow to grow at 6% or 7% while -- it's hard to believe, but while the u.s. government freezes spending, while interest rates stay low. if we actually had those threes fall into place, you would get to a balanced budget in 10 or 12 years. but you need nominal gdp to grow, to get there, and it's not growing nearly high enough to get to that level. >> well, and you would argue -- the only reason gdp is growing at all, is because we have a truly plus dollar stimulant ongoing. they don't call it that any more.
they call tilt budget deficit. >> and you mentioned housing. we talked in the past about it. there's a lot of push and pull right now. affordability has never been better. there is an opportunity. there's a lot of people running out there to buy distressed properties. >> sure. the problem is for the noninvestor, it's tough to get a mortgage. you hear the new home sales came out the other day and they were pretty good. but what people -- what the home builders say is you get people with fico scores that are 720 and they can make a down payment. they still can't get a mortgage. and the reason is their amount of total debt is too high. when they putd together the student loan and the credit card debt, their stuff is not there. house sg a push me/pull you from dr. dolittle going out. it is affordable, even verse -- when you factor in taxes and fixing the roof and all that stuff. but on the other hand, there is difficulty in the system via credit and there's also a lot of supply. a lot of share supply in the foreclosure market.
this, of course, is why the government -- now it's campaign season so you're hearing less about policies. but the government has been trying to keep the homeowners who are not making payments but not yet foreclosed upon somehow to not get foreclosed upon. because it's a real nightmare in housing would be if all the people who were not making payments were foreclosed on, say, over the next six months and all these properties, a few million more were suddenly for sale in the marketplace. this is what i talked about principal forgiveness, this may be an idea or those homeowners who are not making payments. but what a crazy policy, right? if you stop making payments, you get a reduction in principal. people stop making payments. >> jeff, you're a bond guy. i want to ask you about a stop stock you've been vocal about and that's apple. going back to march 8th, you said it was your favorite generational short. people aren't lining up for ipads and two days ago you said you would short apple stock and leverage it 100 times. >> i was being facetious.
i gave a speech in san diego. whey mean is i believe it's in a position kind of like google was, say, at the top of the market in '07. lots of growth, great earnings. earnings have gone up you know% on coca-cola, yet the stock is lower. >> we get your point. >> i'm just saying that google is very overbelieved in terms of stability. sorry, at the rate it's going. emblem attic at the rate of the stock market 2007 was the peak in google. it went up, up, up, and they're looks to me to be a peak in apple. i know it's up 10% today. which is unbelievable. when you think of how many billions of market cap that represents. i will point out something else, it's full of its high. >> on the bond market, we had
very good calls in 2010 and '11 in items of where the bonds were headed. given everything we've heard from you, what are you setting up for us a as we move along? >> i think it will be difficult for treasury bond rates to rise very much this career. they rose a little bit, about 60 basis points or so, about 2.4%. then europe started to go cabloom again. and it seems like there might be one morally. even the treasury bond that seems potentially plausible, you don't make much money. >> yeah, but jgbs are at, like, .9%. >> yeah. i don't really think that the united states interest rates are going to .9% on the ten year. i think it's possible you could see them go back down to 1.5% or so. but how much money do you really make if the treasury goes to 1.5%? if you happens over a year, you may all of 6%. i think at 6% by using my total
return strategy without practice going up at all. >> jeffrey, we have to leave it there. as always, thank you for being here. exchange. >> we didn't get to europe at all. jeffrey gundlach. >> over to gary kaminsky for a look at what's to come on "squawk on the street." >> great stuff. i'm here at the global headquarters of goldman sachs. we're going to be joined by lloyd blankfein and "squawk on the street" right back after the break. you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform.
in london a day of electrifying political drama. rupert murdoch under unrelenting cross-examination over his relationships with the levison's inquiry. government minister hunt defending himself to jeers in the house of commons after e-mails suggested had is staff secretly briefed the murdochs on how to get their $12 billion acquisition of the 61% they didn't own in satellite
broadcaster bskyb past regulators. an adviser to the minister resigned admitting that the contact went too far. we're joined from westminster by a senior member of the opposition labor party. chris bryant recently received damages after they admitted hacking his phones. i imagine like many other britons today have been glue edo the television screen. what other things have we learned about over the last 30 years. >> way back in the 18th century the house of commons passed a motion saying the crown, the british monarch and power was increasing and should be diminished. we could say the same of rupert murdoch. he owned 30% of the national newspapers and single largest broadcaster, bigger than the bbc and in many parts had a complete and monopoly on broadcast
television and what we've been learning over the last couple of days from james murdoch first yesterday and rupert murdoch today is that the relationship that he used was one of fear and favor, trying to bully politicians into doing things that helped his commercial interests in exchange for support from his newspapers come election time. >> how significant to the revelations over bskyb and whether or not david cameron's government was in essence briefing him or giving him confidential information when they too had to judge on whether or not it went through? >> look, i think that what happened before the general election is david cameron and the tory party went to rupert murdoch, begged for their support in the four big national newspapers they had and said in exchange they would cut the bbc, they would remove some of the regulatory burden on bskyb that the murdoch broadcast -- satellite broadcaster and would
allow news corp to buy up the rest of bskyb. they slashed the bbc by 30%. they haven't yet managed to left the regulatory burden and -- but they certainly tried very hard through a series of private briefings providing secret information to bskyb to james murdoch himself personally. they very nearly got close to arranging the news corp buy-out of bskyb. in the end it's corruption. >> will they ever be able to buy the rest of bskyb? is that now possible for news corp? will that be allowed to happen whoever is in power. >> to be honest i think the british people are finished with the murdochs. whether the murdochs are finished with britain is quite another matter. james has had to resign from his posts in the united kingdom and is now living in the united states of america. i hope he doesn't do -- create as much havoc with your broadcasting as he has in the united kingdom.
but the thing -- sorry, go on. >> for you however you do not have the smoking gun. you've cross-examined them in person and in committee. you can't find the smoking gun to link them to the wrongdoing in the newspaper operation an presumably they're safe owning the licenses they do, the federal licenses here for fox. >> well, we'll see. i'm not so sure about that. the one thing that -- the le-- wasn't just hacking phones, it was paying police officers, it was destroying evidence. it was perverting the course of justice. levison can't look at that. that will be to prejudice possible criminal investigations and prosecutions. now, it may well be yet that james murdoch is arrested. if his newspapers have indeed pays police officers, there is a very clear read across to the
senior management act and to international news corp and i think that would mean that the fbi and the united states of america would, indeed, be knocking on their doors. >> we're virtually out of time. do you want to share what happened to you? >> well, look, basically i asked one of the editors of their newspapers have you ever paid a police officer for information in 2003 in the public inquiry and they said yes and nobody ever investigated it. it was a massive embarrassment for them. six months later their newspaper rubbished me, monstered me, all sorts of hideous stuff about my sex life. i'm openly gay. i don't care who knows about that and i think that was an attempt to intimidate me and that's the way they proceeded. >> chris bryant from london, thank you. >> thank you. want to take you to live pictures of detroit where general electric is holding their annual shareholder meeting. got some protests, of course,
which have tended to hound ge over the past few months largely because of their alleged low tax rate, ceo jeff immelt does point out they had a 29% tax rate in 2011. his words are tax rate in 2011 was 29% just as we said it was going to be. you had some big financial services write-offs in 2009 and 2010 but our tax rate was 29% last year. david says the u.s. economy is improving but europe remains a tough situation in his word. >> we haven't talked a lot about europe. didn't get to it with dunlop but our financials are down this morning and when that happens it is a result still of concerns about europe. real quickly, simon, to come back to your interview, news corp, interesting to note, if they're unable to really ever believe that they could buy the remainder bskyb as they wanted to before the hacking scandal unfolded they may have to perhaps consider selling it. and that will be interesting to watch with news corp. a lot of shareholders think what's bad for the murdochs is
good for the share price, don't forget and believe the fundamentals, the continued b buyback of significant amounts of stock is a very positive thing for news corp but will be interesting to watch their decisionmaking on that stake. >> in the meantime, the stock as a minority shareholder -- >> without being able to consolidate it at 38% do you consider selling it if you know you could never buy it. >> thanks very much. you'll stick around for the close. thank you, kelly. >> thanks for having me. here's what you might have missed if you're just tuning in. welcome to our three of "squawk on the street" here's what's happening so far. >> our growth engines are firing just as we had planned help us navigate through this period, what we'll lose is a few patents in the next several years. >> durable goods taking a beating down 4.2% on headline. >> the length depends on policymakers and policymakers
have been postponing the deleveraging which makes this journey even more uncertain. that's why you're getting this tug-of-war. >> get this, 23% same-store sale growth. i mean, hello. it's chipotle only had 12 and they're selling burritos. >> right at the top of the 11:00 a.m. hour i'll be able to bring something unique. we'll sit down with lloyd blankfein, chairman and ceo. >> opening bell on this wednesday, interesting actions you probably know. >> i think the growth story is intact in the u.s. and i still think before the year is over s&p 1500 or higher looks pretty much slam dunks to me. i'm not sure we'll see it this quarter but before the year we're still on for that. whoever wins the u.s. election has got to continue to preside over open and free markets to the world because if they don't and the u.s. goes down this
occasional route that it talked about trying to protect itself, how is the u.s. going to get itself out of the challenge as head. >> welcome to third hour of "squawk on the street." a check of the markets, dow is holding on to a 78-point gain, s&p up more than 14. nasdaq the big winner, 2%, 3,019. apple, the big story up almost 9% after a huge earnings beat propelling that to the biggest one-day gain since the end of december. caterpillar one of the big decliners weighing on industrials like cummins, beat the street but made negative comments about growth this china weighing on the stock. caterpillar down almost 3%. time for the road map. goldman's chairman and ceo lloyd blankfein will join us live from new york. it is his first live interview in almost two years. don't want to miss that. plus, murdoch on the tan in london facing tough questions
about their hacking scandal. what he has said so far and preview the fed expected this afternoon, the announcement, how you should position your money ahead of that 12:30 p.m. statement and goldman's co-head of fixed income, jonathan beinner, all that and more coming up in this special hour. first to goldman sachs headquarters. gary kaminsky sitting down with lloyd. gary? >> thank you, again, karl. we are here at the global headquarters corner office and as is tradition when you are a guest in somebody's house you follow protocol. i've taken my jacket off as i'm joined by chairman and ceo lloyd blankfein. no jackets here today, lloyd. karl mentioned this is your first live interview in almost two years. why today? why did you want to have this discussion today? >> well, gary, we're having our bricks conference today and here you are come to our house, how could i say no?
>> is it a sense given a lot of what's happened over the last couple of years it's important for you to maybe take a different approach dealing with the public and maybe that has a little bit of why we want to do this as well? >> i think so. not today specifically but obviously it occurred to us we haven't gotten everything right with respect to how we've dealt with the public. and don't forget, we are an institutional wholesale firm. we have no real consumer businesses so we hadn't really had those muscles and not surprisingly didn't exercise them and went through a spate out front an available all the time and went through a place where weren't. obviously the answer will be something in the middle. but, you know, i'm glad to be with you today and hope we have a good conversation >> let's talk about the morning of march 14th. it was a wednesday morning. you probably got up early. i got up early. there was an op-ed from vice president greg smith. tell me what that day was like
when you read that op-ed. >> well, i didn't wake up early. actually remember it because i traveled the night before from overseas. i actually got a call in the morning of somebody said, trying to discuss it and i had idea what they were talking about. i went to my computer and saw the article and said, we've gotten used to -- we've gotten used to -- excuse the oxymoron. we've gotten used to surprises so we knew we'd have to grapple with it but we read it closely. of course, our first reaction is to take it very seriously and say what is really going on here and to try to get at the work but, of course, as the day wore on, we just got a tremendous response from everyone. obviously the press response was one way but i, of course, have to deal with clients and with the people at work and from them the response was overwhelmingly supportive and positive. >> you decided to address i think it was through an e-mail the entire force and say is this
your experience? please let me know. you wanted feedback. tell me what the feedback was. did you hear from others in the company that they felt a similar culture which was anti-client existed? >> no, not at all. look at the size of our client business. if not the best client franchise -- you could not have that if you were anti-client. as far as the people in the firm think, we, you know, we recruit heavily. something -- when you give a job offer to somebody on when they have competing job offers something close to 90% of the people accept us. we couldn't have those kinds of numbers if we were like that. the reaction internally was one of shock. there was one person who obviously was very earnest about what he had wring and again wasn't specific charges as much as a diminution of the culture. clients were unbelievably supportive. didn't undo the damage and the shock to the wider public, but
we certainly were buoyed from the response we got from our clients and investors and our people at goldman sachs. >> just to put the issue to bed. you looked through e-mails and idea of muppets and calling clients muppets. can we say that you've done the thorough investigation and it was -- this was typically a one-off? >> look, the answer is, yes, we could find no substantiation. what we have is -- we ask everybody in the firm to do a 360 review of everybody else. we have the reviews of this fellow. we have the reviews by this fellow of everybody around him. we can go through e-mails and have written documentations. we are obsessive about everything soliciting everybody's views and went through that and couldn't find -- if you ratchet up the pressure at goldman sachs and as a result get closer to your clients no downside to that.
>> did "the new york times" ask you to review any of those 360s? >> we had no communication with the paper. >> if they want to see those, would they be able to have access to those. >> we have certain kinds -- asked people to do it on a basis that probably doesn't allow us to show. >> let's talk about the board of directors. obviously every company, every public company has a board of directors. >> right. >> this is a company that the board has gotten some more -- shall we say attention than most in the last several years. give me -- how do you see as chairman of the board as well as being ceo, tell me what the role of the board of directors at goldman sachs should be and is. >> the directors represent the shareholders. they oversee management, management, of course, makes decisions on how to run the business and a board of directors oversees that. we operate through committees and the committees by their names declare what the responsibilities are. we have governance in nominating
and compensation. and audit committee and risk and i'll tell you with as good a board we have, they are very, very focused and ask a lot of questions and are quite knowledgeable. we have board members would have been on our board since we became public and new members who bring a fresh perspective, people in finance and industrialalists so it's a varied group but i'll say also their experience has been varied. think of what this company has evolved into since we became public not that long ago, a dozen years ago, a small company, became a much bigger company. went through -- think of the risk management that went into our experiences going into the financial crisis where we had had much better hedges and had managed our risks to a much greater extent. think of the aftermath of the risk of the downturn where we had, frankly, manage the outcome. >> just in terms of the board. you obviously -- being a
chairman and being ceo and having that role as a combined role or a separate role, do you still think that is sense for a chairman and ceo as a combined role. >> i think it absolutely makes sense. what you don't have in critical moments, you don't have divided leadership or divided authority or more than one focus of the firm. but the way governance has evolved through, you know, sarbanes-oxley and with the roles of presiding directors and lead directors depending on an organization you get a locust of authority in the lead director or presiding director on a board and because of regulation there are times in the processes where i actually leave the room, the agenda is set by others besides myself. it's a misnomer -- the situation on boards is halfway between a separate role and the old -- your old concept of what a single unitary chairman and ceo was and i think it's in the right place.
externally there is one voice for the firm which is a good thing, not a bad thing but internally there is a lot of responsibility and accountability by independent directors. >> did the board at any point in the last four years either encourage or suggest that you may want to step down and possibly create a transition plan within the company? >> no, but, of course, one of the most important responsibilities that i have and the board would have is make sure there's always a session from the moment you get in there is a session plan. >> is there a plan in place right now. >> of course, there is a lot of contingencies but always, always, always. in other words, that's a responsibility you have when you're sitting in any -- period of responsibility there is the what is the long-term plan and what is the -- if you get hit by a bus plan. >> absolutely. well, if you got hit by a bus plan and god forbid that happen, the person running goldman sachs, do they know they're that person. >> not specifically and, you know, we have -- goldman sachs
has always been blessed through the years with a lot of terrific people. if you look, frankly, if you look at the management of a lot of other corporations, philanthropy, hedge funds, private equity and a lot of competitors there are executives there whose -- who made their career in a great part at goldman sachs. we've always attracted a lot of talent and nurtured a lot. >> no plank in place to say gary becomes ceo, the board will make a determination. >> we have a lot of terrific senior executives including but not limited to gary. >> what's your future? how long will you stay around here? >> i have no plans to leave. i read the same papers you do. i just don't know -- you may think they get it from me. i could tell you i have no idea where they get it from. so my plan is -- this is a terrific job. it's interesting. you get to be in a lot of different industries, i get tremendous support from who --
if you're -- excuse my pride i get to hang around a lot of the smartest people and deal with great clients, significant problems with a lot of consequence for the world. it's terrific and i'll tell you, the parts of it that look like they would be hard and unpleasant i assure you are hard and unpleasant and in those moments it's not that you love it but you have a sense of responsibility makes you conduct yourself anyway >> let's talk about the business. we had jim o'neal on earlier, talking about growth country, growth markets. is investment banking still a growth business in the world? >> well, in the world, absolutely it's a growth -- there are businesses and markets that didn't exist -- my predecessors didn't go to china three or four times a year like i do or india three times a year like i do, just wasn't an opportunity. if you think of what investment bank does, which is advise people on their growth plans, finance those plans, manage assets for them, these were not
places where wealth was being created or companies were being formed so now the world has gotten much bigger for investment banking. >> is this company right size today from both a human capital standpoint as well as a capital standpoint to basically create good sustainable returns on capital for shareholders with the size of the market around the world as well as in the united states today? >> i would say if you look at it in the real term, there's obviously cyclical moments when you say today if you mean today wednesday as opposed -- >> right, let's say the next three to five years. >> i didn't mean so much the time. look, we're in a trough of activity, china has been in a bit of a slowdown, kind of a managed slowdown mode, obviously europe has -- and the u.s. is slower then people thought we would have been at this point is obviously in a growth mode but at a lower trajectory and so all of our businesses that i described to you correlate with growth and there is a kind of--i
i would say in terms of growth mode the country may be in like a third or fourth quarter opportunity set so there's very, very short-term questions you can ask as, you know, are these firms absolutely right size? we believe we are. that's our big responsibility and think we're in the right place. for the longer term, we definitely have to expand our footprint overseas. >> okay. >> to the growth markets. >> when you think about growing the business, you always have to think about competition. would you say that other investment banks be it a morgan stanley, a deutsche bank around the world are -- j.p. morgan are more of your competition in terms of executing on growth or is it government regulation when you think about how we are going to develop these businesses? which is more of a competition in terms of you laying out the plan? >> well, our competitors navigate in the same places and, you know, listen, competition is a good thing. we try to outcompete our
competitors but times when they do something better than us we figure out how to leapfrog over them. every industry is like that. >> you've got this huge, huge developed reregulation or new regulations you've got to deal with. is that the biggest threat to the growth of this business. >> i think it's a challenge but it's a challenge for us and it's a challenge for the regulators and it's a challenge for the society. our industry is hugely important for the world. again, we finance growth. we make decisions about whether to support this activity or not to support that -- it's a very key and important function of the economy, the markets and society at large and we're all trying to get it right. and so i would say it's a challenge. now, because we had such a big shock, such a big trauma, not surprisingly people feel the way along, the pendulum goes a little too far and has to go the other way we definitely -- the markets are always evolving and regulation has to evolve wit. we expect a kind of a lurch now
and a very big focus on it, and i'd say we're kind of partners -- look, i don't like everything -- everything that's been proposed or every regulation but the idea we have to have some sort of reform is obviously you couldn't deny that. >> regulation makes me think about politics. >> let me say other one other thing. if the -- as the market gets safer because of certain of these adjustments, there will be no greater beneficiary of that than the firms that manage themselves well. the biggest threat to goldman sachs ever, the existential threat to goldman sachs was the poor performance and the bad risk management practices of some of our competitors with whom we had relationship. >> along with that one would be surprise fundamental a year from today you said we weren't able to execute on plan because of the regulatory environment because it sounds as if you were finding ways to adapt to create the returns that shareholders expect. >> we're also helping regulators -- you also go down
and advise our regulators on what we would like to see straightened up. now, sometimes they go too far and ask them, look, we're not only able to tell them what we think is wrong but it's our duty. ultimately society makes the decision but society needs the input of experts like ourselves so i think it's our duty to inform where they think they've gone too far or not far enough and we won't like everything and the balance won't be struck the way we like it but we're engaged in the process and it's important for everybody. >> lloyd, before we go on to politics, this presidential election later this year, a lot of employees at goldman have gotten behind romney. is there a very strong opinion in terms of who this institution would like to see as the next president of the united states? >> the institution doesn't have a view and doesn't participate in those. we have a number of people and you'd find people on both sides. i get -- my e-mail is filled with invitations to attend
fund-raisers for people of every party and every point of view because that's -- reflects the diversity of the firm. >> have you decided to personally back either of the candidates? >> you know, i'm kind of a rockefeller republican. i'm probably conservative on fiscal issues and more liberal on social issues and where that will get me, i'm not sure. >> we have to run but hopefully will see you before another two-year period. thanks for allowing us in here and, carl, hopefully we got good answers to questions out there and certainly sounds to me as though this institution is trying to figure out how to really reward shareholders in the new regulatory environment and a good thing, not just for goldman sachs but for the overall equity markets. >> thanks very much to both of you.
lloyd blankfein spoke with gary kaminsky. jeff hart is an analyst at sandler o'neal and one from rockdale securities. both listening in with some reaction. good morning to you both. >> good morning. >> nothing like a couple-year absence, jeff, to make everything you say really, really interesting. first the business. he talks about these paths for
growth which were sort of illuminated in the quarter recently. he says we're in a trough of activity. china is slowing down and europe is slowing down more than some had thought but they're right sized. do you agree? >> i think so and, look, the real key, he hit on this was the driver of revenues for investment banks is the economy. it is jdp, the highest correlation of any other driver i can get and if you think the global economy will grow there are opportunities for goldman. in the u.s. a lot of us function every day and have a feel for but there are definitely growth opportunities out there. decent returns without growing too deeply but enough scale to take advantage of those so you could see a few head count reductions but the large scale stuff is done waiting for the environment to give them tailwind. >> dick, your take on regulation, specifically that they don't agree with everything that's been proposed. but that what removes the
existential threat to goldman is the ability for their competitors to behave irresponsibly. not themselves are they trying to pass the buck. >> i don't think so. i think he's contradict. that regulation will have some impact on the company but it will not be significant. in other words, the investment banking business, the true growth business of goldman sachs won't be impacted negatively from regulation and from my perspective the rule is dead. pushed out 2 1/4 years and by the time that comes up i think it might be repealed by the congress or it will fritter away so i don't think that regulation is going to be a constraint on the growth of goldman sachs but, of course, for every industry, if you have companies that have pricing policies which are not appropriate, they have, you know, policies in terms of the way they function in the marketplace which are not appropriate, it hurts the industry. but i don't think that's a
problem either. i think the outlook for this company is extremely strong at the present time. >> yeah, jeff, succession. the hit by a bus question, a lot of good candidates including gary and has no idea where the media gets that notion. do you think that should be something investors are worried about. >> that's something investors should always worry about. but specifically at goldman, i don't get the feeling lloyd blankfein or any of the senior guys are planning to leave soon. the important thing for me is over a decade of covering these guys there is a deep bench. it's one of the unique places where i go for management meetings with management team after management team and say they're sharp so i agree with his point that, you know, there's a lot of people colle collectively running goldman. >> the first question from gary involved the op-ed in "the
times." we don't have the muscles to help you deal with a broad public reaction like the one solicited. it was one of shock internally. did a 360 review and couldn't find any substantiation. specifically talking about municip muppets. >> what's shocking to me the media doesn't understand how badly we need goldman sachs, morgan tanly, citigroup, you know, when i started in this business, there were five big banks in new york an they were alt least a half dozen big brokerage firms and yet the united states wants to maintain control of the financial markets. they want the new york to be the site of where the global financial market functions and yet they keep doing things to reduce the number of companies in new york and the companies in new york are trying to get out of new york. citigroup has moved a lot outside the united states. jpmorgan just announced a major
division will be moving to hong kong. >> yeah. >> i don't know when the media is going to understand that they've got to start supporting the financial industry and that goldman sachs is very important to this country. >> dick, jeff, thank you for your time, guys. interesting afternoon. we'll talk to you later. a few minutes left until european closing coe inine inin comes to a close. this snap spreader system from scotts is snap-crackin' simple -- just snap, lock, and go. [ scott ] feed your lawn. feed it! guys. come here, come here. [ telephone ringing ] i'm calling my old dealership. [ man ] may ford. hi, yeah. do you guys have any crossovers that offer better highway fuel economy than the chevy equinox? no, sorry, sir. we don't. oh, well, that's too bad. [ man ] kyle, is that you? [ laughs ] [ man ] still here, kyle. [ male announcer ] visit your local chevy dealer today.
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coming up right on the bells, the european close. simon to tell us how that trading day has ended. >> interesting session we've actually closed out on. let's hear those bells and have a look. green really across the board in europe and what's important today, carl, you've seen a lot of those stocks that were very beaten down, very beaten down come back. so let me just show you how we traded during the course of the session having a look at the major markets in europe and seeing where we are there. here we go. frankfurt, paris and spain. we've gained throughout the session as you can see. only thing i would point out, of course, wall street's positive opened help. that slight decline you have from the spanish market coming through at the end. let me show you, for example, what is happening at the top of the french market today. here you will see these are the sort of -- these were the kind of government-related stocks under a lot of pressure because
of what was happening with francois aland. you know, they've fallen heavily. they've made substantial gains. if we go to italy and have a look at what's happening there, again, you see these banks -- silvio berlusconi, former prime minister there, 8, 7, 5% gains there. and in spain, let me tell you to the top of the spanish market we've spoken about the construction companies and spoken about the spanish banks, here you go, a big construction company here, all those property loan, all those issues up 5%, banco popular has made gains. the manager of the central bank was up before european mps in the parliament and said, yes, look, the ball is entirely in the court of governments and banks. you need to move and need to
shift. the ecb as far as he's concerned perhaps is not looking at an exit strategy anywhere soon and might perhaps have another lto and said "we're just in the middle of the river that we are crossing. the only answer is to persevere. i think buying time is not a minor achievement." stress points we often look at to see what is happening in europe are the yields on 9 spanish and indeed the italian ten-years. the general trend over the last month and this is the one-month chance has been for those yields to rise in spain but look how arguably they've come back down and importantly below 6%. just have a quick check on what's happening in italy. check those yields as well and similar story, yes, we've gained during the course of the last month, not great sign of stress, but if anything here, we're now at least topping out so that is the european close. quite an important close for those stocks that have been beaten down and for hedge fund
manager, carl, who clearly perceive that now they may have time to get into those worst quality stocks because the ecb, there is still potentially an ecb put. >> after all this time. thanks so much. speaking of yields to rick santelli watching the results of an earlier than usual five-year auction today. hey there, rick. >> busy day. 11:30 eastern instead of 1:00 eastern because of the fed meeting. 35 billion five-year notes, yield, 0.887% when the dutch auction process ended was 89 1/2 so lower yield higher price. the bid to cover is 2.88. the best since the january auction of 3.09. if you look at indirects at 47an average of 43. a solid apple auction and this really gives us a glimpse into what the dealer community may be looking for from the fed. not looking for bad news looking
for good news. now we'll bring in our guests -- see, i told you it was busy. jim by aianco and he will make news. tax armageddon. jim will tell us they're wrong. their calendar is wrong. when do you think taxageddon hit. >> tax and the election. >> you have to explain. bring us into the loop. >> the debt ceil, remember that thing we had a fight about that was last raised january 31st. at the rate we're accumulating debt it will probably be reached around labor day. the treasury then has the ability to borrow against trust funds to push that off into the future. at that point it becomes a political calculus. will the president push it off into october? wrapping in all the tax armageddon and the cliff three weeks before the election is to his advantage. that would be my guess.
he'll probably want to do it in october because we'll be at the debt ceiling and that fight we're waiting for comes before the election. >> that is fascinating because, you know, if you talk to people that respect necessarily fiscal conservatives, the summer of last year when we were going through that circus of debt, i called it fiscal responsibility, that was nasty and i thought there was a lot of mistruths about who will get paid and who won't so all this will come way forward you say. >> yeah, the debt ceiling isn't let's have a one-sentence bill to raise the number but will include taxes and rolling off of unemployment insurance and include automatic spending cuts that kicked in because the super committee couldn't agree. all will be wrapped up in that one ball of wax and all coming before the election, not after. >> so anybody on the left that would rather have some of the more social issues be front and center versus those more on the quizzical right which would like to have debt and debt is just another word for stimulus when you're running a $1 trillion
budget deficit, that is going to be front and center. in many ways how the president and his administration handles this around labor day could give us a glimpse into how well they think they're doing with regard to winning the election. if they really drill it down and say they're going to draw a line in the sand they'll probably have confidence they'll be able to hold on to the combhous. more apt to let's work it out and make it so americans won't have these tax issues looming maybe because they're more nervous, is that correct >> that's correct. will the republicans want to hammer away at the issue or look away like it's a bad car accident and pretend it's not happening and tell you a lot about what they think about it. >> jim, thank you. karl, isn't that fascinating. >> i love it. always love having jim and thank you so much for bringing us to speed on that 11:30 five-year. rick santelli. bob pisani is here talking earnings and we'll talk about
ex-apple everything. >> technology leading the parade and kudos to gary for that great blankfein interview. the important thing is every single day, carl, i come on with new numbers and every single day the earnings numbers keep going up. what we're tracking, remember two weeks ago, 1% earnings growth, everybody is worried about it. today, 6.3. yes, apple helped, of course, but had caterpillar and everybody else helping, as well. revenues are increaseniing as w. now revenue growth 6.3. s&p 500 and again not the double digit growth we were seeing a year ago but still perfectly respectable. one sector and only one sector that's a new leadership group. i bet you don't know what it is, it's real estate investment trusts. my old beat 20 years ago. look at this. four-year high in real he statement investment trusts, remember these are real estate organizations that own and operate commercial real estate on behalf of their investors.
low interest rates are helping them out and some recovery in the economy. let me show you sectors and why real estate investment trusts have been doing so well. recovery in apartments. you all know about that. this business is on fire. high quality malls are doing a lot better. there is new company, new real estate operations filling up these malls. a little bit of a recovery in hotels. lee shush traveler is not as strong as the business traveler. business is quite strong. challenging estimate those suburban office malls but overall things are good. what could derail it? this is your new leadership group. don't want higher interest rates. you certainly don't want flat to negative gdp growth but a growing economy to help it out. overall pretty good. your laggard sector, carl. here's the group that's done nothing. zero. since earnings, again, 3-1 advancing to declining stocks today and big financials can't even get to the up side? this is unfortunate to say the
least. this has happened since earnings. this is not -- this is not unheard of for financials which report first to underperform the market as earnings season goes on but this is rather noticeable now and happening almost every day. remember, 3-1 advancing to declining stocks, skewed -- kudos on that interview. >> thanks a lot. turning our attention to day two of the fed meeting, not much longer till we hear what will come from the gathering. what can we"? steven rishutto is here and michele myers. good morning to you both. >> good morning. >> steven, you have wring that the chairman's role gets easier. how so? >> well, i think the tone of data has softened. what happened with the auction. the markets are giving him an opportunity for very little
activity out of the fed to be greeted as a positive sign with regard to where markets are going to go and from the fixed income perspective but more importantly what they're going to focus in on which will surprise people the deficit story you were talking about a few minutes ago because it's really not the end of the year. it's really not labor day. it's really what happens in the third quarter because corporate america has to make decisions going into the third quarter of the year for the second half of the year and if they're uncomfortable about where the economy will go in 2013 that's going to start to affect the data as early as this summer of this year and that's going to be the thing the fed has to be most worried about as they sit down at meetings. >> michele, steven is right, fiscal cliff. everybody knows what you mean when you refer to it. how explicit can he be today? >> i think he's going to mention it in the press conference. i don't expect to see it in his statement but one of the things he's worried about so acknowledging some of the better data flow but still saying
there's a lot that the economy has to get past. one of the things he must be concerned about as steven said is the looming fiscal cliff that could hit at the end of the year and the uncertainty that can kick in earlier than that as a result of the lack of clarity of how they'll deal with some of these programs. >> steven, some discussion about whether or not they lower their year-end jobless rate target. some say below 8% even. does that -- is that more hawkish or not? >> yeah, i think that's part of the problem here. the original numbers we're talking about go back to the end of last year and the perceptions is what was happening. the decline in the unemployment rate that has taken place has occurred in an environment where it's not a positive decline in the unemployment rate but because the labor force isn't growing and kind of a misleading indicator and that's part of the problem for them. that's why i think the conversation he's going to have to address in the press conference is really going to have to address that issue and
make it clear nothing more than a technical adjustment and not signaling any potential change in policy. >> michelle, are you of the mind that some have said on this show that come june political by because of the timing of the election their hands are tied and we will be on the dark side of the moon at least for a few months. >> we don't think so. we think that bernanke is going to operate outside of the political spectrum so he will do what he thinks is most appropriate to support the economy. our baseline view is that the f fed, they'll stop operations towards the end of june as planned and see how the economy fares, we think that growth will slow. we're worried about the fiscal story which means it's going to prompt the fed to do additional easing towards the fall. >> we'll see how right that is. going to be touchier. steve and michelle, thank you, guys. appreciate you joining us.
don't miss a special half hour at 12:15 eastern time and instant analysis with bill gross, ken vulpert and steve liesman in washington. 2:15, the press briefing from the chairman to explain the fed's latest move and coverage begins on account street signs" right here on cnbc 2 p.m. eastern time. gary kaminsky and what's still to come. you're not done at goldman. >> yes, and, carl, the timing could not be better. we'll talk about the fed and how the sio of fixed income is telling their clients to position themself. "squawk on the street" right back. [ tires squeal, engine revs ]
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next 30 year. >> look, investors are really excited about this and that's why i think we've got so much great participation in this and the story is quite simple. if you look at the economies of the world over the last several years while people weren't watching what you've seen the developed economies, large economies have been borrowing. and the growth economies have been growing but they've also been saving. and they have generally more money coming in than going out so you have a situation where when you think about it just from a fiscal standpoint the developed market, the large markets look kind of scary and the growth markets actually look pretty appealing from a risk perspective. combine that with the fact that investors are generally underinvested because they tend to think of them as emerging market, small, niche, unaccessible that has totally changed and these are bigger, broader, much more accessible
and the good news is they actually yield a whole lot more too. >> obviously the most important thing, if you are fixed income investor and look at some of the developed mature markets because of what's happened around the world yields are so low so if i give you money to manage for me in the fixed income arena will it have a tremendous allocation to these emerging or growth markets so that i can get some sort of income here. >> yeah, sure, and we have vehicles that are dedicated specifically to the growth market debt. we actually are now managing approximately $30 billion of growth market debt across our portfolios, that's up tremendously from recent years for portfolios where we have the ability to asset allocate and make those decisions no question that allocation is pretty significant right now. >> and i don't need to be -- while i may not be concerned that much on the duration don't very to be concerned about the credit quality and concerned about currency things i don't have to worry about if i'm just a straight u.s. treasury investor. >> that is true and, look, credit, you always have to be
worried as a lender, buying bonds, you have to be worried about getting paid back so think about that and growth markets are not just one country, it's lots. you have to do your credit work. that being said, currency risk. our contention would be that's risk you like because you're getting paid for it in extra yield and think generally when you think about it, the large economies are printing lots and lots of money and the glorowth markets aren't. where do you want to put your wealth? you talked about the volatility. it's true if you think about it day to day, these investment also go up and down but our contention would be actually take a step back and think about it in a longer term context and say is it more or less risky when i think about how am i going to store my wealth? >> comments echoed by your colleague. the fed will speak again. any expectations that you'll hear anything that would change any of your strategies out of
the fed today or in the coming months. >> no, you know, i think today's meeting is probably going to be a bit of a yawn. no real expectations that there's going to be any meaningful change in monetary policy. obviously looks -- the fed funds rate won't be moving today. we think it's still going to be at least a couple of years before you actually see the fed funds rate. looks like qe3 given the economic data in the u.s. has been on the positive side, probably off the table although i'm sure they'll reiterate they're in terps to act. >> qe3, not something you factor into your thinking in terms of portfolio construction? >> well, you definitely have to factor it in. we think it's probably become less likely right now. ten years trading around 2%. back into this very tight range, very low volatile period. right now it's towards the lower end. pretty close to home. certainly would tell our clients do you really want to take interest rate risk at this point in time?
we'd say you want want to take rate risk and i'm getting better paid by currency exposure and credit exposure right now. >> carl, there's your over theme from the three interviews we had today, you want to focus on growth markets. that's where you are rewarded for the -- what may be additional risk you're taking. >> growth is the new emerging as some have said. your closing thoughts in a moment. a lot more "squawk on the street" right after this break. ♪
one of the most important responsibilities that i have and the board would have is make sure there's always a success n succession. >> is there a plan in place. >> always, always, always. my predecessors didn't go to china three or four times a year like i do or india three times a year like i do. just wasn't an opportunity. if you think of what investment bank does, which is advise people on their growth plans, finance those plans, manage assets for them, these were not places where wealth was being created or companies were being formed so the world has gotten much bigger. as the market gets safer because of certain of these adjustments there will be no greater beneficiary of that than the firms that manage themselves well. the biggest threat to goldman sachs ever, the existential threat to gold man sachs was soe
of the bad practices we had with competitors. i'm probably conservative on fiscal issues and more liberal on social issues and where that will get me, i'm not sure yet. >> just some of the highlights from our interview with goldman sachs ceo lloyd blankfein. we'll get final thoughts from rick santelli and gary kaminsky who did that at goldman when we come back. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start.
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time for the takeaway. rick santelli can comment not just on the five-year but the statement we'll get in a little more than an half hour. >> i think they're highly correlated. we dropped about two basis points on a five-year after that at q auction, three basis points in tens, why? remember, we started a big sell-off after the last statement because it didn't mention qe or the twist. i think the treasuries are somewhat inoculated to that for a second event and think investors really don't see a big downside for treasuriesout side, outside and a big asterisk outside something that goes on in equities. no mention of the twist whatsoever even with the influence of apple if you get a big downdraft in stocks that will be viewed by the treasury complex.
but if stocks go up and i think that most likely they're not going to be hugely affected look for treasuries to either stay where they're at or rally a little bit at least that's my take, back to you. >> markets will be hyper sensitive to anything fed related in the next few hours. gary, great stuff inside goldman. your takeaways on specifically what blankfein had to say. >> yeah, thanks, carl. you know, before we get to lloyd, let's talk about growth. growth is a major themecross all markets so that is one thing i will take away in terms of thinking about investing but lloyd blankfein, if y an investor in the investment bank, the publicly traded banks whether goldman sachs or any of their competitors i think you have to be pleased with this fact that the institution and others are trying to embrace the new environment and figure ways they can grow their businesses recognizing that the next five years willing nothing like the last five and the next ten years