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tv   Squawk Box  CNBC  May 14, 2012 6:00am-9:00am EDT

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stocks in europe sinking on lowest levels in more than four months. a political impasse in greece raising eurozone worries once again. also a major party refusing to join a new government. we'll have more on that in a moment. and adding to the negative tone, angela merkel's conservative suching a crushing election defeat yesterday. we'll have more from michelle caruso-cabrera in just a moment. and adding to the downward pressure around the globe, china has been cutting the amount of cash the banks must hold as reserves. fueling fears that the european crisis is hurting global growth. we'll head overseas for the latest. if you've been watching equity futures, the under pressure, the dow down by about 82, the s&p off by close to 11, right now
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andrew has this morning's top u.s. corporate stories. >> and a lot of corporate news this morning. yahoo! ceo scott thompson is out ten days after dan lobe accused him of padding his resume by faking a computer science degree. yahoo!'s global media head has been named interim ceo. fred amoroso has been named on the board. he'll get one for himself and the others to michael wolf and harry wilson. and in one more odd twist to the story, the "wall street journal" reporting that the before thompson resigned, he disclosed that he had been dag knowsed with thyroid cancer. we'll talk to a yahoo! share told der in t holder. and three top executives involved with jpmorgan's $2 billion loss are set to leave the bank this week. the bank's chief investment
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officer and one its highest paid execs is going to resign. also two of drew's subordinates are on their way out. ceo jamie dimon on nbc's "meet the press" this weekend had a lot to say. take a listen. >> we know we were sloppy. we know we were stupid. we know it was bad judgment. we don't know if any of that is true yet, but of course regulators should look at something like this. we are totally openky know know and they will come to their own conclusions. >> we'll get openky know know a litt little chemo knke kimono. and we'll focus on regulation with bob corker. and the residential capital unit reportedly nearing a bankruptcy filing. the move could help the auto
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lender shed its troubled mortgage banking business. but it could also lead to drawn out held fights. >> all this not making traders feel that comfortable. we had a rough week last week. rough week the week before. and starting with a rough session this morning at least as far as the indications are down about 82 points for the dow. almost 11 points for the s&p. it has been all this good for -- well, if you hike cheap gas or cheap energy, because we have seen a little drop in the oil. down to $94. ten year continues to rally. and we've got it now at 1.78%. all-time low wasn't too much lower. there's the euro. 1.28. looking for parity by the time i
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head over there in late july. is that possible? >> for your sake, i hope so. >> i'm going over the end of may. when you add in -- you get a hotel quote and let's say they say it's 300 euros. number one, you got to do the euro thing. it that makes it like 450. and then you have to do the v.a.t. thing and that adds another 10% p about and then they throw it -- you're like at $1,000. >> and it's the same thing here. you look at all the taxes. because i got quote some had rates yesterday for hotel rooms and car rentals and by the time you add the taxes on, it adds about 35% on to the top. >> and then you you throw in the mini bar prices. the little bottles. and for you for the sfwheyou ins you. >> 20 bucks, 30 bucks a day sometimes. >> you you almost have to sell an ounce of gold --
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>> segue. >> -- to get a room now a days. man, 1562. time for the global markets report. it's debut day. i laughed, i cried. five stars. two thumbs up. kelly evans standing by in london this morning. it's a different time there. i'm going to say good morning. >> yes, well, you're right, the time thing is the biggest challenge over here because it's early morning for you guys, it's mid-morning for us and it's evening in asia. >> stop, stop. that he's impossible. i can't even get my head around that. it's a different day somewhere, too. maybe not anymore. >> no, that's right, if there's one consistency, it's what you can see going on behind me. it's a sea of red here this morning. there's actually we've tried to count these up, there's about 19 stocks that actually are in the
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green. and look at the index. down about 1 pbs 8% a.8%. we started out at a level and traded off the lows. ftse mib down 2.9% just about. cac 402.3%. xetra dax 2.14 and the ftse down 1.7%. spain dragging, as well. a lot keying off concern about what's happening in greece. can they form a coalition government and if not, what does it mean for the future of the eurozone. bonds are are the big story this morning. as you you mentioned, we'll start with the ten year german bund. yield is now 1.45%. historic lows. ten year italian debt meanwhile surging. and spain at 6.3%. italy, 5.916.
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some of its auctions this morning went off a little bit their people had hoped. spain by the way is now paying about 3.3% to borrow, that's double what germany is paying for ten years. and a look at uk, gilts at 1.86%. >> kelly, thank you very much. and by the way, how is it over there? >> it's good. this is a great team and the weather has finally turned in our paver. it's actually even a little bit sunny. so i can't complain. >> kelly, is it hard to keep your train of thought work next to -- ross kind of exudes that sort of continental -- >> man of mystery. >> yeah. if you had to pick one of the james bond actors that he must -- would it be samuel craig, would it be -- >> dan yiel craig. >> whatever. sean connery, roger moore or which one -- he's almost like a composite. >> i didn't realize you were
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such a fan. i'll pass the sentiment along. >> he knows that. >> he has these great eyes. that's what you have to look for. and he doesn't have the andrew ross sorkin sort of weird pupil hinge going. he's got great eyes. >> wow. this is day one, she's just -- unbelievable. >> in your google thing, that's one of the first thing, people -- a very distinctive cool thing to have. >> it is a cool thing. a very -- you look at it and you're immediately wow. >> unique and gives you character. >> thank you. >> thanks, kelly. break a leg -- no you already broke your leg. good. excellent. we'll check back in with kelly tomorrow morning. but for the rest of the situation will greece and what's happening there, let's turn to michelle caruso-cabrera. is this for real, is the euro going away? >> not yet. but we're certainly closer to the euro breaking apart than we were just a couple weeks ago.
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i don't know that we'll get to parity by your trip. there was hopes that maybe there would be a government in greece. that is not the case. the president of greece which is different than the prime minister of greece will hold a last ditch meet to go try to this together. if you don't understand the parliamentary system in europe, don't worry about it, just understand they can hold elections and yet nobody gets elected. so it means they may have to try again in june. they're likely to try again for another round of election mis-june. >> what happens in the meantime? >> nothing is the problem. so bring up the video. the reason they can't form a coalition government is this will 37-year-old guy, i want the video, not the magazine cover, he has refused to go along with the coalition government. he says by joining he would be aiding and abetting in a crime. this is the guy i interviewed him again last week, wants to restore salaries to their previous levels, restore pensions, restore collective bargaining, wants to include
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everything that will make the markets more inflexible, he wants them back in will. so he says to go along with this deal would be to violate his campaign promises. i think there's something far more important here which is he's seen his numbers sky rocket. and so he thinks if he go it is to the elections again, maybe he can actually win and actually be in charge. >> does anyone realize that if they do that, they are basically tempting europe to kick them out of the euro and they'll be on their own and left with -- >> he knows that very clearly that he's made clear that's the card he's going to play. he said more than once angela merkel has said more than once if greece leaves the euro, the whole thing could fall apart. so he wants to go back to his european partners. it's a game chicken, right? and it's how far are you willing to go. are you willing to go all the way to the point where you'll threaten to leave the euro,
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scare the daylights out of everybody. he said i'm willing to go very, very far because he wants a complete renegotiation. >> you've made the point before that the people who are really in trouble if this falls apart would be the greeks because they can't pay their bills. >> every single day the greek government spends more than it brings this. so they must live on borrowed money and right now they're getting that from their european partners. or they suddenly have to live on only the tax revenues that they bring in which is maybe 20 million euros a day. if they have to live on the tax revenue, all the cuts they don't want to phase in over the next two to three years happen tomorrow. >> they don't even have enough to pay off their daily bills. almost have a blackout the day of the election. almost had a national blackout, that's how severe the cash
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crunch is. your electricity goes off, rioting in the street, previously middle class people are in garbage dumps looking for food. that's what it looks like when and you have violent default. >> and it looks like the europeans are finally starting to say hold organization we're going to stand up to you. >> schaeuble says maybe we allow german wages to rise. so the greeks don't look uncompetitive compared to the germans. if there's ever a time for leniency, it would be now. i think what you're seeing is think of it broadly as the beginning of the negotiations of the third greek bailout in some
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form or fashion. no prime minister has called another prime minister to say we need more money. but people are saying we can't keep doing this. what are we going to do instead so you have the ecb guy from germany saying if you don't stick to it, we'll kick you out. you always have the extremist positions when the negotiations begin. >> what's the chance they're out there? still 50/50? >> i think it's made clear that making certain choices means you'll get kicked out of the euro, i think the calculus starts to change. so tomorrow greece is supposed to pay 436 million euros in principal repayment for some bonds that didn't get tendered. are they going to pay it, are they not the going to pay it some we don't know. the government says do we want to drive the country into an
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official default, if we pay it, then we have a very unhealthful precedent. hedge fund managers would make like 400%, right some because these holdouts that paid, what, 20 event doctcents on the dolla. if they get paid tomorrow, 100 cents on the dollar. so a real white knuckle trade that actually was phenomenally -- worked out well for them. and nobody knows. so we'll find out tomorrow. >> michelle, thank you very much. >> a flurry of interesting corporate stories this morning. we've already talked about yahoo! and jpmorgan. coming up next, carl icahn expected to disclose a stake in chesapeake energy. these stories don't get any better. today is gonna be an important day for us.
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we were down about 80, now down about 95. making headlines this morning, the "wall street journal" reports chesapeake energy is expecting carl icahn to disclose he's taken a significant stake in the natural gas company. the company's cash crunch in corporate governance controversies has pushed its
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stock to lowest level since 2009. the shares lost a billion dollars of value. friday when chesapeake revealed it might have to delay planned asset sales to stay in compliance with the terms of its line of credit, weird because it has to sell things -- >> it's all gut to him, right? i read the headlines. not looking at the numbers. i have to assume there's value in there so i'm jumping. >> such a social -- >> are you hanging out with him? >> no. i have. i like him. big republican. big conservative. right? >> i wasn't even going there.
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>>. >> now to the weather channel and jeff morrow. >> well, it looks like it's a little bit of a gloomy start to the week along the east coast. all the way down in to the southeast, even florida will have a little bit of rain this afternoon. the nice area, chicago, minneapolis, tulsa down to new orleans on bourbon street all looking good. could be storms out in west texas and new mexico, but the west coast, a little bit of a heat wave. vegas up to almost 100 degrees. a little cooler along the coast, but pacific northwest looking pretty toasty, as well. so got to deal with that rain for a couple days i'm afraid on the east coast. >> jeff, thank you very much. let's talk more about the markets. our next guest is tim pre-man, the principal at elevation. he's also an expert on volatility risk. and tim, people have been watching the markets watching
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this downward draft and then watching things again today with more red arrows. makes them nervous. what do you yyo tell people, ar there opportunities or is are it time to stand back shall. >> always time for thoughtful analysis. it will have two impact, one is the immediate impact with lid qui it liquidity on banks. the market will need to assess the immediate impact of the banking crisis. second is going to be growth. ultimately if the euro stays together or if the euro breaks up, what will that mean first and foremost to domestic growth here in the u.s. and on a broader basis, more about growth on a global basis. >> we've been watching the euro in particular and there are so many questions about what to make of this union. we just had this discussion with michelle about what's happening with greece. how is that playing out in the
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currency markets at this point? how do people feel and how sure can you feel about your bets when you're watching this daily drama? >> sure. a lot is really priced in at this point. people would not be caught sideways if there were to be a greek exit. again -- >> they're kind of almost pricing in -- michelle said 50/50 chance. >> the volatility across asset classes are pricing a lot of these potential moves in. so it's been a very slow moving train. it's a wreck we've been looking at for a very long period of time. so people are certainly not going to be caught sideways when it happens. there will be probably be a down trade in the markets. they'll analyze it, but at the end of the day, it will come back to liquidity and growth. so the impact of the euro breakup on growth will be the big question that the markets will try to asset and get their arms around. the most powerful thing i see specifically in the u.s. is the upward sloping term structure that we see. meaning that shorter dated
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implied volatilities or option premiums are much lower than longer dated. if you look at a simple time series of that relationship and how s&p 500 cash does or futures do, it's a positive metric. >> what does that mean? >> it means that the market is ultimately right here right now, the market will continually expect central bank response to reliquify the markets, to pump money into the system and ultimately help growth. >> so it's a pavlovian experiment at this point. we almost know that every time there's trouble, don't worry about it, the central bank will be there to save you? >> that is the general consensus and that's the experiment that we're living lieu. europe has gone through the austerity measures and we're getting our arms around exactly where that gets us. the u.s. has taken a different stance. will geithner and others be able to talk them off of the austerity stance and into some other growth pattern. >> is that the only thing that would really shock people and
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really send volatility skyrocketing is if the central bank changed its mind and was there as a super hero? >> and that's the big risk right how. ultimately investing is so difficult because you basically have to make a big call on central bankers. anybody it that says they have a great call on the market, there are cheap assets out there on historical measures if you look al earnings, pes and those sorts of things. but ultimately much of this is being put together by the central banks. if they were to withdrawal liquidity, it would be a rather -- >> a scary time. david einhorn laid out a piece very recently where he said because of all this, because he doesn't trust the central bank and because he doesn't think that they'll be acting rationally as he thinks they should be acting, that's yes likes gold, do you you agree with a thesis like that? >> i think we really need to accept back and say what are the social implications of the central bank withdrawal liquidity. it won't be good for the average person on the street.
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so no matter what we think is the rational response, the fact of the matter sin natiis inflat not showing huge upticks and whether we like it or not, socially it is the best hingetho do. >> all hoe sethough seniors wou with that if you're on a fixed income. >> it has made it more difficult for fixed income investors. but i think the down side is significantly worse if the liquidity were to be pulled out. >> that has been bernanke's argument, too. tim, thank you very much. coming up, big changes at yahoo!. but as a new c echlceo must hav turn the company around? plus a live report from washington where lawmakers are starting to take aim at jpmorgan. first a look at last week's winners and losers. this is an rc robotic claw.
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welcome back to "squawk box." i'm joe kernen along with becky quick and andrew ross sorkin. making headlines, yahoo! with its third ceo in three years. scott thompson stepping down after a heated controversy surrounding a fake degree on his company biography. yahoo! naming its heed i can't chief ross levinson oig as interim ceo. he doesn't have that awful chuck todd thing. >> chuck todd can pull it off. >> i question the local -- oh, he doesn't have it there.
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i've got a shot here -- >> like from the '70s. >> exactly. i think that influences cynicism. i think you assume he'll make bad business decisions. it's a bad decision to have that. did you look at the new guy? >> yeah, totally clean shave sven. >> this guy could be a winner. wlec levinsohn. >> he's been keeping for the job a long time. >> he's been mentioned as a guy who maybe they should have gone to for years at this point. >> yeah, but he's been -- >> where's the baseball card? we had it. >> looks like a ken doll. >> watch, we'll go here and he probably has a big beard. oh, see, look at will. i knew that you would. you know what, you're a guy that
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can pull it off unlike some -- and you're not running a company -- >> i appreciate it. >> you're not running a company, right? >> i don't think that's -- i just think it's not the porn mustache which was what scott thompson really had at one point. the chuck todd look was actually better. that was an improvement. >> yours, you aren't comi doing the -- you look pretty cool. >> does facial hair go into your research? >> it gives him credibility. >> the jacob internet fund. >> it adds a couple years maybe. >> i would be he would be putting it into his model. >> is this going to work this time? when we heard there was trouble with scott thompson, the stock didn't budge. >> no, it's mostly relevant when they hired scott thompson who is running the company. i've told you this many times. the most of the value within
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yahoo! lies in their asian assets and how they monetize that is going to be the biggest driver of the stock price. that all said, i have mixed feelings about it because if it was early days, he was doing some worthwhile things at the company laying off people, refocusing the companies. even using the ip bullet against facebook as a possible weapon there. i think he was doing some interesting things, but he unwisely went to battle with one of the shrewdest, toughest, hedge fund investors out there. and it's like nixon said, i gave him the sword and they twisted it in with relish. whether it was anninadvertent o outright deception, it doesn't matter. the new guy has been angling for the job for a while. he's more of a media guy and they've had those in the past. i get flashbacks and it scares
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me. he's more on the interactive side and we should give him a chance, but certainly -- >> does the company need to be sold? >> to be sold? i don't know. look, they still have a very viable business. billion dollar plus. within core yahoo!. they have one of the leading finance sites, one of the leading new sites, leading e-mail platform. they have other interesting ideas, assets, as well, including an investment in one of the leading -- >> are you happy that dan lobe is now on the board, does that change the calculus for you now that you have an activist in the room? >> absolutely. again, he's one of the toughest guys out there and it makes it at least likely that this they're not going to do any colossally stupid which has been their m.o. for the past several years. so he'll be looking out for his interests and by extension our interests. i think that's great.
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and the other guys on the word, includes amoroso, they have a sol solid board. so if anything, this move should give investors comfort that the assets will be monetized effectively and investors should benefit. >> listening to you, i think about aol and how it had to reset its expectations and it had assets, as well. and suddenly i think of aol differently. in other words, they came to grips with being smaller and being a different company and it seems to be the initial sustainings stages of working out. could yahoo! do something similar? >> their pat tebents probably d have some value. they have to define their niche. again, my concern is if they go the media route, that could be quite expensive. and this is a perfectly apropos week.
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facebook which yahoo! almost bought is thousand going to be worth $100 billion. but facebook even is having trouble making it on just advertising. so if yahoo! goes the media route and goes the content and high expense strategy, i think that may not be the best thing for them either. so i'm a little leery, but with the new board, i don't believe that's a likely route. >> all right, thanks. appreciate your time. thanks for playing along. it has been the story of the morning. three top executives involved with jpmorgan's $2 billion loss set to leave the bank will this week. among them, ina drew, the bank's chief investment officer. one of its highest paid execs. jamie dimon on "meet the press" on all of this and more. >> we did lose $2 billion trading. and in hindsight, we ook far too much risk. the strategy we had was barely vetted. it was badly monitored. it should never have happened. >> john harwood joins us from
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washington. the debate, has it changed completely, what will we see out of wall and regulators? >> well, from carl levin who i talked to late last week, the word was we got to keep the pressure on regulators not to bend to some of the lobbying that's been taking place by jamie dimon and others on wall street to try to drive holes through the volcker rule. so i think will isn't going to be a lot of legislative activity near term, but certainly this it has rampd up the discussion both in terms of the political and legislative and regulatory communities in washington, but also in the presidential campaign. you've got the obama campaign out with a video this morning going after romney's economic philosophy. and so it sharpens in a way that helps president obama at least in the near term the debate over whether or not we need regulation and what exactly -- how intrusive and expansive government should be in overseeing these banks. >> i'll take the other side of
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that only because i just finished reading a piece by our friend ben white morning money. he said this hurts president obama. this is actually a feather in the cap of romney not so much because romney is out there seen as some kind of regulatory enforcer, but actually because people say maybe obama spell do fell down on the job, four years later nothing is different and that's how the public will view this. >> you know, i suppose that's possible, but i think you have to look away from the fact that a law was passed and it's in the process of being implemented to get to that judgment. carl levin says, we don't know this for sure because you have to see how the regulation is ultimately crafted, that the volcker rule would have properly implemented would have prevented these trades. >> but the current volcker rule technically allows for this. this was a loophole, if u78, i don't know if you want to call it that, that j pchlp morgan an
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other firms pushed for that, this was not really about -- >> i don't get how it does that, though. i don't get how this trade would have hedged their macro risk. and i have to tell you, i have more questions after watching his interview with david gregory than i have answers. >> the bank said we have $700 billion in loans, we have corporations, blah, blah, we have fallen angels. we think these are good credits. so we're going to buy some -- >> but how are are you hedging that by betting on the economy's improvement? >> no, originally here's what happened. there was a hedge against the hedge. they originally bought credit default swaps, insurance, in case the which i were to get worse. and then they said, oops, we actually bought too much of that. we screwed up, we shouldn't have bought so much, so instead of taking that off, they tried to create a secondary hedge and then they went too long. >> and they became the market. here's my point. that was an attack from the left that the president hasn't done
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enough and that he passed a law but it didn't have -- >> that was on politico morning. >> the other argument, john, is that after dodd frank it did nothing to make 00 wig to fail less likely. so we still have banks that are systemic. they're eventually going to be like utilities. in a world where they're not the too big to fail, the government shouldn't be talking about losses. banks are in the business of managing risk. there's going to be fwan e dway gains or losses, but the bank if it has losses should take its lump. we're still at a point where we're worried about tax mayer money. pay ir money. so maybe we do go back to a point where they're seen more as utilities. almost glass-steagall-like, protectors of depositors and fdic. but there's two arguments. from the left that we haven't
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done enough and from the right that it was totally inspeeffeci. four years later and absolutely nothing to make these banks smaller, to make them -- >> but that's not the republican issue either. >> but we haven't got to the test of too big to fail. >> why is the government even talking about these losses as if it has something to do with what they need to do, john? because it could still be systemic. it could still hurt -- they would still require taxpayer hone. >> mob nobody is making the argt this was a systemic threat to the system. >> obviously with the assets that jpmorgan had and -- >> the larger context and the reason why anybody is interested in the story, i believe, is that if it could happen to jpmorgan, it could happen elsewhere and could happen in a much worse way and then we get left holding the
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bag. there will be so much political and market anxiety at that point, right? that's what this is. >> well, yes, but you can't say that it's failed if it hasn't even been tested. we haven't gotten to a situation where a judgment was made that a bank's failure or losses poses systemic threat and then there's a whole process, a shut down process, which by the way jamie dimon embraced and endorsed, said that's part of the 70% of dodd frank that he's in favor of in his meet the press appearance. >> but you you theu you there's questions about whether the shut down works. and should we even try. >> you can't make a judgment one way or the other. they did pass a set of procedures for taking down troubled institutions and for oversight, systemic oversight of the system. and, right, unlg ytil you get t situation where it's tested, you don't know if it's going to work. >> prevented, the loss that happened here about that.
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>> so why are we everyone talking about it. >> for the reason andrew said, which if jpmorgan can have a loss this big, people who -- >> but the law not being implemented yet is not part of the problem here. the that you would not have changed this. >> not according to carl levin. i'm not competent to judge. but -- >> we're still worried about the systemic risk. that's the whole point. that's the only reason these blow hard politicians would be making hay with this right how. if it didn't matter, you would say it's another business that either fails or wins. one or the other. and here we are again worried about taxpayer money again. >> i'm not arguing against that. >> i'm just saying if dodd frank had fixed anything about too big to fail, we wouldn't be worried about eventually ending up in the same place.
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>> no, that's not right. let's put it this way. we won't know until july 12th what the final shape of the volcker rule will be and how effective it will be. we know what advocates on both sides say. we know levin says that the volcker rule would have prevented will and that's the point that he's making is that it should be prevented because smaller and less viable institutions might pose a systemic risk. then if they did, you would get to the too big to fail question. >> read the journal's lead editorial. you know i'll talk about it. you should be prepared. read it in -- i haven't read the tim"times" though, so neither o of us have done the homework oig for the other. >> awkward silence. nice. >> if you have any comments or questions, e-mail us squawk@cnbc.com. when we come back, are you dazed and confused by recent market swings? you are not alone.
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we'll turn to a squawk fan favorite. technician jeff weiss will help us read the charts. hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business.
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u.s. equity futures pointing to a lower open. jeff weiss is chief technical analyst. so anything that has happened so far in the last three weeks that has changed your overall perspective? >> yes, slightly. good morning. yes, about a month ago, and it wasn't that long after andrew and i were having a discussion about up side and down side volume, it's interesting the
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volume numbers i'm getting are showing that the bulls are not getting must have of the volume pay so to speak. this has been going on for approximately five weeks. >> you can almost feel. >> you can. and it's not a question about how much roll assume we have. whether low or high, i care about the percentage of that volume the bulls are getting and right now my volume numbers have gone from well plus territory in january and february and we're coming back to the significant support area on the daily and weekly s&p basis. >> so that's where we're headed. it's funny how it work so is frequently that fundamentals somehow seem to match up sometimes with what the market is doing.
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>> on those rare occasions. >> it has coincided with a perceived slow down domestically and they ever gone away in europe, but things getting dicier. >> to a technician, it's not the news but the market's response to the news that really -- >> so 1353 today. you figure there's support somewhere above 1300. >> i'm figuring it based upon the charts. and i actually had several charts, i don't know if they'll put them up today or not, but -- >> a weekly coming up. >> that's a beauty. beautiful because it lines up well. if you take it a look, joe, you have two bottoms on the left hand side. and if you notice as you get approximately a third to 40% retracement going from left to
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right, you'll see atop the 1298 from where we fell 52% in less than ten months. is it any wonder then that on the way back up to closing cha. is it any wonder on the extreme right-hand portion of your screen are allege, that you see another market top. this is a key line. in a nut shell, joe, if we're going to ever have a shot to get back to the old high, we're going to need to sustain closes near 1450, this chart goes back to '06. this is a serious resistance area. that we didn't have enough volume to get over that area -- >> at 13250 on the dow are where were we on the s&p? >> i like the fact you never ask
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me exact questions. 1422 -- >> when you say 1450 is more -- once we get up there and stay there? >> on a weekly closing. i think that could be big. of course i want to see my other indicators be supportive of that, the behind-the-scenes work i do, so to speak. but overall that's where we need to get. i also had two other charts, i don't know if we have time for them, but i had two other ones if you want to put them up. or not. >> there's the monthly. we'll look at that. >> this is the monthly. >> is this a beauty, too? is this one beautiful? >> well, this to me is a line basically showing the area between 1400 and 1410 on a monthly closing basis. a lot of people are going to look and say come on, monthly closing? after 36, 37 years, if you're a secular investors and looking for long-term trends and looking for an area where something could be significant, we need to
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close on a monthly basis at 1410 as well. >> all right. >> thank you, sir. >> thank you for your kind words. >> coming up at the top of the hour, corporate profits are flying fast and furious this year. plus, carl icahn expected to take aim at chesapeake. stay tuned. a route map shows you where we go. but not how we get there. because in this business, there are no straight lines.
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coming up, financials in focus. two banking leaders join us to talk jpmorgan regulate and a lot more. and europe again a concern for the global markets. u.s. equity futures are under pressure. we've got the full story straight ahead and lots more. >> still ahead on "squawk box," our disruptor series continues with another young innovator who is changing the paradigm in technology. order food through grubhub on your computer or smartphone. pay with a credit card and it's at your door in minutes. matt maloney will join us at 8:30 a.m. eastern. ♪ [ female announcer ] each one of us is our own boss.
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jpmorgan's $2 billion trading loss sending shock waves through the financial world. >> we made a terrible, egregious mistake. there's almost no excuse for it. >> now the fallout. what happens to jpmorgan and the state of the entire banking industry? >> and a perspective from a market master. blackrock's bob dahl on what he's saying that investors aren't. >> plus meet the man who put the book on facebook. best selling author and squawk book club member ways in on the highly anticipated offering and what's ahead for mark zuckerberg. the second hour of "squawk" begins right now. ♪ ♪
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good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and joe kernen. yahoo!'s global media head ross levinsohn has been named interim ceo after thompson's resignation. and fred amoroso has been named chairman, replacing roy basta. all of these considered a resounding victory for daniel loeb who first called dattentio to the discrepancies in the resumé. >> rescap subsidiary will be filing chapter 11.
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>> you're talking by ally. you're not talking ally mcbeal. >> the fallout continues on jpmorg jpmorgan's $2 billion tading loss. jamie dimon said the strategy was poorly executed and poorly vetted. he says the incident hasn't changed his overall view on what the goals should be. take a listen. >> we support getting rid of too big to fail. this is not going to -- we're going to make money with tons of capital bum we support too big to fail. we want the government to be able to take down a big bank like jpmorgan and it can be done. we think dodd-frank gave the fdic the authority to take down a big bank and when it happens, compensation should be called
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back the board should be fired and the name should be buried in disgrace. >> carl levin says the incident proves the need for stricter regulation. >> i think the issue here is the power of banks and whether or not we're going to regulate those banks and put a cop back on wall street. i think this is an issue which is not involving personalities and should not involve personalities and so i don't get into that. the issue is whether we are going to stick with the law as written, which will prevent us from bailing out banks again and the only way to do that is to make sure they don't take the kind of risks that were taken. >> jamie dimon says the bank is open to inquiries from regulators. it's likely to face more questions tomorrow at a shareholder meeting in florida. and ina drew, head of the unit that enkurd those loss sez expected to leave the company, along with two other executives. she offered to resign several times directly to jamie dimon. he would not accept it.
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it's almost a sad story, she was calling so many colleagues offer the weekend and she was crying and upset. >> she was one of the top paid executives there. she made almost $15 million the last couple of years. what i don't understand -- the ft has the story about how the bank was looking as to whether there was a coverup as to what was happening there. if jamie dimon is the top risk ta officer, did he know what was happening with those trades or didn't he? >> i don't think he understood the, tent extent of it. there were two hands not all talking to each other and a trade that went bad -- >> it's a big bank but that bank had over $100 billion he was responsible for, she was responsible for over $400
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billion. i would think jamie dimon would know about a bet that was a $100 billion bet -- >> i'm not suggesting that he didn't know that the bet existed. >> but they didn't explain it properly? >> i don't think he knew all of the aspects of exactly what they were doing and what the exposure truly therefore was. >> that's where my question is. >> following the impact from jpmorgan's big bet gone wrong, we have a former senior adviser to wl ross and company and cam fein is president of a imagine trade association representing the nation's community banks. i've got all kinds of conflicting feelings here. i'm going to read from the journal just quickly. "it's worth noting that once upon a time a $2 billion banking loss was a problem for the bank, not for politicians but in dodd-frank world the biggest banks became more or less
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regulated utilities." i'm going to ask both of you, john, is that a bad thing given what happened that maybe banks that do protect depositors' money and do provide a function for society, is it bad to head back to a kind of a quasi utility scenario? >> i'm sure cam will agree, there are banks and there are banks. >> right. >> there is a case to be made here that at a certain level of size and complexity that different rules should apply and perhaps different capital standard should apply. bassel committee will be looking at the hard at it. jamie dimon and his management team are morning the most talented people in the industry. if they can't figure it out, who can. >> that's right. >> my point is no one is saying this is anywhere close to being for jpmorgan an existential threat at all. >> nobody's arguing that it is.
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>> i know they're not. then why are politicians involved? if it did cure too big to fail and taxpayers aren't at risk anymore, what are we worried about? >> because nobody knows the regulatory authority will work. the worry is we have the law but when we get to the point where we need it, there's going to be so much volatility in the markets that nobody is going to try. >> then we need the regulation. cam, you represent these little guys that hate the big banks anything so i don't expect to you say anything nice about jpmorgan anyway. >> all i'm saying is the term synthetic doesn't belong in the same sentence with the word bank. we have high-risk trading activities conjoined with commercial banking. in the old days when you put $1
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in the bank, you were at least going to get your dollar back. we have to separate the trading function from the commercial banking function like it was for 80 years. >> all right. so, i mean, jpmorgan, no depositor is at risk at not getting his dollar back here at this point. cam, do you ascribe any blame to all this easy money around that has to chase some yield? we're hearing this is a reflection of asset bubbles, tried to chase yield, had to hedge it and hedge their hedge and didn't know what was going on by the time they were done. >> if traders want to hedge their hedge. >> you want glass stegall. you don't want a volcker rule. >> we should have a streamlined
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glass-steagall, some kind of mechanism that separates the federal safety net from high-risk trading. there are banks and then there are banks. we have to do away with too big to fail. >> the question about the jpmorgan trade and i understand the synthetics and some of the instruments they were using may be problematic but the larger question about portfolio hedging against a macro risk, is that a sf speculative risk? should they bible to do that or not? >> they should not be able to do that with banking. this wouldn't have happened if the counterparts thought jpmorgan was money good. the government makes them money
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good. everybody perceives this bet can't lose. >> they are money good. they didn't ask for the government to make them money good. they're good based on their own finances, their own balance sheet. >> but, becky, if it had been catastrophic, the government would have stepped in. there's no question in my mind that we have to separate these kind of high-risk activities from the commercial side of banking. we cannot spread the federal safety net over to high-risk trading. >> we had you on six months ago and you said banking's no fun anymore. the regulations are going to get a lot more onerous as they were. you're going to have to leave and go raise cabbage somewhere. at this point you need to leave. you were ready to leave anyway. you have changed your view on whether -- are you more amenable to some regulations after this incident? >> no, i haven't changed my view toward it. certainly we're in for overregulation and the result of
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this jpmorgan debacle will make matters worse. if this had been a $2 billion loss on a loan, if this had been a big bankruptcy in the company of the united states and -- >> we're in the business of stuff like that. >> we're in the business of taking risk. to be frank, whilism agre is ag some of the point cam has made, remember these people were trying to mitigate a risk. it was an error in judgment. >> where are you on being able to hedge portfolio risk? >> i think when your balance sheet get so big that you feel a need to hedge a macro economic risk that you probably need to be treated differently from a regulatory point of view. >> so it should be allowed but regulated in a different way? >> it certainly should be. it proven to be a riskier
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business in most economies than making loans. >> will basel 3 take care it have? >> the committee will pay attention to what happened and i expect is will make an attempt -- >> it will force them to keep so much cash on hand so they can take care of it. >> i don't think glass-steagall would have prevented this. >> cam, are you okay with normal risk, commercial and industrial loan, that can happen with depositors' money, not just synthetic risk? >> no. you misunderstand commercial banking is a fund unto itself. >> what about high-risk lending? >> high-risk lending occurs and it is a risk business and that's what we have regulations for. >> trading is different than lending then? >> absolutely trading is different from lending.
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>> what if it helps hedge your lending? >> the real problem here is the federal safety net. well, you have several problems. one, you have banks that are literally if jamie dimon and his crew can't understand what this was, you have banks that are too big to manage, banks that are too big to regulate. i mean, jpmorgan just passed a stress test. i don't know if the regulators saw this within the corporate structure or not but that begs some other questions. >> i sort of feel -- just my gut feeling is that banks are still big enough to take us down again, if it really hit the fan again in europe or somewhere, and that's my point that dodd-frank didn't solve anything. all this -- how many pages, 28,000 or 3,000 -- 2,300 pages later we're still systematically too big.
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>> well, joe, look, here's the problem with the resolution authority -- >> we got to go, huh? >> maybe if one of these banks got in trouble the fdic could handle it but generally this happens when there's a cluster, there would be five or six of these banks in trouble. then what do you do? >> all right, cam. thank you. we haven't figured anything out. >> comments, questions about anything you see here on "squawk," shoot us an e-mail. you can also follow us on twitter. up next, how a foreign corporate invasion may help our jobs picture. a look at overseas companies doing business in the u.s. and who is hiring and then he's a "squawk box" blue chip award winner. find out what ben mezrich thinks of facebook. [ male announcer ] when this hotel added aflac
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welcome back to "squawk box," everybody. in our corporate headlines, facebook founder mark zuckerberg is celebrating his 21st birthday today. it could be valued at more than $100 million. at 28, he's half the age of the normal ceo but he'll be about the same age as michael dell and older than steve jobs when those
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two took their companies public. also today, avon says it will respond within a week to an approved $10.7 billion takeover bid from coty. coty says it has reached out to avon for more information about the request. we'll see what happens with that. >> our next guest says overseas company says companies could be the next big driver for labor markets. good morning to you. >> good morning. >> what's this all about? >> well, we did a new report and actually the report there's good news and there's a challenge for us. so the good news is is that even though the american subsidiaries of foreign companies are about 1% of our business, they actually have a proportionatly large impact on our economy.
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if we take the direct workers, the suppliers that supply to them locally and the businesses that count on the spending of their employees, we're talking about 21 million jobs in the u.s., which is about 12% of our economy. the challenge is that the u.s. needs to step up its efforts to br bring in more. >> give me the top issues that need to be fixed. >> the first is we have to actually work to get these companies here. what i mean by that is typically our states go out and they work to try to get foreign companies, the governors are hard at work at it. but we've had nothing really at the federal level and it getting harder for ohio to go compete against singapore. so we are just now starting to get an effort at the federal level, a group called select usa, that is working to tell foreign companies they should come and do business in the u.s.
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because of the quality of our workforce and manufacturing and so forth. promoting is the first thing. second thing, the corporate tax system is out of date. our companies, they survey them all the time. they say the corporate tax rate has to come down. and finally buy american proposals. they've got a winning message bu it but it's a losing outcome. globally engaged companies want to be in countries that are globally engaged. >> biggest opportunity from a country perspective, foreign country perspective is what country in terms of bringing money over here? and then i want to get on to the issue of trade imbalance and how that whole conversation plays into this. >> i think the emerging markets, brazil, russia, india, china are
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ramping up cross border investment. if we're wanting to grow our share of the global pie in terms of cross-border investment, we've got to go after those emerging markets. >> nancy, thank you for joining us this morning. >> thank you. >> interesting stuff. >> still to come, more on the shake-up at yahoo! also take a look at europe this hour, spain and greece weighing pretty heavily on the markets. greece is down by 5.5%, in it little, the markets down by 3%. more on the overseas actions coming up after this. >> coming up, market master bob dahl talks the economy. y.shippit can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees...
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are you still sleeping? just wanted to check and make sure that we were on schedule.
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the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. welcome back, everybody. california's budget deficit is now expected to swell by nearly $7 billion more than expected because of weak tax revenue and slow progress in cutting spending. the governor jerry brown says that the shortfall for the upcoming fiscal year now stands at $16 billion. that's up from a previous
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estimate of $9.2 billion made back in january. brown will now present a new budget proposal today for the fiscal year at that starts in july but california could receive a windfall from the planned facebook ipo. revenue from faebz stock options held by people living in california could reach around $2 billion. but that raises a ton of question. $16 billion worth of deficit. i was just trying to figure out what greece and the budget deficit there stands at. $16 billion is a big number. >> you know the ranking for business friendliness is 50th. they're going to raise the sales tax and raise the income tax 3 points on people that make too much money, over 200 or over 250. we'll see how many more people decide to leave the state after that. at this point you can't go below 50 unless we include puerto rico and some of the territories. so what's jerry brown got to lose at this point? just go ahead, tax it.
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don't cut anything, tax everything. $16 billion. take a good look. that is your future. >> that is my future? >> that is your future. >> comments on anything you see here on "squawk," e-mail us. you can follow us on twitter. @squawk is the handle. and we'll have author ben mezrich. he wrote the book on facebook "accidental millionaires."
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welcome back to "squawk box." treasury making a statement at this hour regarding the bankruptcy of re scap. treasury is saying the bankruptcy won't hurt taxpayers, which loaned alli financial, the parent of rescap about $17.2 billion during the height of the crisis. the bankruptcy will help taxpayers recover from the parent ally. the u.s. has already recovered $5.5 billion of the original loan or about a third of the investment. there was an attempt, guys, i don't know if you remember to do an ipo of ally in 2011 but rescap issues with its residential portfolio delayed that or took that off the table. the question now is whether or not an ally ipo is whether
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that's cleared to happen. >> is it possible we could see an ipo? how far are we in the hole on this? >> we're about $12 billion in the hole. treasury not saying anything about potential losses that could come from this. they, extolling the virtues of having invested in ally financial to keep the auto credit open during the height of the crisis for the automakers. there is sort of a hadnint in t press release in that it was rp escap issues that kept that from coming to market in 2011. >> who are the creditors who are left holding the bag? >> well, the creditors, becky, i think are the ones who will hold the bag but the question becomes whether or not it's the rescap creditors -- i don't know for sure but some of that may
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include fannie mae as well -- >> well, that's taxpayer money. >> that would be taxpayer money through the other door, of which there are many. >> i guess what this means, if anything, for the mortgage market. >> it's another route that's no longer open. the mortgage market has been backed up in a couple ways. s first way has been people qualified for loans and the infrastructure for pror describ not working in any respect and i'm not sure this can help in that regard. >> steve, thank you very much. we'll talk again soon. we've been watching the market this morning and there a lot of red arrows out there, concerned with europe's situation and it's tough to navigate an uncertain
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market at the moment. squawk master bob dahl joins us this morning. we're trying to figure out what this means on many different levels. how concerned are you what's happening in europe this morning? >> we have to be concerned. we're in a post-bubble trust world. the big tremor was late '08/'09 and it feels like we're in another after shock as we speak. the u.s. equity market is still up 25% from its october low and it's only down 5% from its recovery high. my guess is we have some more consolidation and correction coming until we sort all this out. >> what does that man you'd do as an investor? it sounds like sitting on a side line but i know that's not what you do. you buy every day. are you buying more today? >> the attitude we have is be a
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limb more balanced in your portfolio. but into any significant weakness i would add to equities, risk, add to cyclicality. underneath the surface we have an economy doing okay, not great but good enough. the first quarter earnings reports were once again pretty good. >> what we've seen the last week and a half, is that enough of a pullback for you? >> my target had been 130 to 1350, we're just at the high end of that range. we could probe a little lower before we grab hold and it may tyke some time to consolidate after the big gains we've had not on over the last six months but the doubling of equities overs last three years. >> what do you think about this summer? it sounds like we're setting ourselves up for much more volatility and at least much more uncertainty. >> well, i think a lot will depend on europe. i think the other issues are important but that's the primary one. what happens in the greece
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elections, what happens with the unity in europe. does it remain or are there issues there? and of cures the economy and earnings will be important. there's a lot of bad news if n equity prices with the risk premium in my judgment. i don't think that the decline should be confused with the beginning of a bear market. this is a cyclical correction, though europe is a big issue, no question about it. i think the economy will allow stock prices to recover again and then we'll worry about the u.s. fiscal problems in the coming year. >> are you overweight or underweight the financials? >> underweight but less underweight than we were on pullbacks, recognizing the improvement nmt credit situation here in the u.s., slow healing in the mortgage market. we're nibbling away but only on weakness. >> what do you think about jpmorgan? do you own a stake? jpmorgan? >> yes, do own some jpmorgan.
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on weakness i'm happy to add to it. a lot of good things happening there but a very difficult set of transactions they've got to fight their way through. >> are banks too big to really understand what's going on there? are some of these banks just it's impossible to know what the risks are or do you feel comfortable the people know what's going on? >> they are big but i don't think it's that it can't be understood. it's the nature of the transactions, are some of them too complicated. we had a failure of jpmorgan, one thought to be among the fwhes this area so it does shake our confidence a bit. >> it shakes your confidence and changes your investment strategy how or it shakes your confidence and you continue to think when you see a pullback you just buy in? >> if all that was so wrong when the credit bust happened continues a slow heal, we're going to nibble on these
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securities and weakness and this event is providing us some weakness so we would use it as a slow accumulation period remembering that we're still underweight the sector. >> did you buy more jpmorgan on friday? >> i'm not permitted to disclose that, becky, but i like it in these price areas. >> okay. i'll take that with a wink and a nod. bob, thank you very much. >> have a good one. >> you, too. >> still to come, more on the resignation of yahoo! ceo bob thompson. and more on the jpmorgan trade go wrong as "squawk box" continues on a monday morning. >> still to come, he wrote the book for the social network. now ben mezrich sounds off on facebook's road show and the management style of mark zuckerberg. that and much more on the markets when "squawk box" returns. oh, i like it!
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hey, it's sandra -- from accounting. peter. i can see that you're busy...
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but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. we're back on a monday morning. facebook continuing its road show this week for what is sure to be the largest ever silicon valley ipo. author ben mezrich joins us with his take on this much
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anticipated ipo. ben, good to see you this morning. >> good to see you. how are you? >> good. i know you're not an investing expert, you're an author but you do know the culture of the firm. when you think about the long-term prospects of the company and the -- your sense on the future of this company. >> i think mark as meg low mania is a good thing going forward as it becomes this public company. he's a guy who wants to control the important things to him and he sees facebook as a revolution. he wants everyone in the world on faecebook. when you're talking about a company that grows as people join it, having the head of it having his whole life dedicated to make everyone use it is a
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good thing i think. i think he's grown a lot and i think it's going to be a good thing for him. >> internally good leader, bad leader? >> i think he's become a very strong leader. he's a strange guy, no question about that, but i think cheryl sandberg has trained him and helped him grow. i think he can be a good leader. i think what he did when he was 19 is not who he is today. we all did stupid things when we were 19 and now i think he's grown into a good leader. i think he's definitely -- believes in what he's doing. >> people, talk, though, quote unquote, an imperial ceo can go two ways. it can work tremendously, think steve jobs, and it can work poorly and i can give you a list. >> that's true. he's 28 years old so there's going to be a lot of change as he goes into this part. he does things, he makes
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mistakes. heap apologizes and doesn't believe it. he really believes even when he's making a mistake he's doing the right thing. that can go two ways. but when you're talking about facebook, which is his brain child, if you want facebook to be better as facebook, you need the guy who built it behind it. i think in this case he's done well and he'll continue to. >> mark's achilles heel, what is it? >> it's his ability to understand social interaction, which is kind of ironic considering we're talking about facebook. he doesn't think of people the same way we think of people. they're kind of chess pieces in a game in a lot of ways. soap i think his main sort of achilles heel will be how he deals with people around him. even as he's been doing the road show, certain people have gotten upset when he hasn't shown up on time or the way he dresses. that's not just a persona he's putting on. that's who he is. i think his social interaction is going to be his mean problem.
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there's been a lot of great business leaders who are very poor in that department. who knows how bad that really is. >> on the social interaction front, you are say he doesn't understand people, there's this big issue around privacy. one of the questions i have is whether the big challenge for facebook and google, you think out that is going to be the big issue and he's at the forefront, the leading edge of what some people may say is pushing the envelope on privacy. >> i think he personally believes there shouldn't be any privacy. i any he believes we're a better world when we share more. the other thing is that the young people growing up today actually kind of believe that, too. everyone wants to be public. when you talk to kids in high school, they don't see an issue with privacy. they want to put their cell phone number on their facebook page and they want to -- >> do they change their mind down the road, ben? that's something i thought as a teen-ager, too. as you get older, maybe you
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doesn't want pictures from high school following you and from the rest of your life. >> i definitely don't. i was 80 pounds. for the most part i totally agree with you. that ends up being a problem. i think mark believes and agrees with the younger generation that -- >> does that whole generation change their mind as they get older or is it a new way of living? >> it's a good question. the generation of today has gon up with them and that are very free. until it bites them, it's certainly they want to be happy about. as you become an adult, you realize that cab bad thing but i do think it is a generational change. i think it's something that is going to be different ten years from now about how people view privacy. >> ben, how do you think about mark and the public? meaning how he has acclimated or not to being in the public high. when you were writing your book, he didn't participate, he doesn't do a lot of interviews. how is that going to change when
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the firm goes public? >> i mean, that's a big thing. he's become kind of this iconic figure and i think a lot of people look up to him. the social network in my opinion made him look cooler than he really is and he's starting to inhabit that coolness. he's becoming more the celebrity -- listen here, did not want to talk to me, he never wanted to talk to me. he was very unhappy when "the social network" came out and yet when it came out, they've changed their tune because they saw even though there's so much negative in him, they found it positive. >> have you run into each other? >> i haven't but i have run into cheryl sandberg, who i think is -- overall they're not mad at me. i think they had a dart board with my face on it for about a year. >> did she talk with you when you saw her?
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>> she was at my college reunion. we were in the same class. i didn't realize that. we ran into each other. she was really cool. >> i had a better impression of zuckerberg after i saw the movie because, i mean, i looked at him and thought he's a kid. we all make mistakes when we were younger and we learn from it and he's brilliant. >> and he's got that j to him. the ones who succeed have that vision. overall he's growing into that celebrity persona. you know, he makes mistakes. we can learn to love mark zuckerberg. >> we have to run. are you going to somehow try to get some shares of this thing? >> i'm the worst -- i'm like a
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counterindicator. all my money is like in black jack and comic books. i'm a horrible investor. i've spoken to a lot of people and a lot of people really want this stock. that makes me think it's great. >> ben, thanks for joining us this morning. the books "the accidental billionaire," the movie "the social network." >> when we come back, everything on the financials from china and europe. these two guys have it covered. we'll take to austan mark zandi and squawk master stephen roach. they will beau be joining us at the top of the hour. >> joe has your list of stocks to watch right after the break.
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look at this stuff. >> let's take a look at stocks to watch. yahoo! ceo scott thompson has resigned. much better looking guy dan loeb has won out. the company installed a better looking man without that fu-man chu thing.
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>> i think bosstock left in february. >> he said he was going to accept down but testifies technically still on until the summer before it was all over. >> he also brought in two board members who came with him, harry wilson, who is frequent guest host here will be one of those. we should call harry and get him back on. >> and michael wolf, former cfo of via come. he was sitting next to alec baldwin during the twitter incident on the plane. >> he outed him. >> he always gets confused with the "vanity fair" version of michael wolf. >> was he ever a contributor? we've had him on quite a bit. yahoo! did you see the list? it has had quite a rose gallery of ceos that have passed through
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recently. you had the guy remember -- what was the first guy? he always wore black. >> tim kugel. his head used to look look it was -- he would be against a black background and he had a black shirt on, so it looked like his head was floating. >> he tried to get this job. will he ever get another job? would you hire this man? >> i bet he eventually comes back. >> but he's damaged goods. >> that's the other question. >> he tried to blame it on -- >> if he had come out and said i made a mistake ten years ago when i was younger, blah, blah, blah -- >> he's been lying about it ever since. when cara swisher wrote that story in the journal, that was the most damaging piece. the interview where he played
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along and talked about how it was great he had the computer science school. that is where you make it your own. and any kind of disassembling along the way, it doesn't ring true. >> what was your -- >> communication. >> i was a comme. >> poly side. >> you sure? >> no journalism? >> i took a lot of journalism -- >> oh, you took a lot of journalism classes. >> that's what the major was about, about journalism. >> i haven't even audited a journalism class. just so you know, just to get it all out front. it's not on my resumé. >> do you think the viewers would be surprised by that? >> no, i don't think that would surprise anyone. nokia -- society general has cut
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its sales. and avon is going to consider coty's latest 10.7 billion takeover bid, plans to respond within a week. symantec shares cut to sell from neutral. and st. jude is gaining success in new therapeutic categories. >> when we come back, we have one of the proponents of the volcker rule. austan goolsbee will talk to us about the jpmorgan situation and the state of the financials. austan was in the white house when this rule was being considered. also, we'll be joined by former
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morgan stanley executive stephen roach who will talk to us about the banks and much more. that's all coming up in the final hour of "squawk." >> if you're just tuning in, you're two hours too late. >> they must live on borrowed money. think of it broadly as the beginning of the negotiations of the third greek bailout in some form or fashion. >> the fact that dan loeb is out there, he's going to be looking into our interest, that's great. if anything, this move should give investors comfort the assets they have will be monetized effectively and investors should benefit. >> we should have some kind of mechanism that separates the federal safety net from high-risk trading. we have to do away with too big to fail. >> i think he's become a very strong leader. he's a strange guy, no question about that. but there's been a lot that's been put into him over the
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years. i think cheryl sandberg has trained him and helped him grow. (sfx: car garage sounds) today my journey brings me to charlotte, north carolina, where i spent the day with geico driver casey mears. i told him the secret to saving money on car insurance. he told me the secret to his car setup. first he adjusts... first he adjusts... (sfx:engine revving drowns out gecko's dialogue) then he... then he... (sfx:loud drilling noise continues to drown out gecko's dialogue) ...and a quarter cup of pineapple juice. or was that the secret to his barbecue sauce? hey, "secret" sauce. geico®. fifteen minutes could save you fifteen percent or more on car insurance.
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the blunder at jpmorgan raising questions about risk in the financial system. >> we know we were sloppy, we know we were stupid, we know
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there was bad judgment. >> senator bob corker wants a banking committee hearing on the matter. he will join us live at 8:30 a.m. eastern. >> former white house economic adviser austan goolsbee advised on the volcker rule. he'll join us. >> and can the bulls rebound or will uncertainty continue to drag down stocks? squawk market master stephen roach will join us. the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. futures indicated lower. almost got to triple digits.
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now down 81, which was a lousy week for the bulls. the s&p down to 1353. a technical analyst said should find support in the low 1,300s for the s&ps. it's a lot of resistance to get back to the hold highs, you have to get to 1400. >> he said he didn't think this was a bear market by any means. >> though he's worried about the volumes the bulls are able to muster up here. not the volume overall but just the percentage -- >> it was jeff weiss who joined us in the 6 a.m. hour. in the headlines, a story we've been following all morning long, shares of yahoo!. after the departure of embattled ceo scott thompson, the skok is up about 2% this morning. ross levinsohn has been named
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interim ceo. fred amoroso, the board member who had been leading the probe into sothompson's background ha been named chairman. this is a resounding victory for dan loeb, who first called discrepancies into thompson's resumé. and u.s. equities have been under pressure this morning. stocks sinking to low ing ting levels in four months. and greek refuses to join the coalition. and angela merkel's conservatives suffered a crushing defeat yesterday. we'll get a report from our chief international correspondent michelle caruso-cabrera in a few minutes. >> and jamie dimon appearing on
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"meet the press" this weekend to talk about his company's $2 billion trading loss and the future of financial regulation. take a listen. >> we know we were sloppy, we know we were stupid, we know there was bad judgment. we don't know if any of that is true yet. regulators should look at something like this. that's their job. we intend to fix it, learn from it and be a better company when it's done. >> austan goolsbee is joining us now. he was one of the key white house proponents of the volcker rule. he's currently a professor of the university of chicago's booth school of business. it's good to see you this morning. i don't know where your kimono is. >> where are you going with that? >> it's early in the morning, a bad visual. >> don't get out over your skis or we'll have to square your circle. >> austan, your view.
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>> i've been friends with jamie dimon for a while and i do think he's a straight shooter and i'm glad that he's not trying to cover up what's happened. i do think the events in this case do highlight what the -- what paul volcker was aiming at in a major way with the volcker rule is we know that commercial banks, the american taxpayer and the u.s. government are on the hook through the fdic, through the discount window, through a variety of insurance policies if something goes dreadfully wrong at a regular bank, we have to save them. and so they shouldn't be going out with money that's protected by the u.s. taxpayer and betting it for their own account. it doesn't make any sense. >> this raises two questions. one is have we not fixed too big to fail? does resolution authority not work? or are we going to get to a point where we think it works and then we're not going to try
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it? and the second piece is this idea of hedging. should banks be allowed to do that? and if they do it and they fail, what are we, the taxpayers, going to end up doing? >> those are two different and two excellent questions. on the resolution authority, look, i think resolution authority we have significantly enhanced through dodd-frank the ability to break up big companies that are more than just banks. we've always had resolution authority for the bank part but we have expanded that. i don't think that's fully solves this problem because the actual bank, the commercial bank, they have to be bailed out. we have fdic and we have the discount window. a commercial bank knows they have that and they're able to get money for cheaper, they're able to raise money at lower costs because everyone knows they have an official life insurance policy.
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>> austan, are we going to have the guts to use resolution authority when the time comes, if it ever does? >> i think we will. i think the law tailors it pretty tightly if you have to get money, then money can only be used for funeral expenses basically. it can't be used to keep you alive. you have to be broken up and sold off into pieces. the real question is is that enough to deter guys from building up big interconnected institutions? i don't totally know the answer to that but i hope we've made some progress. >> i didn't understand what you said. in terms of hedging their macro risk, should they not be allowed to do that? >> i think we got to keep a major eye on that. in a case like this, if that's hedging against something, well, where is the big positive $4 billion they're going to get from this hedge? >> and hedge their hedge. by the time they got done with
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that, they were so confused about what their position was and then they controlled the whole market so everyone else was looking at it like they had nowhere to go. >> and these are the best guys. these are the best risk managers they are. >> make banks are quasi utilities. >> i'm telling you, the commercial bank, we're on the hook for them. the fdic and the discount window, we are on the hook. >> they pay into that fund, austan. that's not taxpayers. the banks pay into the fdic fund. >> the question is have they paid enough into the fund if major catastrophes -- >> too big to fail, is it really less or are we just right where we were? these things are way too big, way too systemic. so we haven't fixed it, right? >> well, you know, we made a lot of progress. as i have said before with you guys and separately with andrew,
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i don't think it was just the size that was the issue. if you have -- if you broke up bank of america, you could break it into six or eight pieces and every one of those pieces would be bigger than bear stearns. so i don't think it was the biggest guys that threaten to bring down everything. it was this interconnection. we have made some progress in trying to separate those connections but i think we got to make more. >> austan, i want to go back to the hedging issue and figure out what is the right answer here. should you be able to hedge the risk? does it leave too much loopholes and gives the opportunity for abuse? should they be on the hook for it? they originally hedging and then they hedged the hedged because they screwed up and they didn't do it right. that's going to happen in a r y risky business, right?
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>> there's a rule in the tax code that says you can't dedubt your person -- deduct your own personal expenses from a small business. there are rules and it has to be enforced by an auditor. if you didn't have the rule, a lot of bad things would happen. if you start looking at the volcker rule and the fact they have to draw lines and say does this count as hedging or is this a bet doesn't mean they don't have to have rules -- >> that is so difficult to figure out. how would you classify what happened? >> i don't have the details but if you're taking a $100 billion position and you're loses $4 billion from a fluctuation in the marketplace that has no obvious ties to your client's --
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>> it was $2 billion which is a 2% move in the portfolio. >> it's a $2 billion loss. >> it could be more. they're going to have a hard time because now the hedge funds on the other side, look, everybody's out and they're going to have a really hard time unwinding this so they're likely to lose more. if they're saying they're hedging this -- i don't understand it myself. >> my point is you can't just rely on the person doing it, that they say it was hedging. the bank regulations exist for a reason. according to the "new york times," the regulators were swarming around this, why is there a $100 billion position, what are you doing here? >> the regulators got there before the media pointed this out? >> i don't know the answer to that. >> it seems to me the regulators followed the media who followed the hedge funds who were pushing
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them in that direction. >> i don't know the answer to that. certainly they were looking at it before we got to the public announcement. >> we're going to overshoot on regulation probably and we're already in a 2.2% world and credit is already hard to come by. this is fraught with peril whether we do something or doesn't do something. you're worried about the economy already, austan, right? >> i don't disagree with that. boy, i hate to think that because we're struggling to get out of this deep downturn induced by financial crisis that came from not regulating that we're going to say let's go back to not having regulations. >> we're blaming the fed -- someday we're blaming the fed pore this, too, blaming the fed for the first time around because of the asset bubble in housing, blaming the fed because banks have all this cash that they have to chase yield so they do these things to add to their
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profit, right? >> i think it's fair to say some folks are going to blame the fed for everything, including contradictory things. they're going to say the fed didn't regulate and then the fed regulates too much. >> what about the president? ben in politico says this is going to hurt the president, that it shows the president didn't do enough. people talk about the fed but what about the administration? >> i don't know that i totally understand that. i'll go read it but it strikes me the president turns out to have been fair live pressie ent in pushing for the volcker rule. every time the financial industry musters up the muscle to squash if down, the events come out and prove the basic idea correct. >> the left is arguing it wasn't strong enough. >> andrew keeps bringing that up to make sure it's peremptory that it will be deflated, that whole idea. we've put that to rest i think. >> no, i was asking as a
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straight up-and-down question. >> you've made it to the point where -- >> austan, put your kimono back on. >> you can't see below the waist here. >> my idea is jamie dimon all along has been a double agent, where he says i'm just barely a democrat, this plays right into the hands of -- he was a spy, a plant all along that blows up. >> yeah, this was worth it for him. >> it's all playing into their hands. anyway, coming up, the bears making their case as the dow posts its worst percentage loss of the year. >> are they kissing? >> do you know how much pollen is on my car? >> i know. joe's nose is running. >> still ahead on "squawk box," our disruptor series continues with another young innovator who is changes the paradigm in
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welcome back to "squawk box,". a political impasse raising worries in greece. michelle caruso-cabrera joins with us more. >> we were hoping there would be a new government in greece. there is no new government. they'll try to bring the party together to hold the country together. the holdout is alexias seprus. the reason he's done so well in the lks is because he's anti-bailout. he disagrees with most aspects of it and right now he's refusing to go along with any of
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the other parties. each says it's become to backtrack on his promises would of course be cynical and wrong. at the same time you can assume he's doing so well in the polls he's thinking, wow, if we go to an election in june, maybe i can actually win full outright completely and then he'll actually be able to control the government and go on to negotiations with the european union. >> which means he could not backtrack. >> so he gets into power and if we believe what he says weeks presume he's going to go to the european union and say we're not going to do this anymore, we have to renegotiate this bailout, it's too painful to the people, we want you to restore salaries, restore pensions reinstate the rules that you've been taking away.
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take a look at the derspiegel it says "akropolis dieu." you have people from all sides we'll be fine without the euro and heap sa's saying we'll fallt without the euro. >> we were talking to another trader earlier this morning that so much is starting to get its way baked into the market so it's not going to create the chaos that it would have six months ago. >> it was tear gas in the streets, everything else, the
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market was going crazy. the market has fallen but it's not been the crazy or extreme response we've seen in the past. here's the athens stock market. it's a 20-year chart. it's at a 22-year low. it's been horrendous. >> maybe the gun has changed hands. the greeks used to be the ones in the position of power. maybe that's shifted to where the rest of europe is really in a more powerful position negotiating wise. >> that could very well be. they something want the greeks to believe that. does anyone so the answer? eye electionis tsipras believes he has the power to destabilize the entire european union. that's what he's banking on. >> the next meeting is when? >> 11:30 eastern time here. there's no election in june. if they don't come to an
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agreement, we assume we'll hear about elections in june, june 17th. it seems awfully close. after that, it's all up in the air. >> michelle, thank you very much. we know you'll be following in the morning. let's turn back to the markets. for many investors, jpmorgan's $2 billion trading loss shook their stability in the stock market. joining us is stephen roach. stephen, all right, what should we be thinking about the financials today in the wake of this revolution? >> good morning, becky. look, i don't think these trading accidents occur in a vacuum. and i'm sort of leaning more toward joe's interpretation here that we've got big, systemic macro risks in the global economy by any major global imbalances, current account, trade account balances are running at much, much larger
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levels than they have been historically and you inject all this aggressive qe1, qe2 monetary easing into the system, you've got a pretty risky, potentially toxic cocktail there and traders have a really difficult time in managing risks in these environments. i think the discussion -- i've been listening to your discussion this morning. it's pretty exhausting. there's not a regulatory fix for every tiny little thing that happens. it's like a little boy always trying to put his finger in every little hole that springs up. we also need to run our global economy from a monetary policy and avoiding these bubbles in a more disciplined way as well let's not just let the central bankers off the hook here. >> what does that mean? what's the solution? >> to try to avoid destabilizing
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asset bubbles that lead to current account deficits in the u.s. or current account surpl surpluses in china. i add up all the current account deficits -- >> wait a second, are you saying it's the fed's fault? >> don't absolve central banks from this. i'm not putting the blame all on the fed but we celebrate the fed as a great post-crisis hero and we forget the fed's pre-crisis role of getting us into this mess by condoning all this asset -- >> we put you on a string, put you on a string, but there's no demands for loans because you can't get the economy going again so they're left with all this money with no demand for loans and the $400 billion builds up and it's like, whoa, i have $400 billion. how about europe.
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john corzine found that to be such a -- >> you mean the fed's policy of giving all this money and trying to push it -- they don't want it stored at the federal reserve? >> we have a balance sheet recession. it hard to get out of a balance sheet recession, as we found in japan by injecting more money, the real issue is to demand, ses leverage, not to spend more money. >> you can't force a bank to mack loa-- make loans they don' think they're going to get paid back on. >> or there's no demand. >> 0.6%, that's a japanese-like number. we're injecting all this money into the consumer demand
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equation but it's not being spent because consumers want to pay down debt and rebuild savings. that's a rational, logical thing to do. this excess money that sloshes around then create as lot of trading risk and we're seeing that come out in spades with the jpmorgan situation. >> how do you fix the situation, aside from making the fed raise rates? >> you fix it, becky, by i think a combination of more regulatory discipline. we've got a big umbrella structure in place that we think and do that but we also need more monetary policy discipline. we've got to have central banks be much more honest in managing their respective economies. probably not as aggressive easing and accommodation pre-crisis and don't promise too much in the way of economic growth with monetary policy either. that's where we got into this
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mess with both greenspan and bernanke. >> were you surprised when -- separate subject -- when some of the chinese officials threw in the towel and lowered theirs and said we're not going to grow as quickly. did you know bo and his wife? >> i never met his wife. i did meet mr. bo xilai in his several capacities. i'm an optimist. i'll concede the april data released on friday were a lot weaker than i thought. he responded quicker with another required cut in their reserve ratio. i'd like them to cut interest rates. here's the difference between us and china, joe. the chinese, their short-term benchmark one-year lending rate is 6.5% against an inflation rate of 3.4.
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they've got huge scope for easing. up kno you know, what about us? we've got no basis points left in the arsenal. who would you rather be if you had an economic problem, the fed or the people's bank of china? p >> coming up, senator bob corker will join us next. and science initiative... ...which helped students and teachers get better results in ap courses. together, they raised ap test scores 138%. just imagine our potential... ...if the other states joined them. let's raise our scores. let's invest in our teachers and inspire our students. let's solve this. you know, typical alarm clock. i am so glad to get rid of it. just to be able to wake up in the morning on your own.
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welcome back, everybody. shares of yahoo! are trading higher this hour, after the ceo scott thompson is declared out, following questions he lied on his resumé by stating he had a computer science degree. an article in the wall street journal also suggests he has thyroid cancer. is that another reason he wanted to step down? >> i don't know if that's the reason -- >> this is something wall street journal just tweeted. and ross levinsohn has been
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named interim ceo. and he'll get three board seats. one is for loeb and harry wilson is a frequent guest here on squawk and michael wolf. jacob internet fund co-manager darren chef rets joined us earlier today. he talked to us in the wake of this news. >> they still have a very viable business, billion dollar plus within core yahoo! they have one of the leading news sites, leading platforms. he's going to be looking out for his interest and extends to our interests. >> we've been talking about the aftermath of jpmorgan's $2
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billion trading loss. steve liesman has more. >> the fed will be investigating this. they're look at the derivative share. did they miss it. the feds will want to know was this a prop trade or a prop hedge. i want to show you a piece of the letters that senators levin and merckly sent in february "quote, there is no statuary basis to support the proposed portfolio hedging language nor is there anything in the legislative history to suggest it should abe loud. >> what does that mean? >> there was a big hole in it and then it was tightened up. then the rules were actually written and the rules were written to allow for this prop hedging or whatever you want to call, macro hedging.
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>> portfolio hedging. >> john canis joined us earlier and he said there's nothing in the volcker rule or in glass-steagall that would have prevented this. >> what i'm told is in the rules written by the fed, this macro hedging is in fact allowed, raising a question we haven't spoken about yet which is is the fed here a victim of what they call regulatory capture in we spoke to levin and merckly last week and they said what the fed himself done in the rules, it violates the statutory language, it is at odd with the statuary language in the volcker rule. but the issue becomes why did the fed then water down at least what levin and -- i know you have corker coming up and he's a smart guy. >> i heard the fed believes portfolio hedging should be allowed. any time you're hedging something, you can make a
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mistake. in this case they overhedged the first time and doubly overhedged to make up for it. the question is should there be any hedging. >> let's say you were right about that, i would submit it doesn't matter. the fed is a creature of congress. if the legislation does not allow them to allow macro hedging in the volcker rule language, then why is it in there? what levin and merckly insisted is that it has to be -- >> then it's taken out. >> no, but it's back in. the fed put it back in. >> the fed knew they had supplied so much liquidity, they wanted to give the bank -- >> you're back on the liquidity thing. >> they wanted the banks to have some ability to hedge their terrible monetary policy. >> there's no loan demand, they've given them these reservices and they want to give them something to do with the money specific. >> when we all go to sleep,
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right, when we're not focused on the financial issues and regulation issues out there, that's what happens. there's an argument andrew and becky, that the regulators get in bed with the banks and -- >> but here's my question. if jamie dimon doesn't know what's going on, how can somebody at the fed possibly have a better idea than he does? that's ridiculous. >> that's what the fed's argument is going to be, that it is not in the business of approving every single trade out there, it just in the business of performing these big stress tests and making sure there's enough capital in the bank. >> even if you're a regulator digging through the books,i don't know how you're going to have a better time figuring this out -- >> the new york fed guy was in there before jamie dimon, wasn't he? >> i thought it was after the journal's story. >> my sense it was after there were some stories starting to emerge, there was some speculation.
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it might have been before the first story hit but there was a lot of people talking about this, traders talking about this. >> in one of the pieces it talked about within the domain of the new york fed and the new york fed was kept abreast of this. >> i asked austan goolsbee that question this morning and i thought this was a situation where they were involved but maybe they were tipped off by the article or some of the same traders. >> what about the reputational risks to the fed, right? if you are in there and why aren't you seeing these things? if the fed says we can't look at every single trade, then how do we ever hold the fed responsible? and just one more thing, guys. put the yahoo! and the jpmorgan story together, who are the real enforcers out there? who found -- >> it's the hedge fund guys. the hedge fund guy who -- >> if the market does way better enforcing -- what i'm interested among other this evening, we talked about this a couple year ago, if the banks are going to
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engage in this black box financing, the market should exact a premium for that or take away a discount. >> they are. >> in general. i don't understand what you're doing, i am not buying your stock. if i sign up to buy jpm, shouldn't i sign up for risk when it comes to commercial banking not third derivative derivative risks? >> valid points. thank you, steve. >> senator bob corker is calling on the senate banking committee to call a hearing right away. right in the journal away it says there used to be a time when a $2 billion loss in a bank this big, where that would be the worry of the bank, not the worry of politicians. you're on the other side of the aisle, the side that's perceived as not wanting a lot of regulation. why is this your business if they lose the 2 billion?
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>> you're right. it a month or two of earning at jpmorgan. what's happening, joe, is policies are going to be derived after what's happened. this high profile, such a spokesman for the financial industry, there will be outcomes here. i'm old fashioned, i'm dealing with reality rather than myth and perception. just listening to your program speaks to the reason for a hearing. you had john harwood on talking about the fact if volcker had been implemented this wouldn't have happened. we've been on the phone with the examiner in charge at the occ of jpmorgan and that's just absolutely not their perspective. you had a gentleman cam fine from the independent bankers on this morning saying if glass-steagall were in place, this couldn't have happened. according to the occ, that's not true. one hearing before this was put into dodd-frank and basically
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congress punted to the regulators to figure this out. i think having some hearings where people actually understand about this trade, was it a specific hedge or not, which have very key as it relates to policies that will be developed but i think it very important for us to deal with reality and not the perceptions of what would have happened if something else were in place. >> someone is supposed to be watching this and it is the new york fed. my question is in one of the pieces last week, i had read that even prior to april 13th that if it want marked, that the fed -- the new york fed may have known about the position itself but at that point nobody knew that it was going to blow, right? do you know when the new york fed was -- were they -- was it under the scrutiny of the new york fed two months ago do you know? >> you know, we've been talking to the fed and they've been less forth coming with information. their response has been this is way complex and we want to understand more before we make
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any comments to you. what i can tell you is our staff was on this immediately. once we saw what was happening with iksl a month ago, our staff was on the phone with jpmorgan trying to understand what was happening. it's evident in our conversations with jpmorgan that their understanding at jpmorgan has evolved. i'd like to deal with the reality of this situation. >> senator, it almost sounds like you're saying that you want to get involved to make sure that other members of congress don't use this as an excuse to get too punitive on regulations, you're not looking at this on the same way as carl levin is looking at this. >> i'm not a friend or foe of banking. i understand a financial system that functions well is very important to our economy.
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that's my focus here. what's going to happen, joe, is unless we clearly understand exactly what happened here, politicians will use myth, perception, their point of view to not only drive policy around financial institutions that may be damaging, may be good. i just want to make sure we have a good policy outcome here. but for what it's worth, it's going to tie into all kinds of other things. this one versus the 99, there's all kind of things that are happening here. i just want to make sure that as we're dealing with this, we really understand what has happened. and, by the way, again i still say the riskiest business for a bank is making loans, right? i mean that, still is the riskiest business. >> taking jpmorgan and jamie dimon at their word that this started out as a hedge and let's assume it always was a hedge or at some point maybe became a prop trade in some respects, do you believe that commercial banks, investment banks,
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whatever you want to call them these days should be allowed to make these kind of portfolio macro hedges or not? >> well, i think that's a question. and we -- to answer that i want to understand exactly what they were hedging against. i mean, again, this tall took place -- >> let's super that what they said was right, they had all these loans out to corporations. it if they said a couple of of these loans go bad weeshs have to figure out a way to hedge that, they do it by buying insurance. then they say we bought too much insurance and we have to go the other way and that's where they got caught up. >> at a minimum it's very questionable whether the banks should bible to engage in these activities. again, it would be really good to get in and find out what the bank was trying to get out here. we know the derivative they were purchasing and they hedged
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against a hedge. we understand all these things. this could be a learning moment where maybe folks in congress actually understood how these derivative transactions took place and maybe some good policy can come out of it. but nothing substitutes, by the way, for the right capital and this can be absorbed. >> senator, thank you. we'll see you later. >> coming up, our disruptor series is going to continue with a young innovator who is changing the world of food delivery. log on to grubhub. the grubb had been ceo will join us next. a living breathing intelligence bringing people together to bring new ideas to life. look. it's so simple. [ male announcer ] in here, the right minds from inside and outside the company come together to work on an idea. adding to it from the road, improving it in the cloud all in real time. good idea. ♪ it's the at&t network -- providing new ways to work together,
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our disruptor series continues this monday morning as our disruptor series continues this monday morning as we continue to showcase the innovators of today and maybe the billionaires of tomorrow. joining us is the co-founder and ceo of grubhub. good to see you this morning. >> thanks for having me on. >> i'm in new york city and explain what grubhub is. >> it's the number one food ordering service in the u.s. it for pick up and delivery, it's online and mobile. you can order from 14,000 restaurants across the u.s. >> how do you make money?
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>> we bring restaurants more order and it's a better experience. >> are you getting paid a commission per order. >> yes. we actually take a small percentage off the top of the gross sales that we produce and we served over 300,000 diners in the last 30 days. >> now, are you guys providing the technology -- do you provide technology directly to the restaurants? is this like open table where you're getting inside the infrastructure of each of these restaurants? >> absolutely it is. in our cutting edge technology, we've launched a tablet technology called order hub that makes restaurants 80% faster at receiving on confirming online order. >> do restaurants have to pay you to be part of the system? >> restaurants pay grubhub for the incremental order we drive to them but they don't up charge the diners. it's always free for diners to place an order on grubhub. >> the restaurants themselves, the tablets, are they having to
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pay themselves? will you send it to me for free if i'm a restaurant? >> we're still in beta. we have over 400 in market and those were free. it taking a while to make sure every restaurant has one but they're coming out now. >> you're competing about seamless web. they have a big market share in new york. >> we look at it that we're competing again the paper menu. people store paper menus in their drawer, they call the restaurants at an inopportune time, they have to read their credit card numbers across the phone. that's not the best way to do it. that's really how we look at our market. >> you're not paying for the delivery guys themselves, are you? >> no, the delivery drivers are all employees of the restaurant. we provide a better service to diners and included in that is diner service. we take what the restaurant does in food and service and extend
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the service into your home. it's the easiest way to get the restaurant to deliver to you. >> open table, it a different business, it's gone public. when you think about the future of your business, is it a business you'd like to take public, is it something you merge with a seamless web or even open table? >> open table is a fantastic company. i mo the management team well. they're having a rough time right now. i look at them as a strong analogy to take cutting edge technology and put it in the restaurant for everyone's benefits. >> you raised $84 million. at some point investors will want to see a return on that money. when you think of the time horizon of bringing value back to the investors, how do you do it? give us a sense of what the revenues are like right now. >> we're focusing on building the best business. we raised the money at period when is we knew that investment could directly impact the growth of our company.
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in terms of time horizons, we don't have one. we're looking at the value we're producing to restaurants. it's a consistent value and investment and we're going to keep going. joe, have you ever ordered online? >> no. >> i was trying to follow what you were talking about. i call people up and have them deliver food to my house now. >> the credit card's already in the thing -- >> my credit card is already on file at the places i order. >> i said, there's going to be another kid worth $120 million. >> he makes you look old. >> this is the future right here. >> you know all this. how do you -- >> he does all this. he uses all this. >> i use these services. >> you called a black car by -- >> by using uber. i want to get the ceo of uberon the show. on the iphone, it shows you where all the cars are --
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>> you have this cool voice mail thing where you don't have to listen to your voice mails. >> i don't. they all come in as texts. >> you answer by talking, right? >> and when i answer e-mails, i talk -- >> you ride along in your car going -- >> yep. >> a coming up, the stocks that are moving ahead in the trading week. we'll head down to the new york stock exchange next. ready or not, the stock of the day is coming u. up. you're watching s"squawk box."
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welcome back to "squawk box." let's get down to the new york stock exchange. carl, melissa, jim and david are there. i have this idea, maybe commercial banks should just be separated from investment banks. have we ever thought about this and let the investment banks fail if they need to? they won't be systemic and too big and the commercial banks will be all fdic. >> we could glass it glass kernen. >> glass kernen.
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it doesn't sound that preposterous at this point. everybody will be allowed to fail -- >> it worked for a long time. >> sounds like the 1970s and '80s. >> these companies wanted to welcome more profitable. a lot of these companies decided to play with other people's money ifs they used to be partnerships, much more on the line. i'm with you, joe. >> really. that would actually, i guess, work, wouldn't it? would we be globally less competitive as a financial -- >> a total canard. where are these banks that you're supposed to be -- >> you're scaring me. how are we going to compete? >> how are we going to go against that portfolio of tremendous housing? got a development portfolio to die for. >> we were also having a discussion --
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>> sarcasm. >> there are new york fed guy there is all the time watching this stuff. they probably didn't know where this stuff should have been marked. and jamie didn't know. >> they effectively signed off on it. >> but there weren't regulators there watching this. >> have you seen the actual spreadsheets on this stuff? i didn't go to college to get stupid. but this stuff is unfathomable. i don't think jamie dimon can understand it. it's okay to understand that you can't put a man on the moon because someone else has the expertise. these guys did not engineer their own financial -- as they layered on and layered it, it became difficult -- >> david, see you tonight. ♪ why do you whisper, green grass? ♪
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stock of the day, yahoo!. the company replacing its ceo for the third time in as many years. daniel lobe winning three seitz on the board. the

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