Transcripts For CNBC Squawk Box 20100106

good morning. working for a living, there are two major jobs releases before the bell today. the markets at this hour, a mixed picture across asia overnight. red arrows t start in europe and u.s. equity futures pulling back just slightly this morning as "squawk box" begins right now. good morning and welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen and carl quintanilla. jobs, jobs, jobs today. also, two democratic senators decide not to run for re-election. president obama makes another push to pass health care reform and a cold snap in the gulf states is threatening florida crops. >> we'll begin with the economy. two big employment numbers to watch today ahead of friday's government number. at 7:30, challenger gives us the december job cuts. we'll talk to the man behind the numbers. john challenger first is on cnbc at 7:30. 8:15, we'll get adp as dow jones survey predicts a loss of 90,000 payrolls in the numbers last month. we'll get analysis from joel prakken. the economic story does not stop with jobs today. ism services at 10:00 eastern time. the sector index will show some expansion just as the manufacturing number did very nicely earlier in the week. later on this afternoon, the fed is going to release their minutes from their mid-december policy setting session. economists and market watchers will come through the notes for any sign and any insight into the central bank's plans to wind down its extraordinary programs. a lot of data today. >> get ready. if you thought the new year kicked off on monday, you better pay attention today. >> right. and if you remember the expression, it's the economy, stupid, and i'm not talking to anyone. when you talk about the economy, it's the jobs. so many things key up that. when the fed moves, it's almost impossible to move with jobs rates this high. everything that -- every policy, every new initiative is sort of viewed in the prism of what about jobs? and even when you do something besides jobs, it's like, why aren't you doing something with jobs? why are you even thinking about something else? >> and this could be the time when we see job creation for the first time in two years. that's the expectation of a few economists out there. it's not the ton census. the consensus is for a drop in jobs, but only by about 10,000, i think. >> now, you're calling for 1250 for q1 on the s&p. >> i am empathy for pooeg people calling for that. >> can that happen? >> a lot has happened without getting -- you know, we got 70% without a whole lot happening. i have given up on trying to match fundamentals in the market. >> yesterday, a move of just about 11 points and that came after pending home sales were down about 15%. but then you saw auto sales up by 15%. when you add them all up together, you're talking about 11 million on an annualized rate. ford looks fantastic. i guess the question comes always you start to move away from some of those programs for the government, cash for clunkers, they moved away. now what happened with the home sales once you pull away that? >> i think that might be a few that when the numbers get really good, then don't move the market, that is when you -- you know, when you don't know and the market keeps moving, you're confounded by it. but when it's -- you know, when the news come in, buy on the rumor, sell on the news. meanwhile, one job is opening up in washington. senate banking committee chairman chris dodd is retiring. five-term democratic senator is expected to make at that announcement today. his poll numbers are not great and they began falling following the financial crisis and the countrywide, the mortgage in that article we read from maureen dowd's brother. >> cap and dowd. >> right. he said that dowd's approval ratings were as low as his mortgage rates. so that probably wasn't a very nice thing to say. >> no, it really wasn't. >> and i'm quoting someone else here. is this a preemptive move? the people at connecticut might retire him. >> but he wasn't the only one who made this announcement yesterday. >> no. because the people in north dakota were going to retire byron dorgan, as well. it was going to be tough races for both. but north dakota is a conservative place and he is known to be liberal on a lot of issues and this means that the democrats will have to defend open senate seats in at least four states. and if they don't have 60, they can't do everything they want to do and they're probably not going to have 60 after november, so they better do it before which means they better keep cameras out of the committees for health care. >> despite what c span wants to do. >> yeah. this has been the most transparent process of history in the united states i'm told by speaker pelosi, but some people might not agree. >> and bill ritter, the governor of colorado announcing yesterday that he will not seek re-election. >> and another senator switching parties from democrat to republican and having his whole staff resign. >> there are some really red states. they are hearing stuff, they won't pick up the phones any more. >> like you said, anything can happen. it depends on where the economy goes, it probably depends on a lot of issues. but this is the early sign of some shake-ups that could come in 2010. >> and those are two guys that are on a lot that you're used to. >> there is some talk that if chris dodd lead, then jack reed will be in position to take over on the financial committee. >> also, house democratic leadership will head to the white house today. the group meeting with the president at 2:30 eastern time this afternoon, the democrats want to get a final health care bill to president obama's desk before the state of the union, so these are part of the negotiations along the way. >> get a check on the markets on this wednesday. as beck mentioned, we lost a little bit of what we got on monday on tuesday. but futures here, again, moderately negative. we got some decent signs out of asia. new finance minister in japan. and the guy who left, i think for medical reasons, was one of those who have been arguing for a stronger yen. so now that he's gone, there's talk that maybe intervention chatter comes back in japan that could move currencies later on today. but that is what futures look like for the time being. oil, we talked about up potentially nine straight yesterday. we didn't quite get there. we're down 8 cents today with heating oil at a 15-month high as cold weather continues to rock the eastern seaboard. the 10-year note is at 3.773%. the dollar, as i mentioned, we'll see what happens with the news out of japan and the finance minister, but right now, 93.49 dollar/yen. and the euro. gold is up $6.50 to $1,125. let's get overseas. geoff cutmore, good morning to you. >> good morning to you, carl. the european markets over the last hour have been showing a slightly better tone to them. we were negative across the board, but there is an attempt here to try and make some kind of recovery. one of the areas where we've got a bright spot is in the autos. and i suspect that that has a lot to do with the data that you provided us with on u.s. auto sales. and we've seen some of our european focused car companies just riding on the coat tails of the u.s. consumer, seemingly willing to go out and buy cars. away from the equity, i will tell you there are a couple of other stories that the fixed income folk are watching closely. fitch, the ratings agency has downgraded ice lntd sovereign debt to junk after the icelandic president said he did not want to see money paid back to uk and netherlands based governments for effectively the banking crisis they had and the fact that depositors in the uk and the netherlands lost money and greece, another big focus we have eu and ecb officials there today talking about how to tame this great big government deficit. about 12% of gdp in greece at the moment. two stories that the fixed income community are keeping an eye on. but let's get out to christine in singapore. >> hey, geoff. here in asian, we had modest gains across the board as investors start to question the strength of the recovery. japan, the markets there continue to edge higher up 0.5%. resource related stocks continue to rise on the back of rising oil and commodity prices. now, in the news today, i want to mention the resignation of finance minister hiro fujii due to poor health. the japanese yen is coming under pressure as a result. in south korea, the kospi rose 0.9%. authorities there responded intervening in the currency market to stem the surge in the korean won. strong economic data in the past week in south korea has raised expectations of a rate hike ahead of the central bank meeting coming this friday. in greater china, a mixed picture with china, hong kong higher by 0.6%. exporters gained after new factory orders in the u.s. grew. but shanghai coming under prefer your down 0.9%. concerns about new share supply weighing on the market with the chinese currency, the yuan in focus today after a government research one up 10% revaluation and that in turn droves asian currencies higher. we had the central bank coming out to say it will maintain a stable exchange rate. so that is the action coming from asia this wednesday. sending it back to you. >> christine, thank you for that. christine tan, in singapore this morning. let's get to our task force this morning. kevin, mike darda, good morning to both of you. mike, the way you've been writing lately, your tone seems to be that the notion of this slow grinding recovery is losing steam and losing it quickly. >> it sure is, carl. it seems to be refuted by virtually every piece of data that we're getting. so this is no longer just a forecast that we're likely to see an above trend recovery. it's becoming a reality in the data. so we've got an ism report in the manufacturing sector this week. overall number back above 55. from the business cycle trough that was probably june, this is one of the fastest push above that 55 threshold in the last 50 years. we've got first time claims down a third from the recession peak. that's one of the most precipitous declines since the early '80s. we're probably going to see 5% to 6% gdp in q4. and i think those fairly strong numbers will continue into the first half of 2010. maybe not five to six, but i think about had% real gdp growth this year. >> so two questions then. is the market accurately reflecting that? and two, how do we know, as the skeptics argue, that this is not all part of one very nice and beautiful inventory rebuild? >> well, obviously, the stock market with this incredible performance we've seen over the course of, you know, the last nine, ten months is certainly building ahead of steam in here that's much more consistent with the numbers i'm talking about and the down beat consensus forecast on the street. in terms of the inventory rebuild, sure, that's going to be a big part of the q4 numbers. but inventory rebounds are part of the initial spark for recovery. the bears told us don't ignore the credit markets. the turn around there doesn't matter. they said the corporate rebound that started last year didn't matter. now they're saying the inventories won't see job growth, both incorrect, as well. >> the only things we're not seeing that aren't improving are with regard to credit sector in the economy, where we are seeing a reduction in debt and credit in both the household sectors, business sector, and even when we look at financials, we see a lot of deleveraging still going on, being supplemented by aggressive actions by the government. but i'd have to agree with most of what mike is saying, because we had such a sharp downturn, what we're seeing now if terms of the rate of change, a wide variety of indicators that we are looking at, we're seeing that kind of improvement. so we believe we hit bottom in terms of earnings in q3. that was something we put in print earlier this year. we've added risk throughout 2009 hoping 2009 becomes a prelude for 2010. we're watchingful of things like the withdraw of stimulus, and we are watchful for, as this recovers, because we're mindful of the fact that there's been so much government intervention in the markets that the signals in 2009 may not be all what they appear on the surface and could change in 2010 progresses. >> that said, you are still overweight equities, right? >> still overweight equities. we have an emphasis on foreign stocks. we have an emphasis on large cap stocks, technology, materials, industrials. we're still underweight health care and utilities and telecoms and we're neutral on financials. >> mike, does the economy have the cushion to absorb a leg down in housing or we got comments out of an ecb mord member today that don't expect the euro zone to rescue greece, things like that? do we have a cushion to absorb it? >> well, you know, i think if you take a look at important leading indicators for the economy, they're pointing up. if that started to move in the other direction, then i think we'd have to get a bit more worried. there is volatility in the data that, you know, the homeowner tax credit pulled the housing sales forward and now we're getting a bit of a hangover effect. in some cases, it's difficult to discern the underlying trend. my view is that the trend is up, we've got a real recovery coming or taking place in the residential real estate sector. commercial real estate is weak, it's in recession, but it's a lagging indicator. it always lags the business cycle where the residential side tends to lead. i think we have to look at the data, try to des end the trend for some of the noise and keep our eyes focused on the leading indicators. >> mike, are you looking for a positive jobs number? what might adp tell us today? >> adp will continue to show improvement. overall jobs number on friday, i think we're going to see up 50. so the first positive reading since the recession began in december of '07. >> that has to be close to the range of the highs. >> how about the improvement in the number on friday, we just watch out for what happens later on this year as the recovery gains steam in some of the recovery efforts in the low interest rate environment we're in needs to be taken away. >> guys, appreciate that. see you later, kevin and mike. >> coming up, it is cold outside. we know that's not surprising in january for many parts of the country, but it spells trouble for places like florida and industries like agriculture. we'll talk about that in just a moment. first, though, take a look at yesterday's winners & losers. welcome back. the futures this morning are moderately negative. some new data from mastercard adviser spending polls show retailers largely experienced a strong finish to the holiday season. retailers posted sales gains in december. sales at apparel in department stores declined. a cold snap is taking grip of the gulf states. floridas farmers are taking efforts to save millions of dorth worth of crops. scott williams, good morning to you from the weather channel. >> good morning, carl. certainly we are feeling the arctic blast across much of the nation. right now in miami, 40 degrees is the air temperature. houston, 31 degrees. and tampa, setting records this morning, 29 degrees. 10 in chicago. if you are doing traveling via air, expect some delays as we move into interior sections of the northeast due to lake-effect snow. and watching our next system that will move down from canada impacting the plains and the midwest as the day progresses. denver, look for delays. cleveland as we move into portland, expecting more chances for that snow. and snow eventually arrived into the twin citys. look at all of the winter weather advisories, watches and warnings that we have from the u.s./canadian border, freeze advisories all the way down into south florida, as well, as we track this next storm system. omaha today, 16 degrees. st. louis, watching for the snow the move in as the evening wears on. into thursday, chances for snow as we move into vashville, tennessee. even the atlanta metro area will see an arctic blast and an old man winter will be moving into the south. as we move into friday, the northeast, new york city and boston, you'll see chances for some snow, some colder temperatures and some winds. so certainly bundle up, give yourself some extra time. back to you. >> scott, thank you very much. we will forgive you for being the bearer of bad news this morning. we'll check in tomorrow and maybe we'll see something better. meantime, congress is getting ready to tackle financial reform again. we checked in with barney frank. we took the model of what we do with a bank that's failing in which we put it out of business and we've applied that to other financial institutions. and that's the key part of the bill. it says to the financial regulatory council, you have to monitor what's happening. and if there is either a large institution or an activity such as subprime loans, which is threatening us, you have to put the breaks brakes on. rob, it's great to see you. thanks for coming in. >> thank you. happy new year to you. >> what do you think of what chairman frank is saying? >> we actually are in agreement with much of what he's saying. in fact, there are probably the two most important pieces where there is a large degree of -- a lot of agreement is on, one, the need for a systemic supervisor so that we're looking out over the entire system and making it less likely for a crisis that just happened to never happened again. so there will be a way to wind down one of these large financial institution peps. >> chairman frank has already moved that legislation through the house. it's still in front of the senate, though, with senator christopher dodd who is announcing that he's stepping down. between that and between what we've seen with the focus on terror again, after the potential -- you know, the close call with the guy with the bomb in the underwear, what do you think we'll see? >> i think you'll see the body politic return to financial sector reform. and it's interesting. we'll talk about chairman dodd in a moment. but there is the gold timeline in the senate. they're going to try to get a new bipartisan mark through the committee or drafted in the next couple of weeks and perhaps something through the committee at the end of february which could set up floor time to talk about reg reform perhaps in march. >> what are the big differences we know the bills in the senate and the house version? >> there's going to be a new senate bill very soon. but a couple of things that we flagged as areas of concern that are emerging as issues that could be brought up in potentially a conference, number one is the treatment of large financial institutions. you know, we've talked before about there is a provision in the house bill that would call for the proactivity pre-e.ive break-up of large financial institutions. we don't think that's an advisable idea. >> obviously because he represents the large financial institutions. >> i do indeed. >> there is also, within the senate, two senators who are not on the committee are proposing rolling back and returning to glass steagall. we think there is a -- i would say, a misdiagnosis of some of the problem. and the role of the fed. should the fed retain its supervisory authority, that's something we strongly believe and that we think will emerge as a difference between the two bills. >> these calls for break-ups, the return to glass steagall, how much of a hot button topic is that? with the idea of too big to fail, it was running rampant for quite some time. how big of a concern is this for your members? >> you know, it is a concern. there's been a lot of frustration that, you know, facing -- that the industry has been facing as a result of the crisis. there is obviously a lot of failures. there is some on the part of industry, lack of mortgage originalation standards. there's a lot of blame to go around for the crisis. we're trying to go out of our way to say, listen, there's an important role that these large institutions can play. so we're taking a lot of time with the policymakers both the house and the senate took to walk them through. >> so you can get a stronger bipartisan shelby/dodd bill that will allow for the death of the consumer protection financial agency and that that will be out of the bill. >> first of all, on chairman dodd, i think just -- we'll see his announcement comments today about his retirement. i think someone who spent 30 years in the senate warrants kudos for years of public service. i will say one thing, too, on the foreign investment reform, that was a very political issue and he -- >> we like the dirt, though. we don't want to congratulate people. this means blumenthal is going to run and he has a much better chance to holding on to the seat for the democrats. >> that could very well be the case. >> but rahm probably told -- >> i don't think they wanted to take their chances. >> you're a dead man walking as far as re-election goes. and it's probably -- >> to directly answer your question about the cfpa and how it's treated in the senate, i'll tell you, we've talked to a lot of senators on both sides of the aisle who have seen what walt minnic has done. he is a conservative democrat from idaho and he proposed an amendment to the house bill that instead of having a cfpa would have a council within each regulator, would have an office of consumer protection and legislation that would get together, talk about best practices, talk about what they're seeing in the marketplace. >> who is in charge of it, though? >> it would marry consumer protection with the regulator. >> but it would be recommendations that would come from the council and no real teeth in terms of being able to implement anything? >> no. he would stand up a new office in each of the current regulators, strengthening consumer protection and education within each and then having those offices get together periodically to share best practices. >> i know. but to sit around and talk or -- >> no. they would report to congress. >> could they make any of those institutions go back and do anything, though? >> well, that would be the point is to do that. but the point is, we think marrying consumer protection with the proo dental regulator, overseeing safety and soundness is probably a good idea. >> are you on kay street? >> no, it is not. >> i have never -- you know, when i leave, i can never go do this. >> if you were in financial services, you would so -- you would need rob on that wall. >> i love this and i love that. >> listen, there are -- >> do you have to sit and think about it? i couldn't do it. >> when we have sharp policy dinnerses, we'll share them. we're not afraid of doing that. but at the same time, we're reasonably -- you know, the house process is done. the senate, they're just sitting down to develop a new proposal. and so we're talking to the folks on the dodd team and the shelby team and obviously today's announcement will be significantly -- >> you see, i would think you would be somewhat in his camp, because republicans are comparing the cfpa to the -- >> i know. but i'm trying to figure out what i could say to get him to just snap and say really nasty things about someone or -- >> small banks. >> yeah. >> something really incendiary and attack your enemies of the people you represent. attack them. attack! no? >> no. >> i like it when you said, joe, i couldn't do that. he's so nice. >> i've listened. >> wait until he goes back to the green room and talks to his people. >> rob, thank you for coming in. >> you're okay? >> absolutely. >> okay. >> coming up, this morning's top stories, plus a huge day on the employment reports. we've got challenger and adp, a preview from the futures pits coming when "squawk 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talking. >> they have blue collar comedy. >> i can listen to outlaw country music. sirius is the greatest thing. and no one is paying me and i have no perk, no nothing. it's cheap, no commercial. >> and you paid for it. you didn't get it free. >> the radio was expensive. it was a grand. >> but you can listen to cnbc. >> no, i'm not -- >> wait a second, that means right now people are listening to us on sirius. >> if i could listen to "squawk box," but that would be hard because it would be a feedback. >> no, you can on your days off. i listen to you guys on my days off. >> no, maybe "squawk box." anyway, if you're just waking up this morning, we have your top stories. it isn't how great sirius. coming up, we'll have a preview of the trading day ahead n trading pits. also, two democratic senators are ready to happening up their hats. purely on idealogical database they just decided they're idealistic. it had nothing to do with their poll numbers or anything. what the announcement means is for the midterms, the democrats will have to hold on to the seats because they get to stick blumenthal in, right? now david walker skeex to attack the biggest risks to the financial future of our country. and he's been talking about this even before we spent $1 trillion. >> but first, a couple headlines. the two big employment number toes watch today ahead of friday's government number, at 7:30 eastern, challengers december job cuts and then at 8:5, the adp number. a dow jones news wire survey predicts a loss of 90,000 payrolls in the private sector last no. although we are begin to go hear more and more people predict a positive number for friday. mike darda just came out with 50,000. >> and is it a revision up? it should be. we'll have the trend -- that's the way the trend has been, unless it comes back to earth quickly and it wasn't minus 11. >> no matter what comes out, you'll be very interested. >> oh, yeah, you have to listen on sirius on friday. >> are you going to start talking look a radio dj? hey! >> no. and we don't have to worry about mentioning xm or not mentioning sirius. remember when cnbc had warrants and xm and sirius would get mad. where is the check for all these things they're paid to do? >> they must go to your house because i never see them. >> right. because we are backing so many things that we're getting paid for that i am not seeing any of it. >> i think the biggest agenda we promote is our own. >> yeah. that we do for free. the economic story wibt doesn't stop with jobs today. also on the agenda, ism manufacturing at 10:00 a.m. eastern time. forecasters are predicting this will show expansion. then this afternoon the fed release minutes from their previous meeting. it may show plans to potentially start winding down stroit extraordinary programs that it's got out there. jessica hoversen is standing by at the cme. it's kind of a fan favorite for all of our viewers, jessica. >> you get a lot of e-mails, jess. >> yeah. do you get approached a lot? >> oh, wow. >> yeah, from being -- have you been asked for an autograph? >> just from my mom. >> good answer, good appears. >> who is also quite bullish on sirius, as well. >> really? >> as you were talking about it, i was recalling one of our christmas conversations about that. >> you haven't looked at every up day in the stock market. you haven't looked aconstant at everyone, either. you think it sort of has made some sense up to this point which separates you from a lot of people. what about from here? >> i think there definitely is forward momentum embedded within the market. this product expectations for the forty quarter are coming off easy comparisons. and the economic data has been good up to this point. furthermore, the market shrugged off the analyst downgrade of goldman sachs yesterday and the 16% month over month sequential drop in pending home sales. that suggests that there definitely still is interest in the market. there are storm calls ahead and the market is very concerned about the jobs picture. we will get some caller on that today. the adp number is expecting a drop of down 75,000 after a drop of down 169,000 in floef. i think that the market may shrug off that number slightly. because if you look at the adp number over the last six month, it has dramatically underestimated what the bls payrolls numbers will be. i think the market will more acutely watch the employment component of the ism nonmanufacturing index. now, that index has been very anemic. it peaked a few months back and has been trending lower. it's at i believe 41.6 right now. if we can get a solid jump in that, i believe the market will be more confident that payrolls will be able to sustain these gains. i think the risk is to the down side. and also, i don't know about new york, but chicago was brutally cold and so i would imagine the seasonal hiring that normally occurs in these months is -- did not exist this time around. >> yeah. so you think we don't go minus 11 positive last month, we go actually minus 11 to what, might beus 50 or something? >> definitely, the risk is to the downside. minus 50 would probably fit into my prediction. i know a lot of people are calling for a move to the upside, but i think the statistical anomalies that most definitely bostoned the numbers in november, the seasonal factor was exceptionally added, simply will not be present. that being the case, i think you probably get an initial sell-off. i'm not sure if it's short lived. especially the dollar. the dollar reacts now to positive and negative. it's more fundamentally reacts to news in the united states. so i think that if we do get a negative payroll, we probably see a quick dollar sell-off. but i'm not sure if that ruins the trend. i think the next move in the dollar is up rather than down. >> it is. well, that might not be great for all your friends in chicago. we had someone yesterday say that the market will eventually be able to go up even if it's not commodity based, even if it's not led by, you know, the leadership from last year. >> i think it's fair to say that that one-trade correlation that we saw in the markets for 2008 and most of 2009 has broken down substantially. >> although we saw it on the first day of the year, though. the big up day was right back to the beginning of 2009. >> well, one day does not a trend make. >> well, let's hope it does in terms of going up. >> yes. obviously, i think that the fundamentals probably do argue for a continued move higher. i feel as though it's probably more sideways that know it is a straight linear shot. because as i mentioned earlier, there are still head winds, income growth, the political dynamic is still ambiguous and many are very concerned about how the tracks structure will impact small businesses. and so i'm not sure if the outlook for the political landscape is favorable for economic growth. .that will likely continue to keep trade choppy. >> great seeing you. hope to see you back in studio again. it's not quite as cold here as it is -- >> oh, well then i'm definitely coming. ite quite cold here. >> well one live in chicago. it was your choice. >> existentially, i recognize the choses of living in chicago and i accept it. >> then you get summer in chicago. >> right. it is. >> nothing better. >> summer in chicago is beautiful. if it was like that, all year long it would be popular. we welcome the cold. >> lego, burriss, the political machine, the daleys. >> blues fest. we have a great political culture here. >> you do. the entire world watches the way politics work in chicago. >> or stopping on the highway and looking. >> happy new year, guys. >> all right. you, too. >> any comments or questions, drop us an e-mail. >> we like that the white house wrote us. >> the white house said, you haven't been getting our checks? >> yeah, right. our address is squawk@cnbc.com. when we come back, a nurly of corporate headlines. plus, onstar and chevy teaming up on the ultimate remote control for your car. details first on cnbc straight ahead. welcome back, everybody. take a look tt futures if you're gist waking up. the futures right now, a little below fair value. this comes after a day of mixed messages from the markets. the dow was down but slightly yesterday. the s&p was up by about three points. in the headlines this morning, remember y2k? how about y2010? a bug has hit 30 million german and debit credit cards. the microchips in many cards throughout the country'sbacking sector left customers unable to make purchases of cash withdrawals. cash security has been unaffected. look out, that was 30 million cars. right now, it's time for a check on the news outside the world of business. monica novotny is here with that. >> democrats find themselves faced with the sudden fact that several high profile lawmakers plan to walk away from their jobs. nbc news confirming chris dodd will not seek re-election this year for a sixth term in the senate. also north dakota senator byron dorgan won't be running and bill ritter won't be running for a second term. in the latest string of rather embarrassing airport incidents, an airport outside of los angeles was shut down for several hours after a bath with an amber liquid tested positive for tnt. well, it turns out the amber liquid was just what a gardener told the tsa it was, honey. back over to you, joe. >> thanks, honey. we do -- you think about how many actual threats there are and so many things you have to check. and it's so frustrating. that's why i think if you see someone sweating and just so nervous, it's not profiling -- if you're profiling for bombers, it's not that bad. the guy with the bomber is probably not that bad, right? i want a fly list, not a no-fly list. i want to prove that i'm not a problem and that my family is not and i want to flash that card, which gets me through a different area, right? >> didn't they do -- i thought some of the airlines have that for super flyer cards? >> they did. if you were a super traveler. i don't know if that's shut down or not. >> they did some sort of security card where they did the check on you. >> it was in washington airports and some of the shuttle areas and stuff. i don't know if it's still there or not. >> it's one terroristous of 50 million people you check. it's a losing -- anyway, thanks, monica. chevrolet and on-star are unveiling technology at the consumer electronics show today that allows total control of your car when you're not in it. here now with a preview is walt dorfstadder. maria, i know you're here with global volt and chevrolet marketing. i'm not going to mention that. welcome to the both. >> good morning. >> good morning. >> onstar is well known already. great advertising where you can't -- you know, if something happens, you can't reach your cell phone. this new initiative has to do to do with the volt, doesn't it? i'll start with you, walt. >> absolutely. this is really exciting for us to be introducing onstar mobile for the chevrolet volt, the first fully fungal and operational mobile app for an electric vehicle. it's really going to change the way people are interacting with their vehicles. and so we're really excited about it. >> maria, there are so many -- we don't want to say that the volt would be hard to maintain or operate, but you do need to keep an eye on when to charge it and similar things, right? and that's what onstar will help with, even if you're not in the car? >> absolutely. the onstar partnership is very exciting because it's going to allow the consumer to be able to keep a state of charge monitored at all times and it's something that is going to bring an overall experience to the new volt owner later on this year when the volt comes out. so we're very excited about the partnership. >> walt, are you the expert on what it does? will you go over what the capablebilities are for the volt? >> sure, i'd be happy to, although maria would be capable of that, as well. this is an application that has been downloaded happens to be a tried. you'll be able to get a new level of interactivity with the vehicle. you'll get updates on -- realtime updates on the vehicle charge. you know, the state of the battery. whether it's plugged in. whether it's plugged into 120 volts or 240 volts. when will it be complete? all types of really important information. basically your volt is telling you how it's doing. you know, the extended range, you know, how long the range is. the total range for the vehicle. and something that we call the brag bar which is really either lifetime or last trip. miles per gallon. e.d. miles. and miles driven. >> maria, when will -- i'm sorry. i think our satellite, we have a problem. i just want to find out, when can we buy this volt? is it going to change gm's fortunes? that's a simple little question. >> yes. the volt is coming out at the end of this year, end of 2010 as a 2011 model year. and we are looking forward to launching it. we think it's a better electric vehicle. it's an electric vehicle with a range ex-tender. and it will change the industry. chevrolet in partnership with onstar, we've been leading the way in the electricification of the automobile. so it's a very exciting proposition for us. and this whole new onstar mobile app for volt is going to bring that experience to a whole another level as far as monitoring the electric charge and the battery especially for the volt. so we're looking very much forward to it. >> very good. thanks for coming on the show this morning. appreciate it, walt and maria, we appreciate it. >> thank you very much. >> thank you. when we come back, the nation's jobs picture takes the "squawk" stage. two huge numbers this morning. in about 40 minutes. adp in a little more than an hour. there's one place for complete insight and analysis. guess what it is? it's "squawk," so say tuned. hey, who's this? oh, that's kyle. he aced his fifth grade geography class. you 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[ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco. national car rental knows i'm picky. so, at national, i go right past the counter... and you get to choose any car in the aisle. choose any car? you cannot be serious! okay. seriously, you choose. go national. go like a pro. the countdown is on. investors anxiously awaiting friday's jobs report. today we get a warm-up with some key data on the state of the labor market. the former chief accountant for the united states is here. ♪ david walker. why he thinks the biggest concerns this year are the fight against unemployment and dealing with the deficit. failing to connect the dots. the president says the government had enough information to foil the attempted bombing of a northwest flight on christmas day. what went wrong and what needs to be done to keep our skies safe. those stories and more as the second hour of "squawk" begins right now. good morning and welcome to "squawk box." i'm joe kernen along with carl quintanilla along with becky quick. health care. we'll look at where reform stands and the major hurdles that still need to be cleared. an arctic cold snap in no hurry to leave. what you can expect over the next several days including how much snow we might get here on the east coast. and just imagine if we hadn't had global warming, how cold it would be, carl. i mean, imagine. as bad as it is -- >> from from the man who discounts years of data is taking three days of weather. >> years of data. close to 100 years of data. >> you've got 100 hours. >> i've got 6 billioniers of data on carbon dioxide and the planet. >> that's when you started keeping data yourself. >> because i'm that old. a jobs report -- you like primer or primer? although you prime the pump. the jobs data and the adp report set to be released. we'll have the numbers and instant reaction. it's going to be instapninstant. ceo of the peterson foundation, david walker, there he is. he'll be doing a perp walk. i don't know why we put people through it, but he'll be walking along. >> because it looks cool. >> it looks cool and keep running pictures of chuck norris because his name was walker. first becky has a look at this morning's top headlines. >> let's look at the futures first up. we've been watching through the course of the morning and they've been a little below fair value. but right now you're talking down by about 15 points below fair value for those dow futures. again, the numbers we've got coming up later this morning could change everything. we'll be giving the challenger report and adp. meantime, two leading democratic senators have decided not to seek re-election. connecticut senator christopher dodd, chairman of the banking committee, is expected to announce a decision to step down at a news conference later today or at least to retire and not run for re-election. also choosing not to run, north dakota democrat byron dorgan. over the years, the connecticut senator has raised millions of dollars from employees of wall street firms and has been a key player in financial regulatory reform. meantime, house democratic leadership will head to the white house today for a midafternoon meeting with the president. the democrats want to get a final health bill to president obama's desk before the state of the union address. holiday shoppers, they bought a little more jewelry, electronics and boots but they passed by the women's clothing racks. the latest figures from mastercard spending plus unit do show overall the shopping season had a strong finish but you're talking fewer discounts and that could be better news for their profits when we start looking at earnings. online sales soared 17.7% for december helped by bad weather. electronics were up 7.3% in december. luxury sales excluding jewelry were up 5.5% but were still down over 8% for the year. and spending on jewelry, it was up 6.9% in december. that was down 4.1% for the year. and guys, i hope you did your part. >> did we do jewelry? did we do jewelry this year? no. >> i did. >> really? >> going back. >> oh, really? not to her liking? >> i have to -- you know, i need to exchange a gift. the kids are there and everything. but i know it's going back beforehand. i know it is. one of these days i might get it right. i don't know. i've got save up, though. >> yeah, you do. you got some footwear. >> i did. i got some uggs. >> you did? >> i did. i wear them with socks, though. >> the uggs are grateful, i'm sure. >> good one. >> thanks. today's adp a warm-up of sorts for the markets with investors awaiting friday's jobs number. joining us this morning, chief u.s. equity strategist at deutsche and ed yardenni. guys, good morning to you both. ed, we were chatting during the break. you want to talk about your targets for the year first or what your expectation is for friday? >> well, i think the s&p 500 is going to continue to rally this year. i think earnings, we've got an earnings rally now until about the middle of last year it was mostly p.e. led. ever since then we've seen a pickup of earnings. particularly earnings expectations have been improving. and i think friday's numbers will help that because i'm actually more interested in revisions than i am in the december number because the revisions always tend to be to the upside when the economy's improving. and i do think we're going to see that it's conceivable that november's number will be revised upwards from down 11,000 to maybe up 11,000. and then we'll see about what the december number is. but that will be revised up as well. >> right. you go along with that? are we in a period where revisions tend to be our friend and not our enemy? >> i believe so. on the macro side, what i would point out is that we have a simple activity surprise index, and that's been in positive territory now for seven months, which is, you know, unprecedented in the history of that index. so i think that macro data continues to surprise on the up side. earnings expectations, consen s consensus, surprising development, i think, is since q3 earnings season for the market as a whole, they've actually come down. so i think that considerable degree of sort of skepticism as to what earnings will actually deliver, you know, continues basically to prevail which sets us up, i think, for positive surprises yet again. >> you've written -- you wrote a nice piece -- it's been a couple weeks, i don't know if your views have changed -- but you basically say we can anticipate further equity inflows, right? s&p 1325. there's more up side in earnings even after cost cutting is done. those are all positive things. >> yes. the target is 1325, not 1425. 1425 would be recall fair value which is basically normalized earnings times. so we think the market actually is cheap and is going to continue to be hesitant to sort of price in a full recovery which would be consistent with fair value. >> go ahead, sorry. >> yeah, on earnings, i think, you know, the skepticism is that the big improvement that we had in earnings really reflects all cost-cutting measures. and i think one of the issues is, you know, how you should basically look at margins or preferred ways to look at margins top down. so consistent with basically coming from the gdp accounts. and if you break those up into domestic margins and foreign margins, domestic margins is still 70% of total margins. and domestic margins, you know, have risen a lot. but are still well below historical averages suggesting that there's plenty of up side. >> ed, during the end of last year, actually from july on, we had the benefit of having a lot of people well known pundits talking about the market being way ahead of itself. and now we've got both of you gentlemen on today talking about 1300s. do you expect a lot of these people to finally throw in the towel? the ones that were, you know, saying that this recovery is not going -- that the market won't be validated by this recovery? >> i hope not. >> yeah, because i'm getting nervous. you're getting credit. but you think march 6th -- what was the number you gave? it could be by march 6th? >> well, you know, i'm being a little bit facetious. >> you are. >> you know, we did a low of 666 in the s&p 500 on march 6th of last year. double that. you've got 1332. that's the da vinci code, right? >> that's the da vinci code. 1332 by march. >> yeah, one year later, double from 666. but look, seriously, the question is, can we get to 1300, 1350 this year? and i think the answer is yes. and i think some fairly realistic assumptions about earnings. >> i should probably bust on ed a little bit. when economists start predicting -- and i think of you as a great economist. and when they start predicting the stock market like when rubini did it, i'm, like, what are you doing trying to predict the stock market? whitney, rosenberg. you should hear the same thing. why do you think you're in a position to forecast the stock prices? >> i did have a career change when i was at deutsche. i hadn't been an economist and had the opportunity to be a strategist. now i'm thinking of being a symbolist. >> exactly. you're the guy i said when i had empathy -- he was the guy i was alluding to monday morning. we'll see. >> that's an aggressive market. walk us through a few down side risks, rising rates, stronger dollar, exit strategies, geopolitics. we keep bringing up this chatter about greece and euro zone's reluctance perhaps to help their neighbor out, things like that. >> you know, i would completely agree with the list that you just went through, and all of those risks are on our list. the one that i would emphasize, actually, is the high degree of policy uncertainty that really remains. we think, you know, in terms of just going back a little bit through the conversation that we were just having in terms of when will, you know, the bears throw in the towel, you know, we think basically that a self-sustaining recovery has not begun yet. but we are putting our money on, you know, that corporates that basically overshot to the down side will start to spend, and that will provide basically the spark for that self-sustaining recovery. but i think the biggest risk basically to corporates not spending is the high degree of policy uncertainty. i mean, i think if you just think through, you know, the list of things that corporates don't know about the future or they don't know what their future tax rates are, they don't know what the health care cost of hiring a new employee is, if they're in the health care or energy sectors, they don't know what future government policy is, if they're in the financial sector, they don't know what the future regulatory regime is, the list goes on and on. >> could i just jump in? i think you're absolutely right that the political risk has been one of the factors, it's in kind of this wall of worry that everybody's been worrying about. and yet the market has continued to go up. some of that political uncertainty may be clearing as we speak. just the fact that you're seeing some democrats saying, you know, i'm going to retire for no good reason other than they probably won't get re-elected. i think that's a positive. i hope gridlock wins. gridlock is very bullish for the stock market. it's when you have one party that's dominating and just says, you know, in a crisis we're going to get all of our programs through no matter what, no matter what the public polls show. i think the fact that the grid -- we may not have to wait till november for gridlock to work. it's working already. >> good point. thank you guys. good to see you both. any comments or questions? we'd love to hear from you. our e-mail is squawk@cnbc.com. when we come back, the president and ceo of the peterson foundation. david walker will talk health care, the deficit, the global economy when "squawk" continues. time now for today's "aflac trivia question." who was the first nhl player to score 50 goals in one season? 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[ male announcer ] staples has low prices on everything you need for your office. staples. that was easy. now the answer to today's "aflac trivia question." who was the first nhl player to score 50 goals in one season? the answer? maurice "rocket" richard who did so in 1945. >> welcome back. futures this morning, a little negative after some modest green arrows in asia and in europe overnight. we are awaiting challenger in about 15 minutes. the jobs numbers from him and adp in about an hour or so. the president blasting the nation's intelligence agencies for failing to connect the dots, in his words, and stop the christmas day bomb plot, taking them to task for, quote, a screwup that could have been disastrous. >> we have to do better. and we will do better. and we have to do it quickly. american lives are on the line. so i made it clear today to my team, i want our initial reviews completed this week. i want specific recommendations for corrective actions to fix what went wrong. >> the president announced new steps to improve the intelligence or security systems, but he promised they would be coming, signaling more changes for airport travelers. our guest host this morning is one of the leading experts on the federal budget and a fierce advocate for fiscal responsibility. david walker is the former u.s. controller general. he's also president and ceo of the peter g. peterson foundation. david, great to see you. happy new year. >> good to be back. happy new year to all three of you. >> you know, you have been on the campaign trail for fiscal responsibility for years now. as a nation, what kind of grade would you give us right now? how are we doing? >> washington is failing on fiscal responsibility. i think the american people understand that. our latest statistics say that 80% of americans are concerned about escalating deficits and debt number two only to the current economy and their job. way ahead of health care reform, way ahead of climate change and other issues including security issues. they think that congress is broken, and they think we need a special process to be able to deal with it. look, 2009 was about the recession. it was about financial services, health -- the health care. it was about housing. 2010 needs to be dealing with the structural challenges that we face that threaten our future. >> one of the biggest issues you've probably been focusing on is the health care reform bill that's been working its way through congress. what does this bill do to fiscal responsibility? does it tackle some problems in a good way? what are your concerns? >> first, it's not a health care reform bill. in order to be a health care reform bill, you have to deal with coverage, cost, quality and personal responsibility. this is a health care coverage expansion bill. the only reason that people are talking anything about cost is because the president said it had to pay for itself over at least ten years or else he wouldn't sign it. the fact is is that it does virtually nothing to significantly reduce the tens of trillions of unfunded obligations for medicare. it results in higher health care costs as a result of gdp. if it passes, then doing nothing. we're punting on all the tough choices. >> does it pay for itself over ten years? >> fend depends on who you ask. i think it does, but part of the reason it pays for itself over ten years is you get revenues in some savings for all ten years. and certain expenditures don't last all ten years. they last fewer years than that. there are differences of opinion about whether or not it pays for itself beyond ten years. the cbo says that it does. but what people don't want to read is, all the different qualifications and caveats that the cbo puts on that basically saying we have serious concerns about whether or not this is -- will happen and be sustainable. >> the cbo is not giving this a clean bill of health even though politicians who are pushing this through have been holding this up. you were the comptroller general. we've heard from other people who are concerned about the pushback on the states, the amount that it's going to be dumping back on them in unfunded mandates. we've heard others say for ten years you're looking at decent numbers. what happens in years 11 through 20. as somebody who knows these numbers -- >> the bottom line is i think it will pay for itself over the first ten years. i think it is highly questionable of whether or not it will pay for itself beyond ten years because a number of the assumptions being used are unrealistic and that's what cbo is trying to say but they have to score by certain rules so they're sticking by them. my view is for health care reform to be fiscally responsible it has to pay for itself over ten, not add to deficits beyond ten, result in a significant reduction in tens in trillions of unfunded obligations we already have, and result in total health care costs as a percentage of the economy that's less after the reform than before. none of the bills meet that. they may or may not meet number two. they meet number one. they definitely don't meet number three and four. what we're doing here is we're adding a new wing on to a health care house that is structurally unsound and mortgaged for more than it's worth. and we're calling that victory. >> when does that catch up with us? >> soon. my view is is that if this bill passes -- and if it passes, it will be the senate's decision. are there enough changes to where the senate can accept it? it's going to have to go through one more cloture vote. they have to keep all 60 votes. if they lose one of those votes, it's over. and so basically the senate has all the cards. and frankly, a few senators have all the cards. so we'll see what happens. if it does pass, we're going to have to get serious about controlling health care costs. this bill punted on all the tough decisions with regard to payment systems, with regard to tax preferences, with regard to taxpayer subsidies. the things that need to be done, it punted on. so we'll have to have a special process to get that done. >> "time" has a big piece, promise to trim deficit is growing harder to keep with afghanistan, with the unpopularity of raising taxes in this country right now. and the idea that whenever the president tries to do anything it doesn't have to do with jobs, he gets pummeled. how is he supposed to talk tough on deficits when people still say you've got to keep stimulating the economy? >> we have to separate between the short term and the structural. and quite frankly, 2009 was about the short term. it was about trying to turn the economy around, dealing with some serious nonbusiness cycle challenges. and frankly, i'm not as concerned about the short-term deficits and the related debt as i am the structural. the structural or the ice that's below the water for an iceberg is what threatens the ship of state. >> so you don't have a problem with the focus on stimulus right now. >> no, i don't have a problem with what -- now, frankly, we wasted a lot of money, okay? the stimulus was not properly designed. the bailouts weren't properly designed. we spent a lot more money than we should have. we didn't learn some lessons from the past, and hopefully we'll learn this time. but the idea that we needed to do something, we needed to address these crises, that was going to cost money. it was going to add to deficits and debt. that doesn't concern me as much. the waste does, but that doesn't. what concerns me is medicare, for example, is $38 trillion in the hole. and what are we doing about that? we're going to add a new entitlement benefit, okay? hey, get real, guys. >> david's going to be with us for the next two hours. we've got a lot of ground to cover. not only on what's been happening with health care bills but other issues he's watching as well. stay right here. we'll have more with him throughout the morning. also coming up today, what are these people thinking? take a look. frigid temps across much of the nation. these people, yeah, it's not stopping them from taking the polar bear plunge. believe it or not, in these conditions, they're out there. we'll get to your travel or swimming forecast. it's coming up next. also, as we head to a break, let's take a look at where crude prices are sitting this morning. down by about 28 cents right now. "squawk box" will be right back. >> you're watching "squawk box." o 15% or more on car insurance?e you host: did the waltons take way too long to say goodnight? mom: g'night john boy. g'night mary ellen. mary ellen: g'night mama. g'night erin. elizabeth: g'night john boy. jim bob: g'night grandpa. elizabeth: g'night ben. jim bob:'night. elizabeth: g'night jim bob. jim bob: g'night everybody, grandpa: g'night everybody. jim bob: g'night daddy. vo: geico. 15 minutes could save you 15% or more. it was -- becky, you wouldn't do it. it was freezing. it was freezing. i didn't even see the person -- take a shot of me -- january chill, my fat kept me warm. yeah, i did. these guys, they do this constantly. we usually don't show it on the air. we have it on our preview. >> joe goes into everybody. >> yeah. >> my face -- >> joe's face. >> people you put in my face look ugly, and you put my face on other people and they look ugly. that's all i can come up with. let's check in with our friend scott williams who is not ugly at the weather channel. would you jump in that water, scott? shrinkage -- >> absolutely not. >> no, bad. and it's going to stay cold. >> yeah. we are going to continue to find those cold temperatures. who needs caffeine when you can just jump in that water, right? as we move into st. louis this morning, eight degrees. south florida, miami, 40 degrees. so they are breaking out the sweaters and the jackets. chicago checking in at ten. even in tampa, morning record lows, temperatures in the upper 20s. no current airport delays across the area. but i am keeping tabs on the cleveland area as we have some light freezing drizzle this morning and some snow showers. a few snow showers in the forecast as the day progresses. also as we move into the pittsburgh area, watching for temperatures in the 20s and some snow. we'll see a lot of sunshine. not seeing a lot in the temperature department here. only in the 30s for atlanta. upper 50s as we move into miami. now back to you. carl? >> that sounds pretty good. 59 in miami. >> and i think the freezing drizzle in cleveland sounds nice. i don't have any plans later. when we come back, we'll get the challenger jobs number on the way. we've got the numbers and analysis in just a second. really need to do something with it... i'm just not sure what... what is it? oh just return it. returning gifts is easier than ever with priority mail flat rate boxes from the postal service. if it fits, it ships anywhere in the country for a low flat rate. plus i can pick it up for free. perfect because we have to get that outta this house. c'mon, it's not that... gahh, oh yeah that's gotta go... priority mail flat rate shipping starts at $4.95 only from the postal service. a simpler way to ship and return. what are you doing...? calling chase sapphire, seeing if we have enough points to stay longer. now? you don't have enough time... and you have to push all those buttons... no buttons, someone answers every time. yeah, right... bet you a massage... yeah, ok. hi, julie... i have a question about my points. hi, what button do i press for a massage? hello? new chase sapphire... you call. we answer. no waiting. just press right here... go to chase.com/sapphire. chase what matters. welcome back to "squawk." a busy morning ahead. the health care debate heats up on capitol hill. opposite views of what the final bill should look like when it hits the president's desk. then stocks on the move this morning, the animal orchestra is getting warmed up is what i'm told. >> you had to read that, too. >> not my choice. joe's going to bring us stocks to watch as we count to the opening bell. >> i'll tell you why. >> really. that's a good tease. later, an important preview to the government's december jobs number. adp released. the man behind the numbers. first becky has this morning's top headlines. >> right now it looks like those futures have taken a turn for the worse. in fact, right now those dow futures down by about 27 points below fair value. so let's keep an eye on where things are headed. we're getting jobs numbers out and paying attention to that as well. also, democratic senators christopher dodd and byron dorgan will not seek re-election. dodd, the chairman of the senate banking committee, is expected to make the announcement later today. dorgan made his announcement late yesterday. of these two, dorgan's seat is more likely to go to republicans after this election. while the holiday shopping season had a strong finish, not reason for holiday cheer among the nation's shopping center owners. a research firm says vacancy at strip malls hit a high in the fourth quarter. the large regional malls is now at the highest level in ten years. mortgage applications rose half a percent for the week that ended january 1st. the mortgage bankers association says the muted demand comes as mortgage rates rise to the highest level since august at 5.18% for the average 30-year mortgage. challenger, gray and christmas releasing its december jobs report. our own steve liesman. steve, take it away. >> thanks, joe. good numbers this morning. cuts of just 45,000. that's down 73% from a year ago. down 10% from november. it is the fifth consecutive decline. though for all of '09d, it is up 5.3%, almost 1.2 million. layoffs announced in '09. the most since 2002. but it was a tale of two parts of the year. the second half was down 56% from the first half. let's bring in john challenger now. but before, john, i did work on the numbers this morning, when the cuts are below 50,000, monthly private sector job growth in the bls report has been negative only three times. and the average job growth is 0.22%. so the question to you has got to be, is this a piece of data pointing to positive job growth being announced by the government on friday, in your opinion? >> well, steve, that's an interesting observation. i think it's certainly possible that coming out of this long recession where companies have cut continuously and steeply, we may see a quicker turnaround as the economy starts to recover. we saw a great jobs number last month. much better than expected. so maybe that 12 to 18-month period of jobless recovery that we've seen after the last two recessions is going to be less this time as employers are forced to start bringing back more workers. >> do you think they overcut, john, in the first half of the year? >> well, certainly it would seem to be. we saw a seven-year high in job cuts just 11 months ago in january. almost a quarter of a million jobs cut. and now, just as you'd said to start the piece, this second half of the year has been very light, continuing job cuts, and now we're certainly down to job cuts that are the kind of numbers we see during periods of expansion. >> john, you think we got off cheap here. you think the 10% unemployment rate, which is high, and means a lot of pain out there, could have been much worse. >> we reached 10.8% in the last -- in the early '80s recession. so that was the peak then. obviously, in the great depression, we were far above that 20% plus. so this recession called the great recession and often compared to the great depression has not produced unemployment rates certainly anywhere near what we've seen in those previous recessions. >> it's also interesting that '02 takes out '09. '09 was the worst year in this great recession. but '02 had, in fact, if you look at a long-term chart of the challenger numbers, there were more firings and layoffs in the previous recession. >> yeah. and i think that this period has been really, you know, this year was like we had talked about, it was almost like a bipolar year. the real cuts, the heaviest cuts during this period happened in the last half, the second half of 2008 and the first half of 2009. that's where they were really concentrated. >> hey, john, where have the firings decreased the most? >> we've seen heavy cuts in some of the sectors that saw the worst job cuts. so automotive has seen a big decrease in cuts. retail, though, is the number one -- almost 80% drop in cuts in the second half of the year skpared to the first half. >> if you had to guess where the hiring would begin first, where would it be? >> well, i do think that we know medical continues and health care continues to create growth. but i think professional business services, one of those categories in the bls reports, is driving growth. i think also technology is going to see improvement. >> john, thank you very much. guys, we have two other reports coming out. adp at 8:15. and then you're going to want to watch the ism services number at 10:00. that has an employment component in it. that's been lagging. you're going to have to have service sector job growth if we're going to have overall positive job growth in the nation. >> this is an example of how washington and wall street are out of touch with reality from main street. what i just heard is, we have fewer job losses. obviously fewer better than more, but we're still losing jobs, okay? the fact of the matter is, if we look at where the job growth loss was, where is it? government and health care. both of those were fundamentally unsustainable. we're going to have to restructure those. and so in the short term, they may look good, but over time, that's not sustainable. i think, and many people believe, that unemployment and underemployment levels are going to be much higher after we turn the corner on the economy in large part because the change of the nature of the economy and because of our skills and knowledge gap that we face in this country. >> so you think even though the number could be better on friday, we have not seen the worst for employment levels in this country? >> what i'm saying is is that we're looking at short term rather than structural, all right? we need to start focusing on structural, all right? that represents the threat to our future. whether it's fiscal, whether it's employment, whether it's competitiveness. where we're getting growth are in industries that are unsustainable. >> this may be the kiss of death to his point, but most economists agree with him, okay? >> sorry. >> no, the idea being is that -- what we're talking about is cyclical versus sector. we're looking for positive job growth. everybody wants it. we hope it happens friday. his call is february. if it happens, what does it mean? it means we're adding some jobs, but it doesn't mean we're solving the long-term problems in this country that have to do with job growth, that have to do with education and have to do with 8.2 unemployed americans. that is a secular -- it's an entrenched problem, systemic and it's going to be a while working that out. >> you're talking about education, focusing on the right places. what about the idea we're looking at renewable energy as a way to get to? is that a potential solution? >> absolutely. i mean, we need to -- first we need to conserve. we are gluttonous consumers of energy. we need to do more there. we need to pursue alternative energy sources which can result in green jobs and whatever. but what does that mean? that means investing more in basic research, that means making sure that we've got, you know, enough scientists and other people with the skills and knowledge to help us be ahead of others. and quite frankly, when you look at the indicators, we don't invest enough in basic research. and when you look at where we stand with regard to scientists and with regard to math and science and other outcome-based indicators, we're below average. >> we keep putting kids in college and they keep not graduating. that's one of the worst problems. >> college dropouts. >> they don't graduate. first year is great. fourth year, no good. >> plus our immigration policy, we've got too tight after 9/11. as a result, a lot of the people who were coming here from other countries to get ph.d.s, you know, in areas of math and science can't get in or now they're going home because they're seeing that there are opportunities there. >> why can't we get our kids to want ph.d.s as i say from my e news desk with my liberal arts degree. >> thanks. let's find out what the markets are watching. at. cme, market strategist at yastro. peter, are you expecting positive numbers on friday, and does what challenger just said influence you at all? >> you know, as a market strategist rather than an accountant, i'm going to react to the data and not try to get too profound or deep about the economy. i do totally agree with your guest, though, that our economy's got deep structural problems. for this week, if we see strong data, we see better jobs numbers, what we should all look at is how does that affect interest rates? and then from there, using it through the prism of interest rates, we can determine what that means for commodities, what that means for stocks and any other asset classes that we're interested in. if we see strong jobs data, interest rates are going higher. the fed is not going to be able to continue to keep rates low. and even if they keep the short end very low, you're going to start to see the inflation hawks and the bond vigilantes come out of the woodwork and start to sell. so you'll see rates go up in the five-year, 10-year and 30-year area. all of that is going to be bad for stocks. the stock market rally was pretty much driven by the amazingly low interest rate environment that was created by all the easing. you know, when the worst-case scenario didn't pan out in the really low rate environment we've enjoyed for the last year, we had a phenomenal rally. but if you take away the punch bowl, you'll see stocks depreciate. >> you're going to see stocks -- i missed that last part. >> you're going to see stocks drop. >> drop. typically when the fed telegraphs a hiking phase, stocks are flat to modestly down. it's not a bloodbath, is it? >> you know, we're coming from a rate right now of zero. so when you talk about the fed raising rates, let's just call it a quarter of a percent just to make it -- you know, they start raising from a quarter of a percent and we have a two-year note at just approximately 1% for argument's sake, we're talking about rates going up 30% or 40% if they just go from 3 to 4 or 4 to 5. that's a 25% increase in rates. you could see a 25% drop in the values of equities because of just the rates going higher and earnings staying flat. >> we don't have time to talk about what the dollar right do, although i think we could probably guess. >> dollar would rally. >> peter, thanks. we'll see what happens. good to see you. >> thanks. coming up, turning up the heat on health care reform. democratic leadership heads to the white house today to meet with the president as it pushes for a final bill. that is next. as we head to the break, here's a look at the widely held stocks. these are the building blocks of a perfect girls' weekend. it all starts with having more hotels to choose from. that's why i book with expedia. so i can find someplace familiar... or somewhere more distinctive... nice! then i can compare dates to find out when i can save the most cash. done and done. we should do this more often. more choices, more savings. where you book matters. expedia. ♪ dot com tell carl he's coming to new york with me. i thought you said carl was our best presentation guy. [ worker ] he is. just last week he told my team about fedex office print online for our presentations. we upload it to fedex office, then they print, bind, and ship it. the presentation looks good, right? yes, but -- wait, you didn't actually bring carl with you. good morning! but i digress. [ male announcer ] we understand. you need presentations done right. fedex office print online. happy new year! welcome to progressive.com! this place is hoppin'! ah, it's resolution season! well, my resolution -- save money. last year, millions of people visited progressive.com, and those who switched saved an average of over $350. no wonder it's like a party in here. [ blows horn ] [ blowing rhythm on horn ] [ rhythm continues ] i wrote that. starting the new year with savings -- now, that's progressive. call or click today. we're here with david walker. i know you know tony fratto, a cnbc contributor as well. something's all in a bunch. >> he's upset about the steelers. >> about the steelers. but he says how can you possibly call this thing budget neutral in ten years? he says the bill assumes -- the health care bill -- medicare reimbursements for doctors will be cut by 21% and then held flat over ten years while at the same time they plan to increase doctor reimbursement pay in a separate bill that will cost $300 billion over the next ten years. it's crazy. and you, david, are someone who should be able to see that. >> well, first, there's no question that they're playing accounting gimmicks. there's also no question that they're making unrealistic assumptions. we know that taxes will go up. it may or may not generate the amount of revenues they're suggesting. i have serious doubts on whether or not a number of these savings will be achieved. in my view, if the bill doesn't pay for itself based on realistic assumptions, not add to deficits beyond ten years, if it doesn't result in a significant reduction in the tens of trillions of unfunded obligations and lower health care costs as a percentage of gdp after passage than before, it's not acceptable. it's not fiscally responsible. and none of the bills meet that. >> to me it sounded like -- and it's dangerous when someone like you who especially buys into the ten-year not costing anything. >> well, look. i'm going based upon the official scoring rules the cbo has to use. >> why? >> because they're the scorekeepers. if you recall, what i did say was that they have -- >> we listen to you. zpr >> -- that they have all kinds of qualifications and unreali unrealistunrealist ic assumptions. >> i put faith in what you say. >> this is not a fiscally responsible bill. >> okay. all right. house speaker nancy pelosi says it is. and congress is on the verge of passing a final health care bill. the goal is to get legislation to the president in the next few weeks. john goodman is president of the national center for policy analysis. also with us is ralph nies, ceo. national coalition on health care. mr. goodman, you probably heard some of the comments mr. walker was just making. just weigh in on this -- on the first ten years. start with that. >> well, i think david is right. and i think that the situation's worse, though, than what he described because he's concerned about these unfunded obligations we have in medicare, and he might also mention social security. but what we're going to do with this health care bill is we're going to add 18 million people to a health insurance exchange where the government's guaranteeing that health costs will not go above a certain percent of their income. hey, that's an entitlement. and we're going to put another 14, 15 million people in medicaid. it's then going to be bigger than medicare. that's another entitlement. so we're building up future debts, and they're not paid for. >> ralph, are you going to agree or disagree? we probably should have someone disagree at some point. >> i'm going to disagree in part and agree in part. there's no question the current system is dysfunctional, inequitable, not sustainable. the president and the congressional leaders have made much progress, especially with covering tens of millions of people and addressing health insurance reforms. i've got problems, as david does, with the cost containment issue. there's much too much money in the system. what we say is for the first ten years and for the long term, it's got to pay for itself, and it's got to cut the deficits that we have. the health care costs are the leading contributor to our financial crisis, according to ben bernanke and david walker and many others. we want a fail-safe mechanism, a trigger that would come in after three, four or five years. what the insurance industry leaders promised the american people and the president last summer is we promised you we can cut $2 trillion from our health care expenses over the next ten years by decreasing the rate of increase by 1.5%. trust but verify according to ronald reagan 25 years ago. let's put that into law. let's make cost containment systemwide and enforceable. and we can make sure that it's budget neutral and we rein in long-term costs. >> several quick comments. first, john is right that the most imprudent thing that you can do is expand entitlement benefits. that's the most imprudent thing you can do, and that's what's being done here. secondly, ralph is right to say that there are positive things here with regard to insurance reform. obviously, if you can get more coverage, that's great, if you can afford it. and affordability, by the way, is not just about the individual. it's about the government and our kids and our grandkids, if you will. here's the key. we need a fail-safe. there is no fail-safe in this bill. there are all kinds of assumptions that revenues are going to be generated from this. we'll achieve savings from that. but there's no safeguard. this bill needs an absolute ironclad safeguard to make sure that these savings will happen. and frankly, even if you get that, we haven't even begun to really deal with the tough choices. >> john, there's not going to be a fail-safe. john goodman. is there? >> no, no. not one on capitol hill is really thinking about how you really control health care costs. we know costs can be controlled. if you look at those areas of health care where there's no government, no big business, no big insurance, costs are reasonable. quality is high. cosmetic surgery, lasik surgery, walk-in clinics in malls. in all those markets you have transparency, high quality, low costs. so we know it can be done, but it's not going to be done by adding on more bureaucrats and more huge dysfunctional organizations. >> ralph, what about the argument that we have tens of millions of people who are without health care insurance? something needssbe done immediately. this plan may not be perfect, but let's get a way to get people covered and then go back and try and fix it. do you agree with that? >> again, i think that we're off to a good start. but much has to be done over the next month. and i disagree with people who say that the congressional leadership and the president are not looking at cost containment. they are. people are also looking at the possibility of fail-safe. they believe, we believe, we need an insurance policy for this bill that the assumptions are wrong, or for whatever reason, we can't raise the money to make sure we can pay for 30 something million new americans and make sure the others are secure with their health insurance policy. we need that insurance policy, and we're going to make sure we work on it for the next month. and don't bet against it. >> keep in mind, here's what washington is doing. yes, we need some level of universal coverage, but we've got to deal with cost. what we're doing is saying gee, let's have our dessert. we'll eat our spinach later. that's how we got into tens of trillions of dollars unfunded promises, and that's where we're headed again. >> so what's the dessert? covering americans? >> yeah. coverage is the dessert. >> really? >> people talk about affordability. >> some argue that's the entree. that's what you need to do first. >> the fact of the matter is when you made $38 trillion more in promises you know how you're going to cover? it's a false promise to be able to make more when you can't afford what you've already made. >> would you agree, at least, that -- there's an old saying in journalism called breaking glass. you need to change a longstanding problem, you have to break some glass. does this bill at least do that? nobody's arguing we're done with this issue. >> there are positive things. the insurance reforms, the fact that you're getting more people covered, the fact that you've got some pilots and an independent commission. but they won't get the job done. the fact of the matter is that all the tough choices are being punted. they should have started with cost first. >> you can't have a vat of blooming onions as your entree, carl. that's not good for you. your blood pressure's going to go up. your cholesterol. >> you can't eat the fried onion. you eat that all the time. >> john and ralph, we appreciate your time. hope to see you again and come back and talk more about this. >> thanks. when we come back, a special animal orchestra for a very special person when we return. but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business. chevron. so, at national, i go right past the counter... and you get to choose any car in the aisle. choose any car? you cannot be serious! okay. seriously, you choose. go national. go like a pro. ♪ happy birthday, joe! >> happy birthday. that's a joke. it's a joke. greco. i'm not 55. i'm not 55. >> we like to add, that's the icing on top of the cake that we're serving you today. >> right. >> an extra year. >> to add an extra year. what is it? does it make a difference at this point? really? 54 or 55? it's hideous. it's good, though. you know, people that are still 60, 70, 80, 90, doing great things, they say stop whining about being 54. it's a great age. young children. i've got my health, we have everything and i'm thankful. >> you have a job you love. >> a job i love, people that i love. don't make me. don't make me -- >> a crew that you love. >> don't make me. don't send me there. >> the only sad part is you look like such a dork in that hat. >> i do. i don't like that head shot either. it's also chris whalen's birthday. >> yes. >> the guy who put me -- henry kravis's birthday. >> and other people. those are two of the people. >> bonnie franklin from "one day at a time," 66. and earl scruggs is, i think, 86. >> is it his birthday, too? but the joke was that this producer of the show, we used to wish people happy birthday every day. and everybody every day would be 54. like webster when he was still on tv. he was 54. and he kept forgetting to change. >> it was in the template. >> it was in the template. >> you really are -- anyway, 3m was added to the conviction bicyclist at goldman sachs, a target increase of 105 to from 100 and dow chemical was upgraded. i've given up on trying to help people. >> we've got your number. happy birthday, joe. >> thank you. we're moments away from adp. at 8:15 we'll get the number. and then a hedge fund heavyweight giving us his watch list and we'll face the budget crisis with kent conrad in just a minute. attention, "squawkers." out today, a new book by "squawk box" producer lori ann larocco. "thriving in the new economy." pick up a economy at a local bookstore near you. i was just in town for a few days, and i was wondering if i could say hi to the doctor. is he in? he's in copenhagen. oh, well, that's nice. but you can still see him! you just said he was in... copenhagen. come on! that's pretty far. doc, look who's in town. ellen! copenhagen? cool, right? vacation. but still seeing patients. oh. [ whispering ] workaholic. i heard that. she said it. i... [ female announcer ] the new office. see it. live it. share it. on the human network. cisco. countdown to breaking news. the adp employment report about to be released. we have the numbers and the instant reaction at 8:15 a.m. eastern time. betting on a steady recovery. >> she's down under the boat. keep it steady, now! i've got something very big! >> but does steady mean more jobs for the economy? rdq's chief economist, john riding, and jpmorgan chief u.s. equities strategist, tom lee, will tell us what they see for 2010. can you help me? >> yes, but you must be willing to pay a terrible price. >> yeah, yeah, yeah. >> forming a budget task force. the mission, preventing a fiscal disaster. senator kent conrad, chairman of the budget committee, will tell us about the crisis at hand. "squawk box" begins right now. ♪ welcome back to "squawk box." all yyou young'uns out there. cnbc worldwide. someone just wrote in that you're young enough to be -- or old enough that i could be your father. because they lied about how old i was. carl quintanilla is here, too. >> my mom's age. >> yes, i'm close to your mother's age. our guest host today is david walker who's older than i am. he's the former -- >> i'm trying. >> he's the former u.s. co comptroller general, president and ceo of the peter g. peetersn foundation. and he's doing fine. you feel okay, right? it's not the end of the world. >> i probably feel younger, joe. >> anyway, 8:15 a.m., we do have the adp report coming out. an important one. a dow jones news wire survey predicts a loss of 90,000. that's still not good from the private sector last month. but it's been worse than we've seen from when we get the actual employment numbers friday. the futures are indicated down about 15 points. let's get over to someone who has a three handle, that doesn't bother me, carl quintanilla. >> thanks a lot, pops. high-profile departures ahead for the senate. banking committee chairman chris dodd is retiring. the five-term democratic senator expected to make an announcement today. dodd's poll numbers began falling, and then he came under fire for taking a discounted vip mortgage. and fellow democrat byron dorgan also deciding not to seek re-election this fall. the departure of the north dakota moderate means democrats will have to defend open senate seats in at least four states. a cold snap taking grip of the gulf states. florida farmers are working to salvage millions of dollars worth of crops. and the government will be rolling out its latest inventory report on crude stockpiles. 10:30 a.m. expectations are for a draw of 300,000 barrels. right now the price of crude is down 25 cents. $81.52 has added a lot, guys, since it was in the high 60s, low 70s not too long ago. >> carl, thank you. joe, you don't really feel bad, right? >> no. >> you look great. >> i hung on to 53 till midnight. >> yeah, you could pass for your 40s, no problem. >> with the hair dye and toupee and everything else. >> you've got hair, joe. don't complain. >> you're right. i do. it is actually real. >> it's real. >> it's real human hair. >> it's the real deal. that doesn't mean it's yours. all right. as we look ahead to the adp report, the big question is, when will a recovering economy result in steady job growth? joining us now from new york is john riding, he's chief economist at rdq economics. also former chief economist at bear stearns. and tom lee, chief u.s. equities strategist at jpmorgan. gentlemen, welcome. john, i know you don't forecast adp numbers, but you are looking for job growth in friday's numbers from the government. this is going to be a big turn, right? >> well, we are. we were down -- by the way, happy birthday, joe. down only 11,000 jobs in november. there's been a patching of upward revisions. we've seen jobless claims fall sharply. we could see a small rise in jobs on friday's jobs report. we're looking for payrolls up 25,000. it would be a good start. problem is to get unemployment down significantly, we need to create 200,000 to 300,000 jobs a month. and i think we are quite a way away from doing that at this point. >> tom, what do you think about those numbers? what are you looking for in friday's jobs report, and how important is that number in terms of just giving us a general direction for where the economy's headed this year? >> hi, becky. directionally, i think the story for jobs in the next year is going to be an improving labor market. you know, i don't know if it's december or january when we get positive payrolls. the official jpmorgan forecast is positive. 40,000 in december. and, you know, there are a lot of reasons to be encouraged for december positive report. you know, it's the improving claims. it's the fact that temp hiring has been up. it's also that hours worked has been increasing. the normal sequence in what you expect a labor recovery to take place is taking place. >> john, you're still looking for unemployment to be somewhere around 9.5% by the end of the year? >> unfortunately. i mean, you just have to go through the math. the economy's potential to grow given productivity looks to be somewhere close to 2.5%. and for each percent you grow above potential, it tends to take about three to four tenths of a point off the unemployment rate. we see 3.5%, maybe a little higher gdp growth in 2010, unfortunately where we're starting from, at a 10% unemployment rate, maybe creeping higher on friday, that's only going to take the unemployment rate down to 9.5%. you have to see 5% plus gdp growth in 2010. if you're going to get down to, say, an 8 handle auto unemployment when we enter 2011, and that to me seems a stretch with the problems we still have in commercial real estate, residential real estate and elsewhere. >> but, tom, even given all that, you're still looking for the year-end target for the s&p to be up around 1300? >> that's right. i think that the variance in our view versus maybe what most people are thinking is, one, i think there's substantially more pent-up demand in the economy from consumers. so i think we're going to see a much more robust consumer spending. and the second is really that improving labor is really in this cycle going to have a disproportionate benefit to credit easing. because of the lack of business confidence. >> joe, you talk about unemployment and the fact that it's probably not going to go down dramatically in 2010. what about structural unemployment? as we look ahead, you know, when we look at what type of economic growth we might be able to sustain over time, when we look at competitive conditions, when we look at the skills and knowledge of our work force, the changing nature of the economy, what, if any, views do you have on what we might see long term as structural unemployment? >> well, unfortunately, this period of unemployment we're having is disproportionately hitting younger people. people coming out of school, people coming out of college who don't have a job. so we're not getting that on-the-job training of the work force which is going to have what economists call potentially a histore sich echlhistoresis e. my problem, though, is before we can get to the structuredal issues, we have cyclical issues. to get unemployment down, we need 5% economic growth for three to four years. i'm all for that. i don't know how we get there when we're facing what you were talking about earlier on health care, higher taxes. washington, to me, doesn't seem to have a pro-growth economic agenda. >> hey, tom, i know that wall street tends to be more focused on what's happening in the next hour, in the next day, in the next month, maybe even in the next year. some of these problems are quite a bit longer term than that. how do you factor that into your long-term prognosis for what's going to happen with the markets? >> well, as you can imagine, the accuracy of forecasts beyond the next six months is very limited. as you know, in '82, for instance, there were many economists predicting high structure unemployment because of the changes in the labor force and demographics. as you know, in that year, we had almost a 2.5% drop in unemployment. i think forecasting beyond the next 12 months is a lot of luck. and it's really for that reason that when we think about the next few months, i think the visibility of a recovery is going to be much better. i think too many investors are thinking this is going to be an inventory bounce recover meaning short-lived stock rise in the first half. but if you look at precedent, you know, this is the 20th bull market that's been at least nine months long. 18 of the 19 precedent markets actually had positive gains over the falling 12 months. it's likely to be a much better equity year than people expect. >> thank you for joining us. appreciate your time today. john, you'll be sticking around for the adp report. david walker's with us for the morning. meantime, joe's got some news. yeah, i quickly want to mention monsanto which has indicated lower. i think if we look at the shares. this is not a big quarter for the company. it did report a nongap loss. it did reiterate overall for the year that it will hit 310 to 310. i think the estimate is somewhere about 329. it's a $46 billion company. quoting the ceo, hugh grant -- >> who's on the cover of "forbes" this week. >> hugh is? >> yes. in a good way. >> really? >> yeah. >> he says our first quarter is a small but important quarter. it sets the foundation for the year. they also talk about an r&d pipeline and other things that are positive. but just on face value looking at that loss, which is, what, 2 cents worse than expectations for break even. it's the full-year number that's more important. you can see the high end would hit amex expectations. >> you said it, you've got to watch when the market takes news and reacts. >> yeah. although that's not -- who knows where it ends the day. you know, it's got a low of 66. julie from wisconsin was born the same day. >> same day, same year? >> same day, same year. >> happy birthday, julie. >> she's 54, not 55. everyone's writing in. you don't look 55. you know why i don't? because i'm not! >> they told you you look younger, right? >> well, they say i don't look a day over 54. >> you were born on the same day as her. i was born on the same day as sting. >> sting. >> the singer, that's right. >> i want to come over and touch you. that's really -- >> we're in a different business. >> i know guys that have a name like sting. you know, they had a real name. >> bono. >> i'll call myself sting. the edge. slash. >> and it was great for, you know, a nickname for a comptroller general. >> yeah. you did sting a lot of people. when we come back, the next step towards jobs friday. the adp number for december just a few minutes away. we'll get the numbers and the instant market reaction after this quick break. verizon makes a big deal about their maps, but when you look a little closer... their story begins to fall apart. see, at&t let's you talk on the phone while you surf the web. [ clattering ] verizon...doesn't. at&t has the most popular smartphones and the nation's fastest 3g network. verizon...doesn't. [ clattering ] glad that's cleared up. oh, boy. [ male announcer ] at&t. a better 3g experience. get an exclusive pantech messaging phone free after mail-in rebate, only from at&t. but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business. chevron. just moments away from the release of the adp number for december. steve liesman is here as we look at futures a little below value after decent numbers overnight. steven. >> thanks very much. adp reporting that private sector employment will drop by 84,000. that is the best number since march of '08. you can see relative to what economists have forecast minus 10,000, it's a little bit on the weaker side, but it's a little better than the expectation which was 90,000. that was the forecast. this is the largest gain in services plus 12,000 since january '08. the best small business decline since july '08. although it's worth pointing out that the adp has been undershooting the bls private sector by 50,000 a month including misses of greater than 100,000 in five of the past seven months. you take that together, net-net adp has counted 600,000 more job losses since the beginning of '08. much more coming up with joel and john is hanging around but we're going to do something else first. quickly, the number is a little above expectations? >> a little better. >> negative -- >> 6,000. >> so 90,000 was the expectation. it's 84,000 is the actual number. >> steve, thanks. we'll come back to you for more. as you probably know, we're expecting the head of the senate banking committee, senator chris dodd, to announce around noon time that he's not seeking re-election. but we do want to bring in someone who's obviously now at the center of a lot of speculation of this. >> he says he will. he's seeking to succeed fellow democrat christopher dodd in the senate. blumenthal told the associated press, he will announce his candidacy at noon today. at the dnc. so we can get it straight from the horse's mouth. >> when are we going to do that? >> i think now. >> do we have him on the phone? connecticut state attorney general richard blumenthal, are you with us on the phone? >> i can hear you if you can hear me. >> i can hear you. interesting times. what are your plans? >> first, i want to say that this decision by senator dodd has enacted enormous grace, dignity and courage. and connecticut owes senator dodd tremendous thanks for his extraordinary devotion to our state and our nation working for people tirelessly over the years. and i intend to be a candidate. i will not be making a formal announcement today. but i do want to let people know about my plans which are to be a candidate for united states senate. i'm taking nothing for granted. it will be a great deal of work, and i'm going to earn the votes and support of people in connecticut. >> the a.p. is reporting that you will announce today at noon. is that not true? >> senator dodd is announcing today at noon that he is going to retire, and i'm planning to do a press conference at 2:30. >> at 2:30, okay. it was widely reported that you were hesitant to announce anything before the senator decided what he was going to do. why did you hold back? >> i supported senator dodd. he's a friend. he has been a tremendous public servant. and i would continue to support him. if his decision were to continue to run. one of my lifetime public service goals has been to serve the people of connecticut in the united states senate. and this opportunity is a great one for me, and i hope for the people of connecticut and, as you may know, i've fought tirelessly in this job, and i want to continue fighting for people in connecticut, working tirelessly and relentlessly to make a difference in their lives. >> mr. blumenthal, what causes are at the top of your list if you were elected to senate? what do you think the most important issues should be focused on right now in the senate? >> for the country as for the united states senate and connecticut, jobs and the economy have to be number one at this point. but there are a myriad of issues that i will be discussing as a candidate for the united states senate and listening to the people of connecticut, listening is a very profoundly important quality in any public servant. >> mr. blumenthal, this is david walker. i'll be moving to bridgeport in april, so i'll look forward to hearing what you have to say. >> it's a beautiful area. welcome to connecticut. >> well, thank you. the areas that the american people are concerned about based upon statistically valid polls, number one is the economy and jobs, you are correct. but number two is escalating deficits and debt that threaten our future. and i think it's very important that you address that issue as well as short-term issues. and i hope that you will. >> i appreciate your advice. and certainly as a resident of connecticut, i will be listening closely to you and many, many others about the importance of fiscal prudence and responsibility which i intend to demonstrate throughout my career both as attorney general and as a member of the state legislature. >> attorney general blumenthal, we've seen and witnessing how important 60 votes can be in the senate to your party. with what we saw with governor paterson down here, the white house sometimes involves itself in these things when it looks like someone might have a problem getting elected. have you had any discussions at all with the white house or rahm emanuel or anyone about, you know, solidifying this seat as a democratic seat? >> i'm going to keep my confidential discussions with the white house and with senator dodd and with other parties confidential right now and certainly talking about what may be done over the course of the next month is a bit premature. all of this news is still very, very new. and i hope you'll forgive me for -- >> so who was it, rahm? >> well, i hope to be talking to you over the next four weeks. i appreciate your talking to me. >> this is a game of 20 questions. >> you get called up, you're going to get asked questions. >> dodd has had to dance to delicate dance between being an advocate for consumers and adhering to the wishes of some of his biggest backers. and that has been some of the nation's largest banks. you obviously are in a role where you have been -- i guess you could argue more on the consumer advocacy side. do you think -- how are you going to approach that balance? >> one of my most recent causes has been to urge that the federal reserve roll back interest rate increases and fees that have been imposed by banks on credit cards and other debt because i believe they are unconscionable and unacceptable. and i'm going to continue to advocate on behalf of consumers, working tenaciously to serve their interests. the banks, in effect, have sought second rescue in the form of these higher interest rates. the first one being the bailout last year and now the benefit they're seeking from hikes in interest rates, seeking to anticipate the february 22nd deadline, and i've urged the chairman of the federal reserve to roll back those increases in the interest of consumers. i'm going to continue to fight for consumers. fight for the environment. fight for jobs and the economy and fight for fiscal prudence. >> you know, as you mentioned, protection for consumers, there is a big difference between the senate bill and the house bill when it comes to consumer protection in the financial reform regulations. one provides for a separate consumer financial protection agency. the other does not. what do you think is the proper way to best protect consumers? >> i supported a consumer finance protection agency. i've testified before senator dodd's economy in support of it. i've publicly advocated it along with other reforms in the financial system. and talking about issues at this point is a bit premature, but i have a record on some of these issues. >> also, the governor in connecticut has requested legal action to try and amend the federal health care bill that is pending right now before congress. you've said that you will immediately review the governor's request, but what do you think? what's your next step on that plan? >> the next step has to be from congress to act because any legal action is premature before there is a final bill or law signed by the president. no action can be taken by any state, whether connecticut or any other before there is finality to the legislation. >> if that legislation is passed, though, and it ends up putting unfunded mandates on the state, would you agree as attorney general to try and pursue that lawsuit? >> as a matter of policy, i have opposed many unfunded mandates. but we're researching constitutional issues raised regarding that particular proposal, if it's the same one that has been brought to my attention by the governor, which is the nelson amendment to the senate version of the health care bill. >> obviously, that puts you in a little built of a difficult position if you are running for senate as you'd be dealing with a white house that is obviously in favor of this bill and maybe a state, at least from the governor's perspective, that has some big concerns about what that bill means. how would you maneuver that fine line to walk? >> you know, right now i am about to begin the day a very unusual and unique day for me personally. i'm going to await senator dodd's announcement and give him some time to really have a feel to himself at this point. a discussion of issues certainly i'll be doing it, but i'm going to await some of these details until later in the day or week or months ahead. >> overall, mr. attorney general, i mean, you worked for moynihan. you've been doing this at the state level for a long time. do you know what you're getting into? are you ready to -- we keep talking about the dysfunctionality, not just the senate, but the house as well. you're prepared for all that, i guess. >> i take nothing for granted. i take no one for granted. i have been working on these issues for the last 20 years, fighting for the people of connecticut. sometimes against some very long odds and powerful foes. so i'm ready for whatever the future brings, but i certainly am nowhere near complacent about the challenges ahead. >> and mr. blumenthal, you have been a friend of "squawk box" and cnbc for a long time. there are other foe morning shows -- >> don't hold it against me. >> there are other foe morning shows that will pursue you. we like to have you first all the time, where should be, and as you are today, and we appreciate that. >> you folks do a great job, and i really appreciate the opportunity to be with you. >> if you're happy with the picture, that's great. if not, we can get a new one. >> we've got a different one for you. you're close to the studio, too. >> that's right. >> mr. blumenthal, thank you for your time. >> thank you. >> as you said, a unique day for you. we'll be watching you at 2:30 later on today. >> thanks so much. want to get back to the subject at hand which was the adp number. you want to bring in ryding as well? >> sure, john's out there. let's get joel cracken first. is joel there? joel, good morning. tell us about this number, 84,000, joel. what's it say about where the job market's headed here? >> we're making some improvement now. but the report this morning suggests that the improvement is uneven. the declines in manufacturing employment and construction employment were actually a little bit larger than last month's declines. and they were only partially offset by an increase in employment in the service sector of the economy. so we're moving in the right direction. the progress is a little uneven, but i do expect within the next few months to see our headline number turn positive, which will be a very encouraging development, needless to say. >> hey, john, good morning. what's your forecast for friday? >> well, we were at 25,000 gain in payrolls. and i think given the excellent analysis you gave us about how the government numbers have been tracking ahead of the adp data, there's no reason to change that at this point. we have to remember, of course, that the variability around both this number and the government data have something like an average of 70,000 to 80,000 a month. when you say 25,000, you're really saying a number around zero. and let's face it, that is much better news than the 700,000 job losses we were seeing at the beginning of last year. >> in defense of both of you guys as forecasters, let's be clear. we're talking about a number of 108 million for private sector employment. so trying to get the 30,000 or the 40,000 right is a bit like trying to, you know, hit the head of a needle there. joel, talk about john's -- i don't know if you want to call it criticism, but this notion that you guys have been out there, your numbers more mess mystis ta pessimistic. >> i'm going to be watching the annual benchmark revisions released by the bls later this week with considerable interest because my sense is comparing the monthly numbers from the bls to the so-called pcew benchmark numbers that we're going to see a downward revision in the bls numbers that will, in fact, be concentrated in the early part of 2009. and i think it's going to go a long way towards squaring -- >> squaring it up? >> -- this difference. >> i've like to talk benchmark samples all morning long, but unfortunately we don't have time. i want to thank john and joel for joining us this morning. and we just keep rolling towards this number. more data and more data. and the debate about will it be positive? will it not be positive? mr. walker saying, does it even matter if it's positive? what are the long-term structural issues. continues to be something to talk about for a long time to come. >> at least the number will matter for an instant market reaction. we'll see movement, that's for sure. before we go to break, we should get rick santelli's take on what adp and challenger said. rick, your thoughts today. >> well, 84,000 was definitely worse than expectations because they changed during that foe initial and continuing claim drop. the market didn't move at all. it's really not putting much credence in this number. so i guess we look forward to friday. >> are you going to make a call on friday? does it matter to you that much? >> you know, i'm not going to make a call. i do agree with one comment that was made, trying to pick the white now's out of a work force over 100 million isn't easy, but i think anybody -- the feel of the jobs market doesn't match some of the claims, distorted claims data so i'll still say we're not going to see positive job growth. and if we do, it probably means there's more hiring going on at mcdonald's than walmart. >> thank you very much, rick santelli in chicago. coming up, we will have a conversation about avoiding a bigger budget nightmare. senator kent conrad, the chairman of the budget committee, he will be our special guest. first, though, making his way to the set, cliff asnes, founder and managing principal of aqr capital management, one of the world's largest quant funds. we'll find out what he is watching in this new year. 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you cannot be serious! okay. seriously, you choose. go national. go like a pro. i intend to be a candidate. i will not be making a formal announcement today, but i do want to let people know about my plans which are to be a candidate for united states senate. i'm taking nothing for granted. it will be a great deal of work, and i'm going to earn the votes and support of people in connecticut. >> the attorney general of connecticut breaking some news on this show a couple minutes ago in that he is going to be a candidate for the seat that senator chris dodd is going to vacate, as we think he's going to announce later on today at noon. mr. blumenthal's going to hold a conference, as you can see, at about 2:30 eastern time. welcome back to "squawk." futures in front of that responding to adp numbers, responding to challenger, expectations for jobs friday, all adding up to a modest negative picture this morning about, i guess, ten points or so below fair value. speaking of adp, the latest number shows the u.s. economy lost 84,000 private sector jobs last month. investors now looking to friday and that december jobs number for the government. we keep hearing various estimates. in fact, some positive, some negative. >> last night the estimate was down 90,000. some this morning were that it would be down 73. it's probably in the middle of those expectations. >> on adp. >> something to keep an eye on. >> joseph. does the future of smart money investing lie within managed futures? our next guest thinks that may be the case. here in a special "squawk" exclusive, our friend cliff asnes. you look great. you look like you've lost weight. founder and managing principal of aqr capital management, one of the world's largest quant funds. this is what's heavy, $24 billion in assets under management. the fund is launching its latest mutual fund offering. there's nobody, cliff, that doesn't think long term, i guess, that given the emergence of china and india that this is going to be a long-term secular story that's never going to go away. may have its peaks and valleys, but it's here to stay. >> you mean the trend? >> yes. >> the hard assets. >> it's a great observation. when managed futures tries to do is, of course, as you're alluding to, bet on short and long-term trends. there's a lot of evidence both from traders for years. and academics tend to pick things up about 20 years after traders prove the traders were right. but there's evidence from both camps that trends tend to continue. and the current one going on and the one managed futures players tend to be betting on is exactly what you're talking about. is that stocks will continue to go. that selected commodities particularly those favored by china will continue to go. some of the currency actions. that is now. one thing about managed futures that makes it a little different is it is a bit on trend, but it's an absolutely -- it's a strategy absolutely willing to bet in either direction. so that's the trend now. but if you look back to kind of august or fall and winter of 2008, managed futures, you know, it gets things wrong. don't let me act like it's a complete arbitrage and you always make money. back then it was a very bearish strategy. so over time it's an uncorrelated strategy. right right now betting on a lot of those trends you see in the world continuing. >> and commodities, it's not just, you know, gold and copper and oil. it's s&ps and foreign currencies, the dollar plays, interest rate plays. and it's long and short on all of them. >> again, everyone does it a little different. so i don't want to speak for the whole world. but the way we do it is we divide the world into four asset classes. equities, bonds, currencies and commodities. prior to that roughly equal on all four and ends up being about 50 different securities. we're not just commodity players. we're not just fx players. we're not just equity players. we find -- one of the nice things, when you're a stats geek like me, you worry a lot about finding things that have worked for a long time. but were just random that go away. so finding something that has worked -- and i've said this before on the show, i'll say it again -- i worked like a cowardly statistician. worked for me 53% of the time. if my car worked like mine worked, you'd fire your mechanic. given that you want to do it in a lot of different places. 60% of the time in 50 different places adds up to selling good. so these trends, they're not saying you want to bet your life on any one, but there's a solid evidence that in the short and long term what's been happening tends to keep happening a little more often than not. >> although you have years, like a year and a half ago, when everything all the trends just got busted right in half. what happens to those kind of strategies at a time like that? >> you know what's a real danger? someone like me comes on a show like this and has to act like their strategy always works and is always a good thing. you don't make any one strategy. you don't listen to a guy like me and go, yeah, i should give him all my money. that's a problem. we think that managed futures is a great diversifier. one of the things is when it's gone bust and it's never gone bust to the extent of disaster, but when it's had bad periods, have tended not to be very bad periods for the markets and the opposite. when the markets have had their real trouble, they've usually been the extension of trends that have been in the works for a while. and managed futures has done quite well. so the idea being in managed futures has put a small amount of your money, i don't know what that is, 5%, joe may be 100% with us, but most people 5%. and view that as something that you hope to make money over the long term, expect to make money over the long term, but very importantly you expect to make money at times when other people are not making money. >> if the worst-case scenario in your world plays out there was airway to make a lot of money when you're unsuccessful and trying to do this incredible thing -- >> trying to make money both ways. >> you have variances in volatility in the short term, but if you have patient money, what do you see as some of the trends longer term with regard to the dollar in interest rates? >> right now, and let me caution, we are people who a year later could have a very different position. but right now we are on the more bullish side. we are almost uniformly positive on equities. i'll tell you guys, we do limit the total. if everything's going the same way, we'll say that's a little too much. and we'll cut it back. but we're bullish on equities. commodities we're on net bullish but it varies. things like oil and corn we like, things like natural gas and wheat, we don't like. currencies were a mixed bag. oddly enough, we don't have a super strong opinion on the dollar. we don't like the euro. it's funny, everyone talks about a dollar crisis. what's going on in governments, but i think of it more as a paper money crisis. i think the euro is in at least as much trouble as the dollar. when it comes to bonds, it's very eclectic. there's no strong trend in bonds. short australian bonds. you're right. i don't want to make it sound like a panacea. we can lose money if no trends apply. you tend not to lose a lot of money, but you can go a while without seeing a trend. but if we see big trends up or down, they tend to be good times for managed futures. >> cliff, we've got to end it there. we'll see you again soon, hopefully. >> always a pleasure. happy birthday. >> thank you. >> i spoke up just for you. >> you did. thank you very much. >> it's the other ear that's going, though, right? >> the hearing is the least of my problems that are going. >> do tell. >> thank you again. futures, by the way, on our way out, a little bit negative. we got some green arrows in asia and in europe, but people still digesting what we just saw from adp and wondering what the jobs number's going to bring on friday. when we come back, dealing with the crisis. senator kent conrad, chairman of the budgeted committee, will talk about the bipartisan task force put together to avoid fiscal disaster. we'll ask him about richard blumenthal's plans to run for chris dodd's seat. actually, 47. ladies and gentlemen, mr. larry mccarthy. amidst today's financial turmoil, our sophisticated wealth transfer strategies... and philanthropic expertise ensure your legacy... is passed on to family or your favorite pastime. ♪ northern trust. wealth management. asset management. asset servicing. welcome back to "squawk box." just moments ago connecticut attorney general richard blumenthal making some news, speaking first to "squawk box" about the retirement of senator chris dodd. now, he didn't officially announce his intention to run, but he sure gave us a big hint as to his plans for running for that senate seat. >> i intend to be a candidate. i will not be making a formal announcement today. but i do want to let people know about my plans which are to be a candidate for united states senate. i'm taking nothing for granted. it will be a great deal of work, and i'm going to earn the votes and support of people in connecticut. senator dodd is announcing today at noon that he is going to retire. and i'm planning to do a press conference at 2:30. >> so the dodd presser will happen at noon, we think, and mr. blumenthal's presser at about 2:30 eastern time. so all of that going on on the hill in addition to all this talk about this bipartisan task force to address the nation's looming budget crisis. to talk about those issues, chairman kent conrad along with our guest host, david walker, former u.s. comptroller general. president and ceo of the peter g. peterson foundation. senator, great to see you this morning. good morning to you. >> good to see you. >> before we get into the fiscal task force issues, i guess there's going to be some turnover this fall, it appears. your thoughts on senator dodd leaving and the potential of a would-be senator blumenthal coming in. >> well, if it's true that senator dodd is going to announce that he's not seeking re-election, that's a big loss for the senate. he's deeply knowledgeable. somebody that has been really on the front lines of economic recovery. of course, an improvement in the regulation of financial institutions across the country after we just narrowly averted what could have been a global collapse. so the loss of that institutional memory is a significant one. >> there are some -- there's a lot of speculation as to if he leaves, as you say, and you're right, he has not announced it yet, that his decision could affect how financial reform is put together in the senate, one e-mailer sent a note to politico saying he can come to -- he can dance with the special interests that brought him to the dance in the first place, us. his loyal donors in the banking community. does it change the setup? >> first of all, i don't know why anybody pays attention to one e-mailer who is blogging -- you know, this has really reached a level of absurdity. you have some crank out there who wants to express himself, and unfortunately they get attention in this media-saturated environment. look, chris dodd is deeply respected, as is my colleague, senator dorgan, who announced yesterday that he would not seek re-election after 30 years in the congress. byron dorgan is one who has been right on virtually every important economic issue before us. including the need for fiscal responsibility which is really the goal of this task force that you are discussing. >> a lot of times we, you know, we're not going to say i, senator. so we can read it somewhere else and read it to you. it's a way of asking you a question, right? then you can't yell at us, right? you understand. i'm sure you've tried that tactic before, right? >> very rarely. >> go ahead, carl. i'm going to ask the senator something a little later. >> let's go to david. >> nsenator, thank you for joining us. your task force, i know you've been a proponent for fiscal responsibility and concerned about the structural deficits that we face. can you talk a little bit about why you propose a task force and the benefits of having a statutory task force rather than a presidential one. with regard to the ability to get a vote or whatever. >> well, first of all, david, thank you for your leadership. as head of the general accounting office, no one did more to sound the clarion call of the need to face up to our growing debt. you know, it's not so much the size of the debt we currently have. we can certainly manage that. and, in fact, at a time of sharp economic downturn, you always see debt increasing. and that has to be. but what we're concerned about is the longer term. as you know so well, longer term, we're on an unsustainable track. we're going to have a debt that will be 100% of gdp, gross debt of the united states in just the next couple of years. more disturbing, much more disturbing is that we are on a track by 2050 to have a debt that will be 400% of our gross domestic product. that clearly is unsustainable. that clearly would threaten the economic security of the country. so the reason we've come up with this task force idea is it's very clear that going through the regular economy process does not work well when you face a long-term crisis. you really need both sides to get together if you're going to have a sustainable solution. and the reason we have proposed a statutory task force, that is one that is in law, is because that's the only way you can assure that the recommendations of the task force or the commissioner, whatever one calls it, that's the only way you can assure their recommendations get to a vote. and that, after all, is the importance of the exercise. >> senator, when we were in d.c. and you graciously joined us at the senate, way back then, it was a while ago, you said, co-ops. no way public plan is going to fly. and then we still went through it anyway. we went through on the house side. then we went through harry reid brought it up and here we are again. it's off the table. number one, is that always necessary? is that the way it just operates, there is just no other way around it because you got to try and satisfy everyone? and, number two, because you didn't embrace the public option, do you feel -- are you getting nasty calls from constituents in north dakota? are you in better shape because you've always kind of been more conservative on that issue? >> i've gotten ugly calls from the left, from the right, from every side. look, i tried to deal with reality and the reality is there never were the votes for public option. i said that at the time. it was just the reality. look, i proposed an alternative which i think is better. if you look at what works, other places in the world, it is a not for profit insurance provider that is tied to insurance market reforms and delivery system reforms so that we adopt the best practices that are out there. you know, we've got places in the country, mayo clinic, cleveland clinic, geisinger in pennsylvania, if we had their numbers nationwide we'd have no problem. so it's not as though we've got to reinvent the wheel here. >> well, your party is in a big rush. you said this. it was five months ago and we still had to go -- you know, why do we have to go through all that? >> let me just say the big rush, there is not much of a rush here. we started thon a year ago in june in the finance committee so if this is a rush i'd hate to see something that was being slow walked. >> senator, what about the issue of, you know, on one hand we're expanding entitlements under this bill. on the other hand we've already got tens of trillions of unfunded entitlements. that seems to be inconsistent. and what's the risk that health care, quote unquote, reform ought to actually get repealed to a great extent if it passes in its current form, part of it, at least? >> you know, i think what is really important is what is the end product? and the end product has to be a proposal that helps narrow our long-term deficit and debt. and we've got a beginning of that, because the cbo says this will marginally reduce deficits and debt short term and long term, but we've really got to do a much better job than we've done so far. that really goes to the question of containing the explosion of health care costs. that's why i, personally, believe this idea of a national not for profit entity that can offer insurance coverage, that can offer competition, offers the best prospects for helping hold down costs and providing quality care. and we see that model has been adopted in some other countries. it's worked very well. their costs of half of ours. they are getting health care outcomes at least as good as ours, in many cases better. so the models are out there and we've got to obviously have a distinctly american model. we're not going to adopt any other country's formula just in total but i think we can see models that do work. >> senator, i know the senate is a very genteel place. people on both sides of the aisle tend to agree with each other but you have been someone for so long who is a backer of fiscal responsibility. what did you think of the deals that were cut to get senator nelson to sign off on this health care plan? >> i think it's much ado about not much, because in terms of medicaid, the federal government is going to provide a hundred percent of the costs to all states through 2016. no congress can bind a future congress. all of these other side deals really don't amount to much. >> so the idea that they were going to cover the costs for nebraska in perpetuity, you think, is not a binding deal, that this is something the senate can turn over down the road? >> yeah. there's no question about that. look, the federal government is going to cover the full medicaid expansion costs for all states through 2016. after that it's a jump ball. in my state, the federal government is going to cover a hundred percent through 2016, then 95% after that. but i think anybody who's realistic understands that anything beyond 2016 is a jump ball. >> finally, senator, by when do you think we can get -- we will see a fiscal task force? is that a first half 2010 story? >> i certainly hope so. look, i think it is so important to separate the short-term from the long-term. we're hearing from many that we're engaged in hooverite economics, those of us who want to put in place a means to deal with the long-term debt threat. i'm not talking about taking measures in the midst of a downturn that would raise revenue or cut spending. >> understood. >> that would be unwise. but for the longer term, it is absolutely imperative that we put this country back on a sounder fiscal footing. and david woker can give you chapter and verse why that's important. i think it's important. i think the american people do. it is time we get about putting in place the long-term changes that are necessary. >> well, we'll see how quickly that comes together. senator, appreciate your time. a lot to talk about today. we'll see you next time. >> all right. coming up, another possible senator, connecticut attorney general blumenthal breaks news right here on "squawk." the political power play coming up next. what's going on? 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