Transcripts For CNBC Squawk Box 20100217

i'm not going to america. i'm making preparations so that i can go at the appropriate time. i'm working with people on the ground, so i cannot tell you when right now. >> shares in toyota, which have been under pressure, although they seem to have stabilized in that $72 to $75 range. one of the things to keep in mind with toyota, this is a company that is trying to get its arms around all of its problems as they move forward with the fixes or sed acceleration in the united states want the those fixes, they've done about 500,000 models through monday. they're doing about 50,000 to 75,000 models a day being brought into dealerships and then fixed. so the latest news from gentleman pan considering a expansion of already recalling 8.5 million vehicles. >> phil, how seriously do you take the word from regulators in congress demanding some of these documents that detail when the company knew what went wrong. is that a serious investigation or is that political -- >> no, it's serious. it's serious, control. and it sets the stage for a couple of things. first of all, they want to get a paper trail of xngtly when the company knew what it knew. remember, when we first interviewed jim lentz on "squawk box" a few weeks ago, shortly after that, a letter went to toyota saying listen, on cnbc, you said x, y and z. you met with us a few days before that and you gave us a different answer. what's the truth here? so they're trying to get into the timeliness of how toyota is sxonding and it sets toyota up for a major fine from the d.o.t. it has that capacity to do that, a multi million dollar fine if it says they didn't respond quick enough. >> they could easily set a fine for the biggest record, right? >> absolutely. and gm had a fine for delaying windshield wipers years ago. they were too slow in recalling those. if they find that they did not react within five days of having the information, then you're going to see potentially a big fine against toyota. >> phil, this statement today from mr. toyoda, that he is fought planning on coming for the congressional hearings, are you allowed to do that as a ceo? if congress demands that you come, whether you're in the country or not -- >> that's a good question. examine clearly, i don't know exactly where legally the law stands in terms of that. but his feeling is likely this, knowing the people in toyota as i do, i suspect that his belief is that yoshi anaba is better qualified to handle the questions from congress. he speaks english a little better than mr. toyoda. he probably has a better grasp in terms of how they're dealing with the recall issue here in the united states than mr. toyoda, and i think that their feeling is that yoshi anaba is the best person to handle this in terms of congressional hearings. >> but given what has happened over the last week or two, as they've gotten tarred for having this secretive negotiations and secretive corporate culture, it may not be the best -- >> well, you're right, politically, does it send a message that will leave a bad taste of people in washington? probably. there's probably people that say, you run the company, you'll talk. their contention is that you'll get the same information if not better information from yoshi. anabi. >> meantime, carry enjoji is in tokyo and she joins us from the ground. there's a lot of body language being ahead here, right, kaori? >> there's a lot of body language and probably you're prefrg to the bow. it was almost a nonevent today. aim r i'm aware that there are press reports that suggest that they're looking into a possible recall of the corolla. it was not mr. akio toyoda fielding these questions. it was the viewpoint who has been at his side throughout the last three weeks. they acknowledge that they received complaints fewer than 100 and they're still investigating, looking into the specifics of this case. and they said that as they normally do in events like this, they look at the problem, they see what the problem is, and if it warrants a recall, they will conduct a recall. so he didn't flat out say that they're considering a recall of the corolla. in addition, whether or not mr. toyoda is coming to the u.s. or not, there are about maybe five or six times the various journalists asked whether or not he's going to appear in front of congress. the first rouvend of answers from mr. akio toyoda is that yoshi anaba is probably the best person to answer in front of congress. but he was asked repeatedly throughout the press conferences. towards tend of that he said if he is asked, he will think about it. society hasn't entirely ruled it out. but he hash giving a lot of face time to the press over the last few weeks. but he did not give a defingerprintive answer as to whether or not he's going to appear before congress or not. >> so if he's asked, he will think about it. that's as far as he was willing to go? >> at the last round of questioning, that was his response. >> kaori, sometimes, though, congressional requests are not requests. they're subpoenas and they require the ceo to come before. maybe there's something that's getting lost in translation. but this frdz of the pond, it certainly seems as though there's been some sort of a front that's put up that says, i'll think about it. i'll consider it. it may not be his choice. >> it's possible. i think he's acknowledged in this news conference today that there were short comes at toyota and he apologized for them today and he repeatedly said that there has been doubts about the timing of his appearance in front of the public and that may have been delayed and he wants to address some of those concerns. and there was an emotional bit during this 90-minute press conference from a journalist for a very reputable japanese newspaper and he had, look, if you're the president of the company, you're saying you want to regain customer trust, especially in the u.s. market, why don't you go ahead and speak in front of the u.s. public? and his answers to those were a lot bit evasive and not definitive. but he said he's looking for an appropriate time and at some point, he will make that trip to the u.s. >> but again, i'm just saying from the perspective that maybe something is getting los lost in translation. obviously, people look at things different culturally in the i'd versus japan. but you said they were pushing him of this idea of what he said and when he said it and when he knew things. there was a report last week that suggested that the company knew about these problems for a full year before he told regulators or u.s. customers. did he address any of those points? >> no. and i think that's where a lot of the frustration lies. because when some of those questions comes up, he refers the answers to the executive vice president. and i think you're referring to the floor mats. i think they fixed the floor mats in europe well before this whole issue rose in september of the last year. so that time lag they have yet to address and that's why there is a new probe about u.s. regulators about whether they've address today problem. >> kaori enjoe gee, thank you for that. a white house report being released today says the $787 billion stimulus prevented another great depression while creating or preserving 2 million jobs. the 39 will speak on the economy at 10:20 new york time. meantime, the republicans are calling this a badly executed plan. john boehner says this is hopelessly out of touch with reality. although the "new york times," one of their good economic writers today writes about the stimulus and say most of the impacts suggest it's going to affect about 2.5 billion jobs. the debate over it continues, even a year to the day since it was passed. >> and you can probably look across a very broad spectrum and get every single opinion out there on this. >> yes. >> meanwhile, the treasury says loan balances fell in december. a monthly t.a.r.p. survey shows loans declined by 11%. loan originations rose during that same period. and the financial times is reporting big banks are accepting losses on properties to try and clear their boonks of those troubled mortgages. they're turning to short sales. financial firms say that they lose 20% less on a short sale than they do on a foreclosure. the practice is expected to become more popular this year as an increasing number op of homeowners find themselves under water. >> you'll see the gains yesterday. best gains not only of the year, both in terms of points and percentage, but also the best gains in december. we have not had two days in a row up for the dow and s&p since the beginning of the month because we've had this up one day, down the next day. and we continued that pattern yesterday. futures, though, relatively positive. asia bas was back open again. the nikkei was up. europe was up despite joblessness in the uk at the highest level. there's 1997. we'll see what happens later on. we've got a lot of stuff come on the way. highway patrol earnings tonight. oil is up 88 cents. some people are talking about $80 perhaps by the weekend. 10-year note. we'll see what the minutes say, but the spread continues to be very wide. a lot of chatter about the bond vigilantes continuing to come out and maybe forcing some politicians' hand. in terms of fiscal discipline, we have a new budget panel going. >> plus, did you see the story that china actually sold a big chunk of the treasury holdings? >> yes. >> so it's no longer the number one holder of our treasuries. that's reverted back to japan. and that has some people worried about what this means. are the chinese losing faith? are they less interested in loaning us money? >> 34 billion in december. >> i think they still have something like 775 billion or something or maybe 769. but the idea that they would take that big of a step has people start to go whoa. we saw what buffett and ackman and a lot of investors do yesterday with some of that data, so we do the same thing with the chinese. >> right. >> the dollar having a pretty big morning. but the euro continues to be pretty strong here, close to a one-week high versus the dollar. gold, as you know, had a pretty good day on monday, giving back just a touch, $1.20 ated 1,118.60. let's get tour task force this morning. steve hodge ddburg and kevin gittes, guys, good morning to both of you. kevin within do you want to put yesterday into perspective and tell us weather that tells you that this sort of phase we're in is corrective and nothing more severe than that if it's true? >> well, i mean, what it tells me is that there's a lot of unevenness in the market these days. it's very unusual to see both bonds and stocks go up. but they're likely going up or down for different reasons. as far as the bond market is concerned, we're very concerned about what's happening in europe, especially in greece as far as the debt situation is concerned. and then we've got an uneven economy as it returns to normalcy, if whatever that is we call that these days. so there's a whole lot of information coming out. one good thing is we don't have any treasury supply this week, per se, other than the regular bill options. so the focus will be on the economic numbers. and there's a host of them this week. but most of yesterday was short covering, concern about europe, and just information coming into the marketplace that case safe haven trades to favor treasuries right now. >> but the equities had a fairly good day. and some people are pointing to things like merck, a feeling that greece can be solved, empire was okay if you ignore some of the internals. do things like that give you some confidence, or not? kevin? >> oh, well, yeah. obviously, it does. but like you said, we've had an up and down day. so it's not like, you know, we've got this great news that skomg into the marketplace that's about to drive stocks or bonds higher. it's a lot of unevenness. so we'll have a good day and then a bad day. we're going to get housing starts today and they're likely to be up after being down the previous month and then up the previous month from that. so you know, right now, we're in kind of a volatile open market that is delivering a whole lot of new news and a lot of new buyers as well as sellers. so it's a tricky time right now for bonds and stocks. >> steve, what is your outlook right now? how are you feeling? >> well, to put it in a larger context, simply, the world doesn't have enough revenue to service the amount of debt that we've taken on and put in place over the past 50 to 75 years. and i think what is happening is that we're now repricing assets. starting in real estate in 2005, it went to stocks in 2007, commodity and oil in 2008. we had the initial leg down of the bear market. we've had a really good bear market rally that ended, we think, in the first quarter of this year, in january, and i think we've rolled over. now we're in the process of repricing all these assets, and the collateral underlying these assets to reflect the new reality and to deleverage worldwide. and that is what you're seeing in the bond market, in the stock market and commodity markets. >> deleverage on a consumer level, on the bank level, on the sovereign debt level? are we graduating to a bigger problem or are these smaller after shocks of the initial big problem we faced last march? >> well, yeah, i think we are graduating with a bigger problem. the bigger problem is we've started to deleverage a bit on the private side and we've kresd our leverage on the public side. so it is the new bubble or the mania to try and offset. in terms of public debt, the only way to service or pay it off is to increase taxes or to increase more debt spop there's really no easy way out. it's a long process. it started years ago. i still think it has years to go. what we're telling our subscr e subscribers is stay short-term, stay safe. don't try to get caught up in this. >> stay short-term or stay short? there's a difference. >> actually, both. for the majority of your assets, stay safe. maybe short-term treasury bills, three, six, nine months and for the risk portion of your capital, try to get short. pick your spots. when we had market rallies like we had yesterday, try and pick your spots to get in and look for the next leg to go on the downside. >> kevin, we hear those concerns a lot. for the past i would guess year or so, would those types of concerns argue that the dollar would suffer as a result. that would not happen. would you expect the dollar to continue? >> the dollar strengthening for two reasons. one, we are seeing some economic recovery and that is good for the recovery. the other is what is happening here in europe it has helped the dollar. as a result, the dollar has increased against all the major currencies across the world. i think that's going to continue. europe is not a one and out deal. hopefully the economy recovers at this time to see the dollar firm more. but looking at the banks, the el fapt in the room is the commercial portion of this. potential real estate is a potential problem that could derail the recovery. while the dollar is firmer, it has to face some real uphill climb before the end of the year. >> would we be seeing -- i know some have called it an undervalued bid. would be be seeing any bid for things like general growth? >> well, i think that you will because, you know, there's a market for everything. but i think what -- what we're worried about is how these banks will carry these assets on their books and how much more write-downs have they had? have they recognized the write-downs like they were? >> i think this is the year of the reckoning. i think you want to be safe, in safe assets. i think 2010 has the potential to be a major down year in the market, many like late 2007 through 2008 was. we're very bearish on the market here. >> and your call, were you close on the mark last year? >> we did very well last year. we identified extreme pessimism the first quarter. we said we were going to have the largest bear market rally since the start of the decline in 2007. we identified 10,000 for a target on the dow. we got there late last year and we said, you know what? thanks but we think this rally sending here and we think the next leg down is starting. >> we'll see where that takes us. steve, kevin, thanks, guys for your time on a wednesday morning. >> thanks, carl. >> coming up, buy sell or hold? some of the world's most successful investors disclosing their latest moves. first, as we close to a break, let's take a look at yesterday's winners and losers. hi, may i help you? yes, i hear progressive has lots of discounts on car insurance. can i get in on that? are you a safe driver? yes. discount! do you own a home? yes. discount! are you going to buy online? yes! discount! isn't getting discounts great? yes! there's no discount for agreeing with me. yeah, i got carried away. happens to me all the time. helping you save money -- now, that's progressive. call or click today. welcome back, everybody. as you can see, u.s. equity futures at this hour are above fair value. you're talking about the dow futures up by just over 17 points right now. this comes after major gains yesterday when the dow was up by better than 160 points. we'll see if this last through the morning. we have plenty of news coming your way, including some breaking news coming up at 8:30 eastern time when we'll be getting data that will be very important, as well. in the headlines this morning, warren buffett's berkshire hathway reporting its latest stakes. the company reporting smaller positions in conco phillips. berkshire reducing several of its biggest investments as it prepared to complete its takeover of railroad company burlington northern. berkshire cutting its conco phillips stake by 34%. it reported 27.1 million shares in j&j. that is 267% below what it reported in the previous quarter. berkshire's procter & gamble stake, it was declining by 8.8 million shares. that is just over 9% of its holdings there. berkshire reporting higher shares today in walmart stores, wells fargo and the value disclosed the portfolio of the united states equities rising from about 2% from the third quarter. meantime, george soros each hedge fund disclosing it bought almost 95 shares of citigroup during the fourth quarter. >> knowing berkshire the way you do, what do you think he's doing? i was sprooifs surprised by johnjoh johnson & johnson and proctor & gamble. but he did the same thing, he told some j&j. i asked him at the time, why were you telling johnson and johnson? he had he hated selling it. he just needed to raise cash for other things he was buying. but my guess is selling those two, my guess is he's doing this because he was raising money for burlington northern. that was a major deal that they pulled their cash together. one of the rating agencies last week cut its ratings on berkshire hathway because of concerns about this deal going through and how much kavp cash it left them on hand. i don't think this is a signal that he's lost faith in johnson and johnson or proctor & gamble. >> or more defensive overall. >> no. my guess would be just because of burlington northern and probably repositioning some things because of the stake there. >> cash is probably about what, 40 billion at its height? >> yeah. and he has said in the past he doesn't like to have less than $10 billion on hand. he just doesn't feel comfortable. just like me, i like to have that petty cash around, too. >> just as a cushion, it's interesting, what the markets have been for the past two years, he has put money to work -- >> yeah. >> -- in all sorts of various ways. >> and a lot of they also these deals have been deals that he's had access to. if you're doing something like the general electric deal or the goldman sachs deal, it's not just going in and buying flat out stock. he got great return owes 10% return owes some of these things and convertible deals to boot. >> dividends and you name it. >> right. >> interesting. a lot of good data last night. >> anyway, yeah, we saw from a lot of these funds, what some of the other major investors had. right now, though, let's get to your national weather forecast. hey, kelly. >> hey, guys. i dread looking at my energy bill, by the way. it's been unseasonably cold down to atlanta. it was enough for a record in atlanta. we continue to see flurries and snow showers swirling around the great lakes. pittsburgh, 38.5 inches, and that is making it our snowiest february on record. you can see we have the snow continuing in places like syracuse, beckley, west virginia, it's snowing right now. even around new york city, we can't rule out a few snowflakes swirling around with those winds. they're going to be dwight strong. watch the turbulence. we've got this low pressure that continues to circulate in. all of that cold air. it looks like this -- tomorrow. okay. we're going to -- kelly, we're going to interrupt. there's some problems with the audio. typical things with live television. when we come back this morning, we'll get to the top stories and futures pits, as well. tdd# 1-800-345-2550 to help with my investments. tdd# 1-800-345-2550 so where's that help when i need it? tdd# 1-800-345-2550 if i could change one thing... tdd# 1-800-345-2550 we'd all get a ton of great advice tdd# 1-800-345-2550 just for being a client. tdd# 1-800-345-2550 i mean, shouldn't i be able to talk about my money tdd# 1-800-345-2550 without it costing me a fortune? tdd# 1-800-345-2550 if i had my way, investment firms would be tdd# 1-800-345-2550 falling all over themselves to help me with my investments. tdd# 1-800-345-2550 (announcer) at schwab investors rule. tdd# 1-800-345-2550 are you ready to rule? good morning. welcome back to squawk here on cnbc. i'm carl quintanilla along with becky quick. joe is off today. he's back on monday. he better be enjoying those last few days of vacation. making headlines, the eu's top economy official says he wants answers from greece by friday. the eu is demanding the greek govern complaint how it used currency swaps. meantime, eu finance ministers have given the debt-laden country until march 15th to show it can make big spending cuts to bring its deficit down. there's more stories in the paper about goldman sachs and how they helped usher the country into the eu and basically were their sponsor, helping this happen. >> if they look at some of the other countries they've allowed into the union, apparently jpmorgan was doing similar things. but now it was, okay, we've got these very high standards to get in. you've jumped over the hurdles, but you were cooking the book to get there. >> now you have to survive. >> and that's what we'll be following for quite some time. construction of the dubai metro, it has started. a healthment has been reached with the japanese led consortium behind the project. the group says work never stopped, it just slowed. and it's still negotiating on contractor payments. >> in washington, the president is going to sign an executive order tomorrow creating that panel. he will make two washington insiders to lead the panel. allan simpson, their job is going to be to help bring down the federal budget deficit to % of gdp by 2015, nearly 10% today. allan has a quite quote in the times that says there's nobody in congress who doesn't understand where we're all headed and that it doesn't matter if you're a democrat or a republican, if you've forgotten your american. that's sort of his line in the times today. that is going to get a lot of talk about whether or not this thing is going to get anything done. >> it is. and you saw allan bayh saying he would step down -- or not step down, but not run again. ericson bowls, he will there for the last balanced budget agreement. what will be interesting to see see if simpson and bowls can get things moving back towards that general direction and see if there is a place where you can reach a agreement on this. >> any common ground. >> yesterday was the biggest percentage gain that we've seen since december. europe is in the green and we're hanging on to gains by about 18 points above fair value. oil is on the rise on a generally weaker dollar, although mixed. up to $77.29 the 10-year noed note, people are beginning to talk about whether or not bond vij lapty res divorce to force fiscal discipline with the 10-year, a little below 3.7%. the dollar is mixed up against the yen, down against the euro, which is about at a one-week high against the greenback. still above 1110 ated $1,117.80. let's get to the futures pits. >> jessica hoversen of mf global, jessica, we've been watching what happened yesterday, trying to get a sense of where the market is headed. with a strong move like yesterday, do you think the market has any better idea of a direction at this point or is this just more volatility that we have to learn to live with? >> i think it is a little bit of a volatility. right now, though, the market has a lot to focus on. obviously, we continue to keep our eyes across the pond and watching the situation in greece. but i believe the situation in greece has moved into this risk purgatory area where the greater risk has been identified but the market is now waiting for something larger or for another shoe to drop in order to move off it again. if you look at the euro/usc it's lost about 10%. that has been a function of what is happening in the prifr rel debt market. right now, i believe march 16th is the next eu financial minister's meeting. i think you are going to see a lot of choppy trade before the market understands what this next step is. there hasn't been -- though right now at the u ministers are just sort of pledging political support for greece, they haven't come out and is actually provided a bailout, nor has, you know, greece actually started to really implement some of these austerity measures. so in that limbo, the market will weight and focus on the economic news, the news yesterday was actually favorable. we had some positive economic data and today we're going to watch the fomc minutes, industrial production and housing starts. >> jessica, that's my sense of it, too. if you look at the wall street journal or look at the rally stories, they're saying this rally yesterday is because of more clarity coming on the european situation. but to me, it seems like it's anything but. you're going to be watching the numbers come out today. is it your sense that the european situation will just kind of be that storm that is sitting just off the coast? >> most deaf nay lt. i think that the europeans have provided anything but clarity on the situation. basically, they've just kind of put their shoulder around greece and said we'll stand by you. but they haven't indicated what exactly that means. but i do think in a situation like that as we wait in limbo, there are other things to be focused on in the immediate term. obviously, there are greater threats out there and that has -- you know, those have been recognized and those are outside of greece. and you still have commercial real estate. you still have consumer debt levels exceptionally high, unemployment is very high. and there is still the ambiguous question of over what is happening in washington. and so in the immediate term, as wu mull over those larger macro threats, we watch the economic data and the corporate news for short-term direction. >> commodities were up yesterday. is that because of any real sense that there's growth or potential for growth in the united states and in the world economies or is that because the dollar was weaker yesterday? >> i would say that the jennings of the recovery still remain intact. but i don't think that consumer demand has gotten to a point where it justifies exceptional rallies in the commodity markets. long-term, yes, probably, but i do believe yesterday's move was more a function of simple risk taking capital flows and a weaker dollar. jessica, thanks a lot. it's always great to talk to you. >> thanks so much. have a great day. >> you, too. >> we would love to hear from you this morning opinion squawk@cnbc.com. we'll take a quick break and get in news inside and outside the world of business when squawk continues in a moment. welcome back, everybody. right now, the futures are indicated higher this morning. dow furps up about 22 points above fair value. dow up by 169 points yesterday. we'll see where things go through the morning. in the lower corner, we are only 1:48 away from housing starts. so stick around for that. right now, let's stick around for a check on the news outside the world of business. monica novotny is here. >> we'll start with the president marking the start of a new nuclear age. president obama backing more than $8 billion in federal loans to build two nuclear reactors in georgia. the loans would lay the groundwork for the nation's first new nuclear power plant in 30 years. it's part of the president's plan to combat climate change. a new study says last month's earthquake in haiti could be the worst natural disaster in history. the report estimates rebuilding costs at as much as $13.9 billion, sharply higher than haiti's original estimate. this one is for you, carl. america has a new top dog. last night, say die, the so theh terrier was top honor at the westminster dog show. sadie was called the total package. >> i'm just reading about her now. she had previously won the pure reason na nationals. did you know that? >> oh, didn't you go? i mean, of course. >> yeah. lucky came in second. she was very hurt. there he is. >> how much smaller would you estimate lucky is than sadie? >> i don't know. what's saydy's weight, do we know? lucky is six pounds. so i'm guessing maybe five luckies would equal one sadie. she fits in a purse. i don't speak from experience, of course. >> there you go. >> there you go. >> so you need to get lucky in one of those contests. i think lucky is a contender. and i want to see you trotting with her, the way they run around the circles. >> yes, the new running chute. >> is lucky a girl or boy. >> he's a boy. dow component hp is set to release quarterly figures tonight. aaron, good morning to you. >> good morning. >> do you think the stock has got room to run? >> yeah, we do. we continue to have a buy rating. it's our top pick, $62 target price on the name and we expect positive results tonight out of the company across the board. i think imaging and printing as well as their enterprise business and continuing to see the bftsd of a healthy pc environment, specifically the consumer environment on the heels of windows 7 after being released back in october. >> in the race between leading the charge, consumer or commercial, which is it going to be? i think right now we're still consumer driven in terms of the demand environment. i think as we move into the second half of the year, i think we start to see a change and a shift towards more of the commercial or the corporate pc upgrade cycle. we're definitely more inclined to say that that starts to gradually show up in the second half rather than a material upside driver here over the next couple of quarters. >> interesting. but a buy rating and a 12-month target of 62, right? >> correct. >> that's not too bad. now, you say dell might be the more speculative bet if you're going to play this sector. >> that's exactly right. we have a buy rating on dell, as well. that company is more levered to that pc upgrade cycle. we put out a peer review note here on dell basically saying it's probably early in the dell story. however, from a valuation standpoint, i think it's starting to become more and more attractive as we look towards that corporate pc upgrade cycle and the continued strong demand market that we're seeing in the intel server-based market. >> are you convinced that dell has as many duck necessary a row as hp does? >> we think hp is a much structurally better company from a model perspective. it is a call somewhat in a rising tide where you saw both scenarios for dell and believe they can benefit for more so just that benefit upgrade cycle on the back half of the year and see some lifting headwinds on our gross margin story, which has been a big focal point which we anticipate will continue over the next one or two quarters and then start to lift in the back half of the year. >> what are your thoughts overall about the degree to which tech has been under appreciated. people talk about tech not leveraging 265 plus intel margins. why is it wrb we topping out here? is that what is happening? >> i think that the sentiment, and this includes hp, the sentiment is generally positive. i think most of the street is above the guidance for hp. and i think the set up is one where tech in general takes a pause going into the seasonally softer first half of the year. i think a lot of these companies are structurally sound and we continue to see improving i.t. spending through the course of 2010. >> specifically, an apple question, i know we generally don't lump apple into these conversations all that much. but how disruptive are they and where is the point at which we talk about market share gains becoming important and substantial? >> obviously, apple is more of a consume er-driven company. they have about a 4% to 5% share in the pc market, very higher priced solutions. i think the call on dell and hp is more about the commercial market, which apple is a small player in. we continue to watch apple competitively, however, i think our call is more corporate driven on both these dell and hp stories here as we move forward. to follow on that, i'm not a believer that the recently announced ipad is going to meaningfully cannibalize the pc market, be it at the consumer level nor at the corporate level here, either, as we move over the next year or so. >> you're saying pretty decent nice things about overall spending in 2010. what are the risk toes that? what would bring about the possibility that perhaps companies don't spend in the second half as we think they might? >> i think we watch closely corporate profit trends and that's been highly correlated with dell's top line and hp's enterprise business. so if we see a contraction in the corporate profit trends, i think we have to start to be a more cautious scenario on the overall i.t. spending environment. at this point, ting macro data points continue to support more of aour back half recovery story and then a continuation of that going into 2011. >> we've got a ways to get there, but we'll see if it happens, aaron. thanks. >> thank you. coming up, we're going to head over to the chairs and talk about the stories grabbing our attention this morning. and then, one year later, as president obama's economic recovery act made a difference? we will ask dnc chair tim kaine. (announcer) we're in the energy business. 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. some people like to pretend... a flood could never happen to them... and that their homeowners insurance... protects them. it doesn't. stop pretending. it can happen to you. protect your home with flood insurance. call the number on your screen... for your free brochure. live picture of washington which sort of leads us into our conversation in shares. this budget panel being put together with, you could argue, elders of washington. erski erskine bowles seeing if we can bring some bipartisanship to that process. meantime, "the times" this morning is talking about another set of old lions, george soros, nicholas grady from treasury, guys we haven't talked about in our daily lives for years. saying not only is the volcker rule okay, but for a lot of these guys, it's just a starting point. jack who we talk to a lot and has been a longtime critic, says i'm a believer the system has gone badly awry and needs massive reform. the supermarket model, i can be convinced that we should move back in the direction of glass steegle. and nicholas brady says if you wish the government to guarantee your deposits and bail you out if necessary, then you cannot be involved in speculative activity, even if that means you can no longer trade on behalf of your customers. so it's interesting the way an older generation is coming in to tell the current generation how things should be fixed. >> and the critics say things like volcker hasn't been around. he doesn't understand how the markets work. today he's too out of the loop. it's impossible to separate what's been put together at this point. that i have less faith in criticisms like that. one point i do understand concern about is what happens if you impose these rules on u.s. banks and u.s. banks only? doesn't that open you up to crazy foreign competition? it would be interesting to see if the volcker rule could be implemented on a global scale. >> that's an awfully tall order. >> it's a huge order. the idea of getting agreement across. in some ways, our guest was saying yesterday, if we were to set the example, maybe it would build up more faith and confidence in our system, and as a result, the u.s. would win more money from investors who would feel more comfortable putting their money there. anyway, it's an interesting argument. i do believe in a lot of cases our elders have a lot of wisdom to offer us and we should sit up and pay attention. i want to talk a little about global warming, global weirding, as thomas friedman is calling it in his column today. there's some huge movement afoot with climate change. in fact, the lead story in both "the wall street journal" and in "the financial times" today is about how some of the major companies that have been throwing their support behind climate change research have kind of pulled out at this point. those companies include bp, conoco phillips and caterpillar who are stepping back because it looks like there may not be agreement in washington when it comes to climate change legislation. thomas friedman has a thoughtful column today where he lays out what he calls global weirding. he said, look. you've got to pay attention to it. every time it snows in washington, you'll hear all the same old rhetoric of what's happening. he says part of the problem with the climate science community is their own fault, bringing some of this on themselves for nonpeered reviewed research, failing to respond to legitimate questions. he offers a solution. he says there's all of this mountain of research from multiple institutions. what he would like to see is the climate science community convening its top experts from places like nasa, m.i.t., stanford, california institute of technology and producing a simple 50-page report called what we know summarizing everything we know about climate change and language that a sixth grader could understand with an unimpeachable peer-reviewed footnotes. then you could go on and take on some of the biggest exaggerations and errors from the climate skeptics and talk about where they get their funding. >> and get some credibility. >> and get some credibility back. but he said look, we need to understand what it is we actually know. right now it's too confusing. the issue's been too muddied. >> very interesting. got top stories when we come back. a lot more "squawk" continues in just a moment. one man's trash is another man's treasure. fortress ceo daniel mudd spends his days buys bruised and battered investments all to make a buck. we'll welcome daniel mudd straight ahead. if i had to sit on a bench during the middle of a game due to diabetes it would frustrate me. in a basketball game a couple minutes could mean a big momentum shift. my bayer meter is very important. 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(announcer) the contour meter, only from bayer. putting the bears on ice. >> he's got it. he's got it. that's a good shot. >> stocks logging their best day in three months. can the bulls remain on target? >> begging it to move. begging it to move and hits it. more car trouble for toyota. the automaker looking into the possibility of another recall. what ceo toyoda is saying now and his plans to fix the problem. whistler's big slide. >> fantastic down here, she is definitely got it. >> 83 miles per hour, gold medal! >> while athletes go for gold, bankers go for green. while all the olympic drama isn't just on the slopes as the second hour of "squawk" begins right now. good morning, everybody, and welcome back to "squawk box." i'm becky quick along with carl i did n quintanilla. joe is out this week. we have a packed lineup including large-cap companies. plus bank united ceo john kanas joins us. the t.a.r.p. and how small banks are faring in this recovery. and whistler hosting some of the most exciting winter sports at the 2010 olympics. but that excitement is about to shift from athletes and fans to a major business transaction. today's guest host, daniel mudd, is here for the next two hours, the ceo of fortress investment group. we're going to talk about that and much more in just a few minutes. it's great to have you here today. >> terrific to be here. thanks. meantime, the morning's top headlines. >> now's out of japan. akio toyoda leading a new task force. the company is evaluating power steering problems in its best-selling corolla model, the best-selling car in the world. phil lebeau joins us from chicago with the latest on that. phil? >> two pieces of news out of japan, one the corolla. also, toyoda addressing questions about whether or not he'll appear at congressional hearings in washington scheduled to start next week. he said this morning he does not plan to testify at those congressional hearings. however, later on he clarified he will consider a request to testify if invited. mr. toyoda also says u.s.-based executives for toyota are the best people at this point to appear at hearings as he considers tomming to the u.s. >> translator: i'm not saying i'm not going to america. i'm making preparations so that i can go at the appropriate time. i'm working with people on the ground so i cannot tell you when right now. >> meanwhile, toyota executives are looking into corolla power steering issues. toyota has received fewer than 100 complaints about steering. the company says it will do whatever is necessary to fix the problem as needed. that may have ultimately include a recall, but at this point the company says it is simply looking into the issue. meanwhile, the company's top safety adviser says the company's electronic throttle controls are safe. >> translator: logically speaking, the chances of a malfunction are extremely low. i say fail-safe because in the event of one, the one that will prevail is the signal that tells the car to slow down. >> as you look at shares, two questions will be looming over this company today. one, will mr. toyoda appear at congressional hearings if he is subpoenaed to appear? at this point we still don't know when he will come to the united states, but he made it clear, becky and carl, that if the request is put in for him to appear, that he may appear at those congressional hearings, although at this point it is not in his plans. >> thanks for that. talk to you soon. some other stories we're watching this morning, berkshire hathaway reporting its latest stakes after the close last night. the company reported smaller positions in conoco phillips, j&j and procter & gamble. also reporting a 27.1 million share stake in j&j, 26% below what it reported the previous quarter. there's a look at conoco phillips. p&g stake declining 8.8 million shares or 9%. george soros's hedge fund more than doubled its bet on the price of gold during the fourth quarter. soros and other investors like john paulson have previously touted gold as a hedge against inflati inflation. the new york-based firm also disclosed it bought almost 95 million shares of citi. soros's filing revealed large bets on monsanto, holding nearly 3.9 million shares at the end of the quarter. that's up from 1.1 million shares three months earlier. so a lot of data tossed around all over the place, whether it's warren buffett or soros. we've got paulson and akman also with some moves in various stocks as well. so interesting data last night. it's going to be read a lot today. >> it is. and carl, we're just getting deere earnings right now. and i want to look at this because if this number's clean, this is a massive beat by deere. you're talking about 57 cents a share in earnings. the company was expected to earn 19 cents a share. looking through, it looks like the revenue came in well above expectations as well. worldwide net sales in revenue were down 6% on a year-over-year basis. but from some comments from the company where they see that -- they're talking about solid execution of operating and marketing plants throughout the company and are especially gratifying in light of the global economic conditions that remain stubbornly weak. it doesn't sound great for the macro economic, carl, but it looks like deere is doing very well, much better than expected. they're clearly seeing benefits from efforts to win customers with advanced new products while taking cost and asset discipline to an even higher level. again, not great news about the macro economic outlook, but keep an eye on shares of deere because right now those shares are at least $2 higher than where they closed yesterday. i've got a bid of $55.60 and an ask of $57. my ask on this machine is $57. that closed yesterday at $53.78. deere coming in with much better than expected earnings, 57 cents versus the 19 cents that the street was expecting. when it comes to outlook, they say their sales are projected to be up 6% to 8%. they talk about some favorable currency transaction. in fact, that's going to help them by about 3% for the year and 5% for the quarter. for the full year, though, they're looking for net income to be about $1.3 billion. so we'll keep an eye on that. again, that's a much better performance than had been expected. let's get to today's guest host. his firm is making news today. daniel mudd is the ceo of fortress investment group. fortress is announcing it's buying logan circle partners. he's also the former head of fannie mae. we're happy to have you today. >> it's a pleasure. >> let's talk about logan circle. why moving into this traditional bond investor firm? this changes your portfolio a little bit. >> it changes a little bit. it's really a continuation of the focus that we've had which is focus, niche-oriented businesses, really strong managers. but what we're seeing is the clients are less thinking about traditional assets and alternative assets. they're thinking more now about ill-liquid dollars and liquid dollars. we've got hedge funds that are liquid. this is a business that's pretty liquid as well. we've got private equity funds that are much more in the ill-liquid space. what we're trying to do is balance and offer different things to clients. the market offered us an opportunity to pick up and join these guys which is a terrific step forward for us. >> what's it going to mean in terms of the composition. you say it's not changing that much. >> we'll grow about $11 billion of assets under management. it will put us into the business of long-only management in the fixed-income space. they do a lot of things we do. they take kind of a macro view of the world, look at sectors they want to be in, and then they buy bonds in various companies. that's a process we have. so i think it's complimentary. but our investors, the cios of our existing businesses, will stay focused on their funds. the team at logan's going to stay focused on their funds. i think that's the way to build fortress going forward. >> it's a lot tougher to get private equity dollars to raise those dollars. i've heard that from many people. is that part of the reason why you look around for a place to buy some assets instead of raising them? >> well, i think there will be a time -- we are raising private equity funds as we speak, but more in the distressed space, right? so the traditional private equity, you're absolutely right, it's harder to raise money because it's in that ill-liquid space. hedge fund business, a little easier. and the traditional loan-only business easier. everywhere, though, that conversation has changed and investors are much more cautious. they want to know more. they want to see the investors and know exactly where you'll be. >> we had you on a few weeks ago. it's gotten worse since the last time you were on? >> it's had a bump. it's had a bump. that's kind of what we thought all along. this slow, shallow rising recovery. but with bumps along the way. and the bumps, by their nature, i think, will be unpredictable. so you'll travel along and then bump you'll have a dubai, travel-along bump, greece, the one that's in the news now, here in the u.s., and that kind of sets everything sideways for a couple of weeks. and then we move back forward. >> but is it a function of where we've already been, or is it something new and systemic, do you think? >> i don't think it's something new and systemic. i think the longer-term prospects are pretty good. nobody, whatever they claim, actually knows what the timing is going to be. and how long it's going to take. nobody knows what those bumps in the night are going to be. you know, we're recovering slowly. but right now, it will be interesting when one of your later guests comes on to talk about whether we're seeing liquidity in the market out there. that's what's tightened recently. >> we're still learning how to dispense fear when we're presented with a set of problems, right? people are saying, well, greece is a big deal, but california is a much larger economy. why around we paying as much attention to california? i mean, those things are something the market's still got to digest and get their arms around. >> the market needs some clarity and some directionality. and we don't have that yet from the standpoint of government policy. we don't have that yet from the standpoint of eu policy. we don't have that yet in terms of who's going to make it through this next phase. and so that's kind of what we think the big picture is. 2008, 2009, the plumbing was really broken. nobody knew what was going to happen. 2009, '10, '11, we're in this messy, back-and-forth period. one of my colleagues calls it the dog's breakfast, unknown ingredients, might be good, might be bad. after that i think we build a recovery out of it. >> i like the plumbing metaphor. like when you set up a new sink, the water is brown at first. you have no idea if it's going to be clean again, right? >> and it's leaking somewhere. you don't know where it is, down in the basement. >> when you look at washington and some of the proposed changes, regulatory reform changes that are coming out of that, it's the same thing. probably a dog's breakfast with what you're seeing here. but what have you seen that you think is a move in the right direction? and is there anything that concerns you? >> i think the move in the direction of an overarching, simple, regulatory structure makes a lot of sense. but it's a really long bridge to get there. so, you know, it seems to me that the reality is that, you know, there's systemic risk out there. there's somebody out there that sees the whole system for better or worse. it's the fed. they ought to regulate the system. underneath that, you have the safety and soundness regulators that know each of these areas of business they've been regulating. underneath that, you have examiners that know how to look at organizational issues. underneath that there's a debate about a consumer regulator. if you could stay within the framework of something about that simple as opposed to this balkanized structure of different regulators, different states, different industries, people able to swap charters in one business for another business, i think we'd be a lot better off. and americans have a lot more confidence in the system. >> with the feds calling the shots at the top. >> i think they're calling the shots for what they know and see which is a view of the whole system. when risks are spiking up or down in the system. but the other things, the consumer piece of it, the examination piece of it, the insurance specialization, they don't have that. that could be parsed out to other regulators. >> interesting. people still point to may of '07 when bernanke says subprime is 9% of mortgages, right? they're not infallible. and we can't expect them to be, i guess, is the answer, right? >> none of us is infallible. if you didn't learn that, you missed something over the course of the past three years. >> dan's with us for the rest of the program. we've got a lot more to talk about. meantime, any questions or comments this morning, we'd love to hear from you. our address is squawk@cnbc.com. when we come back, european exposure, debt crisis overseas, how some u.s. companies might be impacted. still to come, olympic skiers headed to the starting gate at whistler while bankers in new york await a possible auction. we'll get an update from daniel nu mudd, the ceo of fortress, just ahead. time now for today's "aflac trivia question." what baseball player nicknamed the georgia peach amassed 4,189 hits in his career? this is not more benefits at greater cost to your company insurance. this is not how does it fit in my company's budget insurance. this is help protect and care for your employees at no cost to your company insurance. with aflac, your employees pay only for the coverage they want or need. and, the cost to you - nothing at all. if all you know about us is... aflac! ...then you don't know quack. to find out why more businesses provide aflac, visit getquack.com now the answer. what baseball player nicknamed the georgia peach amassed 4,189 hits in his career? the answer? ty cobb. >> aflac. >> welcome back. how could the european deck prices affect u.s. companies? the dollar/euro relationship at the heart at the answer to that question. joining us this morning to explain, sam stovall, chief investment strategist at standard & poor's. sam, good morning. how you doing? >> good, carl. how are you today? >> good. i'm fascinated every morning you walk in, you wonder what the relationship's going to be, dollar/euro. close to a week high against the dollar. where are we headed next? >> that's a good question because certainly in december and the early part of january, we were working in lockstep while basically the stock market and the dollar, they were strengthening, and they were both going up together. but then after we saw the split when we had the concerns about the mediterranean sovereign debt crisis, et cetera, the question was, we're probably now seeing european currencies weaken in a flight to safety to the u.s. i would tend to say by the end of this year we'll probably be going back to a weaker dollar environment. our belief is that because of the increased debt situation that we're seeing here in the u.s. and probably the lack of the willingness of the fed to raise interest rates sooner rather than later, that we'll probably end up seeing a weaker dollar as we move forward. >> interesting. there is some who postulate that european economies will find themselves close to or back in recession, right? they keep monetary policy relatively loose. they don't tighten the fed does, and we see continued euro weakness. is that not possible? >> that's certainly possible. when i updated our economic projections today, what is interesting is that every month we end up having stronger and stronger economic projections, not just here in the u.s., now we're looking for 2.7% increase in real gdp. but also around the globe. now we're looking for a 3.2% increase in real gdp versus the minus 1.9% in 2009. most of the developed nations are likely to see weaker than average growth and europe, uk, et cetera seeing weaker growth than in the u.s. but most of the strengths still being found in india at about 8%. and in china at more than 10%. >> either way, daniel, you've got to love the back-and-forth, right? the volatility works for you guys. >> there will be continued back-and-forth with some directionality. we like to see some directionality. we think the dollar will continue to be about where it is, particularly against china, against japan. there will be some volatility around it, you're absolutely right. the big question, it seems to me, when we get to the end of the year, is how deftally will the federal government be able to extract the existing support it's got in the market? if that works well, we'll see a smoother path. if that doesn't work well, the various agencies are a little bit uncoordinated. it could be bumpy. >> you've got to buckle up. although some have said -- and sam, i'd love your take, too -- the fed has withdrawn some facilities, and they've gone as planned, right? >> the fed has started to. and it seems to have been absorbed pretty well. >> sam, would you agree? can we rely on their very short frak record right now? >> well, yes, i would say they have been reducing some stimulus. it has been going relatively well. certainly it's not as headlined as the raising of a fed fund's rate, but certainly, you know, with what their stated of purchasing mortgages, et cetera, it has been going well. >> overall, markets, sam, you think the correction, as it's been, what, 4.5%, is over? >> the correction of 8.1% on a closing basis, almost 10% on an intraday basis, i believe, is over. i think we're probably going to be going back to the recovery highs. maybe even go above that again before we start wondering whether we are going to be experiencing a four-year cycle low. >> what's going to drive that, since we now have to wait until march 16th before the next chapter of greece gets written? >> well, i think that we're going to be continuing to see what the earnings forecasts are leading into this block. becky was talking about deere and indicating that we had been seeing a better than expected earnings outlook for that company. certainly it's still a little bit challenging on a year-over-year sales basis. but earnings are definitely coming in much stronger than anticipated. we're still looking for about a $77 on the s&p 500 which would imply a more than 35% increase on a year-over-year basis. however, it's still just getting us back to where we were. >> health care and telecomes still your faves? >> no, health care and industrials. high debt-to-equity levels i think will be a drag. >> do you feel confident about that in the near term, daniel? >> again, i'm not making any predictions about the near term. i think it's going to be bouncy for a little while. and i think we go back to that question is how deftly can the feds pull out of where they are. >> that's unchartered waters. see how we navigate it, right? >> there are a lot of different agencies that have to play together. as you see coming out of washington, there's a little bit of turf grabbing, a little cooperation, a little hand-holding and a little more turf guarding. >> you know all about that stuff. >> i've seen that movie, right. >> sam, thanks for the time. good to talk to you, as always. >> thanks, carl. when we kpcome back, more o this morning's headlines and the winter olympics in vancouver. take a look at where oil is heading, above $77 and people talking about possibly $80 by the weekend, even with relatively mixed dollar picture to date. we'll be back in two minutes. check out the bid/ask on shares of deere. looking sharply higher this morning. up by at least $3 above where it closed yesterday at 4:00 p.m. you're talking about major gains after the company came out with earnings much stronger than expected. deere reporting 57 cents a share versus the 19 cents the street was expecting. also talking about how, for the full year, of fiscal year 2010, they're expecting to earn $1.3 billion in net income. that's compared with the $1.06 billion in net income that the street had been expecting. revenue for the quarter came in better than expected. the company also is seeing some benefits from efforts to win customers. however, it does go on to say that the global economic conditions remain stubbornly weak. so good news for deere. not necessarily for the rest of its competitors. but you will see that stock trading higher today. meantime, a little m&a action involving walgreen. they're going to acquire the new york-based drugstore chain duane reade. funded with existing cash. they're buying it from oak hill capital affiliates. synergies between $120 million and $130 million in the third year. going to be dilutive for the first 12 months. duane reade will continue operating under their own brand. anybody who lives in new york knows the brand pretty well. duane reade. not as big a bid as, say, the assignment property general growth story of yesterday. but the m&a trade continues on this holiday-shortened week. >> pretty big transaction, over $1 billion. that includes the assumption of debt as well. >> yeah. and the company had -- duane reade had about $1.8 million in sales. when we come back, any comments or questions? we'd love to hear from you. our address is squawk@cnbc.com. darin rovell with the latest buzz from the olympics. >> when we come back, we'll reveal what athletes make enough off of their olympic stat to us just live off of it. the big money from the olympics and the big money earners next on "squawk box." straightforward is the way td ameritrade does business. simple, fair pricing. no hidden account fees. no shenanigans. just good value. real help. smart people who are easy to work with. that's what td ameritrade stands for. what does your investment firm stand for? it's time for fresh thinking. it's time for td ameritrade. 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. welcome back to "squawk box," everybody. let's get a check of the markets right now. the dow futures are higher, but just about 32 points above fair value right now. a little bit of improvement through the course of the morning. remember, we're coming off a very strong session from yesterday when the dow was up about 169 points. we've also got breaking news. walgreens acquiring its rival drugstore chain, duane reade valued at about $1.1 billion when you include the assumption of debt. duane reade will continue to operate under its own brand name. meantime, toyota says it is examining possible power steering problems with its best-selling corolla. akio toyoda says once they have all the information, they'll take whatever action is warranted. he says he will not be attending the meeting on the recent recalls. mortgage applications edged lower by 2.1% last week. this is as mortgage rates held below 5%. mortgage bankers association says that the average 30-year fixed-rate mortgage stands right now at 4.94%. and check out shares of deere & company. the construction equipment maker smashed expectations, came in with 57 cents a share for the first quarter. that was 38 cents above the street's expectations. they're talking about how they are winning some market share in what they're still calling a difficult global environment. but right now you see those deere shares quite a bit higher. in fact, right now it looks like they'll open up by about $4, better than an 8% gain. it's only wednesday, but merck yesterday and we'll see what walmart and hp say tonight. most olympians don't make a lot of money off their olympic dreams but there are a select few who do not have to work second jobs. our darin rovell is live with a rundown of who makes what. it's a tough way to make a living, darin. >> reporter: absolutely, carl. just think of it as the fact that your biggest events come once every four years. but there are actually people, athletes, who do make money off being an olympian. let's start you off with our million-dollar list, or as we're calling it, the bronze medal earners. take a look at the guys out there according to forbes that are making $1 million. there you see the snowboarders, hanna teeter, gleretchen bliler lindsey jacobellis, was knocked down in the semis but still a lot of companies have faith in her including visa. so, too, does germany's maria riesch, an alpine skier. i had never heard of her either. then the silver medal earnes, ted ligety and bad boy bode miller make a living off endorsements as does anton ohno who has deals with vick's and nestle's. ohno looking to become the most decorated winter u.s. olympian with one more medal. picked up a couple deals this week which i hadn't seen including one with omega. three weeks ago you probably didn't know the name lindsey vonn. now you do. "sports illustrated" calling her the best skier ever. five chances to medal in five events. red bull and rolex are hoping she'll battle through the bruised shin pain. at the top, one name you know and one you might not know. kim yu-na, a south korean figure skater has deals with hyundai, nike, samsung and procter & gamble, worth an estimated $8 million a year. according to "forbes." and finally, there's american snowboarder shaun white who "forbes" says makes $8 million a year off deals with the likes of burton, red bull, oakley and at&t. we talked about white about what companies he'll do deals with. >> it's got to be something that kind of is relevant to my life and something that i'm into or that i can speak highly of in a way. you know, i've ridden for burton snowboard since i was 7 years old. i just did this massive deal with them for a long-term thing like a ten-year deal because, you know what? i love the company. i love the owner. >> reporter: white, of course, taking part in his only event, defending that gold medal in the men's halfpipe tonight, promising to break out that extra trick, the double mctwist 1260 which we're told he landed in practice yesterday. so shaun white, an amazing guy. he has the name, the nickname, flying tomato, he's got the hair and, of course, what all marketers want and all marketers need, you've got to win. and there's a lot of faith behind shaun white tonight. >> yeah, darren, i was going to ask you, in terms of the mix of personality and success on the field, right? i mean, how much is it about the color of medal around your neck and how much is it about how you come across on camera? >> reporter: yeah, carl. it definitely starts with you've got a better chance if you have a gold than a silver. but at the same time, obviously, these companies need to have faith in the fact that you can break through the clutter. shaun white, sure red bull goes and builds a halfpipe for shaun white, but he breaks through the clutter from his look, from his name, from his brash attitude. he does it all. and that's why he's on the top of the list even though he's got that one chance, and that's it. he can be the most marketable guy in this olympic games even though he competes in only one event as opposed to some of the skiers that compete. >> how do all of these athletes compare to michael phelps? is he at the top? he certainly shares, i would argue, maybe the most name recognition. >> reporter: yeah, phelps -- that's a good question. phelps, i was last told about $10 million a year. and that's the highest number any olympian has ever achieved. and he's still around that point despite, you know, some of his troubles. he's still there. and subway, up until a couple weeks ago, still using him to swim to vancouver which, i guess, speaks to the power of the brand that you could be this summer olympian and still get the work during the winter olympics. >> doing the freestyle through concrete which he actually probably could do. darren, thanks. talk to you later this morning. darren rovell in vancouver. no waiting in line at the bank of "squawk." john kanas making his way to the state. the state of regional banks and investing in distressed companies. also with daniel mudd in just a couple of minutes. ♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco. tdd# 1-800-345-2550 that's why, at schwab, tdd# 1-800-345-2550 every online equity trade is now $8.95 tdd# 1-800-345-2550 no matter your account balance, how often you trade tdd# 1-800-345-2550 or how many shares... tdd# 1-800-345-2550 you pay what they pay what everyone pays: $8.95. tdd# 1-800-345-2550 and you still get all the help tdd# 1-800-345-2550 and support you expect from schwab tdd# 1-800-345-2550 millions of investors. one price. tdd# 1-800-345-2550 at charles schwab... tdd# 1-800-345-2550 investors rule. tdd# 1-800-345-2550 are you ready to rule? welcome back. some 15 bank failures came in january, and that number is still counting. last year we saw 140 banks that went under, making it the worst period since 1992's savings & loan crisis. veteran bank executive and private equity investor john kanas. also our guest host today is dan mudd of fortress investment group. john, welcome to the table. thanks for coming in today. >> morning. nice to see everybody. >> you know, we've been talking with dan earlier about lending and liquidity issues. has lending opened up or is it still very tight? >> no, it's still very tight. i'm waiting to come out here one day and say yes. to that question. but lending is also switched around. the federal government is the largest bank in thetoday, and it does most of the residential lending in the united states. if you put together fannie, ginnie and freddie, that's 95% of the market. and with fha making 97% loan-to-value loans at below 600 fico scores, there's not a lot of room for banks to compete in the mortgage lending space. credit card has been taken up by the four major players. so the rest of the banks in the country are relegated to the sort of, you know, commercial real estate business and cni lending. that's been widely publicized. we all know what kind of condition that's in. >> does that mean it's a bad or difficult time to be a banker? >> it's a very difficult time to be a banker under traditional circumstances. >> given the narrow room in which you have to operate. >> that's exactly right. obviously, you know, you cited the numbers. it's a tough time to be a banker. and we're seeing the industry get squeezed down and right size itself. >> john, is the narrow room that you've got to operate because you can't find credit-worthy borrowers or because you're cautious because you don't know what the next month or the next quarter's going to look like? >> it's a combination of things, dan. there have been, for the last decade, a very narrow space for regional banks and community banks to operate in. and that exacerbated now by the fact that there's just -- there's not an overabundance of credit-worthy borrowers in the system. we're focusing on small business lending opportunities, and we're doing our part, and we're aggressively trying to get credit out in south florida. but quite frankly, there's a lot of damage to balance sheets there. so it makes it doubly difficult. and we're not alone. most banks today are suffering for too many liabilities and not enough opportunities tobias sets and not enough lending opportunities. banks need to lend money to make money. and that's, i think, going to be the problem for the foreseeable future. >> is it different than you expected? you just got into this business last year. is this what you expected, a difficult slog in the early going? >> you know, becky, i've been fairly pessimistic. i would say realistic. and it is exactly what we expected to see. and we expect to see this for a long time. >> on the pessimistic note, how many banks are going to fail? before we're through the woods, a year or two, say, john? >> i started saying in 2007 we'll lose 1,000 banks. this time it's been widely misquoted. but i would stick with that. we lost 140, 150 last year. we're on track to lose a similar amount this year. we lost 25 or 30 the year before. so by the time this is over, in terms of banks being shrunken down out of the system, i have no trouble thinking about 1,000 fewer banks as a result of failures. but i think the bigger issue is one of consolidation after the failures are over. for the 1,000 or so that i think will fail over the cycle, there's another 2,000 or 3,000 bankers that aren't having much fun in this market, and i think that we'll start seeing real activity in traditional m&a probably starting now and going certainly heating up later this year and into next year. >> you would say the small guys are too small to care, really. does it matter? >> they're very small institutions. even the institutions so far that have failed, with a couple of notable exceptions, have been fairly small institutions. look, based on the business activity in our country today, there is an overcapacity in the banking system, and that will be taken care of. >> if business is lousy and it's exactly what you expected, why did you get into the business? >> we made a unique investment by a lost share arrangement as many other investor groups are, and so it's made it possible for us to operate without loan losses, with an excess amount of capital. and so we can take advantage of opportunities that banks around us don't have. and we expect that to continue for some time. so in this process of right-sizing the number of bank institutions, bank united will be a survivor. and one of those institutions, i believe, that others will be consolidated into. >> john, as always, we appreciate these updates on what's happening in the industry, and we look forward to talking to you again soon. >> nice to see you. coming up, it is home of the downhill ski events for the 2010 olympics. we're talking about the whistler ski resort. just days away from possibly being put on the auction block. we'll talk about why creditors are threatening and what fortress is saying about that situation right after this.  welcome back. futures looking pretty good after actually getting a lot better after the triple-digit gain we had yesterday. the biggest gain for the markets since november of last year. plus a couple of stocks to watch this morning. check out what deere's going to do today, posting much better than expected first quarter earnings in revenue. the company says cost cutting and strengthening at its in-house finance arm characterized it as weak global economic conditions. almost 58 there. that's going to take the stock almost back to levels of last september or so. so keep a close eye on deere. then, of course, walgreen, asquaring duane reade, new york-based operator of drugstores for about $1.1 billion including some debt. they're going to keep the duane reade name but a nice addition to the walgreens stable of stores. all that drama at the olympics, it isn't just confined to the slopes. there's financial drama behind the scenes at the iconic whistler resort where many of the events are taking place and where we find our michelle caruso-cabrera who joins us with more. michelle? >> reporter: hi, becky. yes, whistler blackcomb. a lot of drama on the slopes when you turn on nbc. but financial drama behind the scenes as you mentioned because the owner, intrawest, is in deep financial straits. so deep that some of its creditors which become the now defunct lehman brothers are threatening to foreclose on intrawest and auction off properties like whistler in the middle of the olympics. intrawest, by the way, was bought by hedge fund fortress at the height of the market back in 2006 for $2.8 billion. the company has been struggling with $1.7 billion in debt it took on to do that deal. fortress, of course, run by dan mudd, the guy sitting with you on set. the idea was that they were going to be developing all of these condos. they would provide cash flow to pay back the loans. we all know what happened to the end of that movie. the housing market, real estate market collapsed, and now they missed a debt payment of more than $500 million back in december. by the way, there are dozens of resorts in western canada and western united states in similar situations to this. but this one is unique, of course, because this is where the olympics are taking place. now, the creditors had set an arbitrary deadline of the 19th, two days from now, that if they didn't get some kind of settleme settlement, they were going to foreclose and perhaps do an auction. the negotiations had been so acrimonious that the lenders actually took out an ad in the papers back in january 20th and said that they were absolutely foreclosing. they were doing the auction. and folks within the restructuring world say that is one of the most obnoxious moves they have ever seen. they've never seen anything like that. just to give you some degree of how the debt negotiations were going. and i'd love to hear an update. on how they're going right now with the leader of fortress that you have sitting there. >> the best person to talk to right now. michelle, let's turn right now to dan. dan mudd. dan, what happened here? what is the situation behind the scenes? >> well, i mean, intrawest runs a whole series of destination resorts. you know some of them, stratton, steamboat, vancouver-whistler blackcomb. they're beautiful, they're having the olympics and all that. that said, we did a buyout. we used a lot of debt to do it. and there are really two businesses there. one business is the on-slope operations. and the other business is the related real estate business. the related real estate business is really tough. right? the on-slope operations actually a pretty good business. so fortress, as a long-term holder, we want to manage our way through the cycle and realize the full value of this investment. we missed a payment along the way in the process. the creditors told us they were going to put the ad in, by the way, and we've been having a series of discussions. they're tough discussions, right? money's at stake. big mountain's at stake in the papers and all that, but i think people are working constructively. nobody wants to see any damage done to the olympics in the process. and everybody wants to see a good financial result for intrawest. they're defending their interests. that's what happens. >> what about the 19th, the deadline two days from now? is that just arbitrary? is there a chance we could see foreclosure on these properties and perhaps an auction during the olympics? >> no, i think that during the olympics is really not part of the question. the question is will we be able to reach an agreement in a timely way? and everybody's working really, you know, down to the 19th. to 24 by 4 to get there. i'm cautious. i don't want to make a prediction right now. because the discussions are ongoing. but everybody's at the table. everybody's talking. sometimes the voices are louder. sometimes they're quieter. we're working to get there. >> have you offered to put in more cash? >> i don't want to go into the details of exactly what's been proposed right now. until we have an announcement to make. these things move around a lot before you actually get there. >> is the problem the level of leverage that was originally in the deal? is it about consumer spending on discretionary things like tourism and skiing? is it a real estate issue? what is the crux of the problem? >> it's both. sure. when you use a lot of leverage, obviously, when the market turns down, you've got a big problem. that's the story of the entire system right now. that said, the two businesses that you're in there, one is consumer discretionary. people want to take a vacation, spend money, go skiing. one. two, they really like it there. they want to buy a property there. they want to stay and come back every year. both of those businesses, no matter where you are right now, it's a very tough time in the cycle. >> we should point out intrawest owns other things like abercrombie & kent, right? extremely high-end. >> that's right. that's what we've tried to focus on in the business are the ones that are really special. you have to go there. and when you're there, you feel the kind of, you know, special feeling, the kind of services, the kind of sense of place that you get when you go to whistler blackcomb, when you go to stratton and steamboat. >> but is it your sense that just the type of real estate bubble that we saw, is it your sense that this was a peak and it's going to take years and years for valuations to come back? >> sure. it will take a while. these are largely second homes. you know, as you guys know, we haven't gotten through the first home crisis yet. so i think once there's some stability in the primary market, once, you know, the unemployment numbers move back, once all these other questions start to get resolved, that will take a couple years. but then i think you'll see the other business, the property business, start to come back. because there aren't two of those mountains in the world. >> is there a similar problem at places like steamboat, other properties that intrawest owns, or is this specific to whistler? >> these are broad discussions around intrawest. but the focus is obviously mutual when you talk about the discussions we're having with the locals of the olympics. >> we should point out, by the way, that disruption to the olympics according to the vancouver committee, if indeed there's some kind of transaction that happens in the midst of it. >> that's clearly in everybody's interest, michelle. absolutely. >> although you probably would prefer this to happen at a different time. yes? >> well, if you could choose your time, the world would be a different place. >> reporter: did your creditors not choose the timing, specifically the 19th, because it was in the middle of the lake-effect snow as a negotiating tactic? it's an arbitrary date. why that date? >> i don't think so. >> if so -- >> i tried very hard not to be a conspiracy theorist in life here. >> michelle, i'm guessing this isn't the topic of discussion on the slopes, but correct me if i'm wrong. >> reporter: oh, no, it's about bode miller and canadians and everything else. it's very exciting. it's so gorgeous here. >> michelle, thanks. we'll talk to you later. a lot more, of course, with dan throughout the course of the show. when we come back, we'll dig into the surprising numbers from deere. man, i don't think knocking the cover off the ball is even the way to put it. >> literally, we had to look through release three times to make sure to make sure there weren't extra numbers included. they beat expectations by about a mile and a half. >> stock's going to open up $3 or $4 higher. also, a year ago the $787 billion stimulus plan became a reality. we'll talk to former virginia governor and the chairman of the dnc, tim kaine, about the economy, jobs, stimulus a year later and financial reform when "squawk" continues. ah, auto! sir? 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"squawk box" begins right now. good wednesday morning. welcome back to "squawk" here on cnbc. i'm carl quintanilla with becky quick. our guest host, daniel mudd, ceo of fortress investment group. we've covered a lot from markets to dollar to property to the fed. and a lot more to come in the hour to come. still, though, our top story continues to be toyota today. the president, akio toyoda, vowing to tighten quality control by personally leading a new global task force. the company's evaluating some power steering problems now in its best-selling corolla model. our phil lebeau has been covering the press conference today. another fascinating display of corporate may have this morning, phil. >> it is, carl. but the headline that's going to get a lot of attention particularly in washington is this one. akio toyoda at this point is not planning to testify at congressional hearings scheduled next week. they held a press conference this morning in japan. while he said he is not planning to testify at the hearings, he did say he'd consider a request to testify if invited. so perhaps we might see him. he says u.s.-based executives are still the best people to appear at the hearings on toyota's behalf. he says the company broke its own rule of building beyond demand. >> translator: relatively to the speed of our growth, we did not spend enough time nurturing talent which is a time-consuming task. what's more, we were slightly behind in our ability to collect information about customers' complaints which would have enabled us to embark on kaizan. >> referring to company's improvement overall. meanwhile, here's the news on toyota and the corolla. the company is looking into power steering issues involving the corolla. there have been fewer than 100 complaints that people feel as though they lose control of the car even though they have not lost control. toyota says it will do whatever it needed to fix the problem. as you look at shares of toyota. keep in mind, it's been generally been holding in that $72 to $75 range. there was speculation for a while that we might see the stock drop down into the mid-60s. but it has not really broken below 70. it's as if investors are saying we think that they have a general handle on all of the problems. but clearly, as you can tell with the corolla issue being brought up, there's still more questions out there. >> phil, thank you very much. you will continue to be on top of that story, and we'll get more from him as it develops. meantime, look at shares of deere & company this morning. they are indicated sharply higher, coming after the construction equipment maker reported first quarter earnings of 57 cents a share. and that came as a surprise to everybody on the street. the street was only looking for estimates of 19 cents a share. revenue beat consensus by a healthy margin, too. and the company raised its full-year guidance. joining us with analysis is steve voelgman of jeffries & company. steve, what happened here? >> this was a quarter when they were supposed to be focused on inventory reduction. obviously lowering production aggressively to do that. and, you know, i think numbers were fairly low. and, obviously, things came out a little bit ahead of that with respect to, you know, how the eps worked out. >> things came out better than expected. they're also raising net income benefits for the full year. but it's not because of a healthy environment out there. is this just a company that's performing well? >> i think it's a two-part story. i do think the environment's a little healthier than most investors originally believed. they raised their top-line guidance for the year. you know, fairly meaningfully. but as you said, it's also an execution story. and these guys have done a great job on cost cutting, raw material costs have definitely worked in their favor lately. so i think you've got a two-part story here. >> they said themselves that global economic conditions continue to be very challenging. but you think maybe that's just them being a little conservative in what they're saying? >> well, this is a company that i think tries to tell it like it is. they're looking for sales increases of 6% to 8% this year. that's not off the charts, but it's a healthy increase, i think, off the bottom. you know, we'll have to work with that. i do think they're -- they just raised eps guidance 50%. i think they want to make sure people don't get too carried away. >> fair enough. when you look around, though, and read this news from deere today, obviously, it's going to help that stock quite a bit. do you think that when you look at some of their competitors, you'll be looking at them with maybe the idea that they could earn a little more as well? >> well, i have to say, we've been pretty bullish on this whole farm sector to be honest with you. it's the one sector i can see globally that's running at 100% capacity utilization at the bottom of the industrial cycle. i think crop prices are headed higher and i think people will be reinvesting in farm equipment. there are other ways to play that. you can play agco. we have a buy rating on that. a little less exposure to north america but i think the same sort of big-picture fundamentals will benefit them as well. >> steve, seasonally, is this quarter generally up wione of strength? if the beat comes at a time? >> i think investors and maybe the whole industry got a little hood winked. remember, we had a very late harvest in north america. in fact, in some places it's still going on. i think farmers, you know, got finished this year later than normal and sort of when they finish, they take stock of what they have and what they need and go out and maybe buy some equipment. i think maybe the season got pushed back by the late harvest this year. >> steve, you say you've been very optimistic about stocks and where they're headed. at what point do you start to show concern? >> well, if the risk ishyperbolt the year of a multiyear investment cycle in the ag business. again, it's the only business i can see globally that's running at 100% capacity utilization now at the bottom of the industrial cycle. as we get, you know, better global growth and recovery in places like europe and even eastern europe, i think there's going to be two, three healthy years of reinvestment in this business going forward. we're definitely not ready to jump off yet. >> all right. steve, thanks for joining us. >> thank you. it's been a year since the president signed the $787 billion economic stimulus plan. how stimulating has it been for the economy? that continues to be the subject of debate. here with thoughts, tim kaine, former governor of virginia, chairman of the dnc. he joins us. governor, good to have you with us. good morning. >> great to be back with you. thanks. >> it's been fascinating to watch. i know the administration is fanning out across the country. not you particularly, but the administration will hit some 35 communities trying to convince americans that this thing worked, is working. how is that going to go? >> well, i think americans already get it. i've seen polling recently that would suggest that even though we're not where we want to be, and we've got a longer way to go, americans understand that the president and congress are doing heavy lifting to get the economy going back again. i have an interesting vantage point. you know, as a governor up until a month ago, i was deeply involved in writing state budgets before the stimulus act passed and last year, then i got to rewrite the budget after it passed. i saw the difference it made in virginia. we're talking thousands and thousands of state and municipal jobs just in terms of the stabilization money to states. but we're also talking significant investments in new technologies, in small businesses, and we're seeing it have an effect. there's a great article in "the new york times" about the effect that the stimulus is having, saving or creating up to 2.4 million jobs. gdp starting to grow again. and as you guys know, i mean, we saw it here. the gdp started to fall. and then employment followed. it's going to take some strong gdp growth now two quarters in a row before we see the employment pick up to where we want it. but we do know that job losses have fallen from over 700,000 a month to now near net even. and we're going to need to keep working so it will start to grow. but we're feeling very good about this. and you know what? maybe the best proof of it is what do our harshest critics say? members of congress and governors and senators who voted against the stimulus and who have gone around saying it's not working and it's socialism or whatever they're claiming, we found 90 -- more than 90 of them are in line trying to get stimulus dollars, handing out oversized stimulus checks, appearing at photo ops, writing letters saying it's critical. it will help our economies start to grow again. so, look, the harshest critics are in line and saying we want to be part of it. >> the president called them out in baltimore and some other places. all that said, there's still, i think, some level of confusion among middle america about what the stimulus is. i've seen some polls that say people think the bailout and the stimulus were one and the same. why hasn't the messaging been cleaner, and is that going to change? >> you know, i think that's a fair critique. there are so many pieces to trying to get this economy going back together and whether it's dealing with a collapsing american auto industry and trying to save it, which this administration has done or dealing with the meltdown in the financial sector which was occurring when the inauguration occurred and trying to save it. there's a lot of moving pieces. but look, the stimulus was basically three things. first, it was tax cuts for working families. 95% of america's working families have received tax cuts and are continuing to receive tax reductions as a result of the stimulus. second, it was infrastructure spending. so spending on roads and ports and sewage treatment plants which both create jobs immediately on the construction side but then build a platform for greater economic success. and in that infrastructure spending, there's also significant investment in new technology. so, for example, you saw the president make the announcement about nuclear energy projects in maryland yesterday. the third piece of the stimulus was, you know, what you do when times are tough and people are hard hit. extending unemployment benefits, recognizing that medicaid roles are expanding in trying to deal with people as they've lost their health insurance as they have medical needs. those were the three pieces geared directly to the needs, you know, that an economy experiences in a down cycle. and all of them are working to, you know, get us back on the right path. >> the one thing the critics will also hit you with, though, is even if you go by some of the numbers that david puts in the piece today, 2.5 jobs impacted. doesn't quite hit the promise that the president initially made. is that fair? should we have expected him to have a forecast that ended up putting in in line? >> i think you may have the stats right before you and i don't. i think the president made a commitment about job numbers by the end of the stimulus spendout. >> so we're still on our way is your point. >> yeah. so what you've seen, like the vice president has an editorial today in "usa today" talking about we're through year one of the stimulus. there's a second year. actually, the stimulus extended over a period of two years and three months. some of it was retroactive. but essentially we're half the way through. if we're at the 2 million number in year one, and there are still significant infrastructure investments to make and investments like these new energy technologies that the president and his team are rolling out, i think there's a very, very solid expectation that we'll reach the numbers the president described when the bill was signed. >> governor, just to go back to what you said about some of these people who were opposed to the stimulus plan, now using some of those funds, i mean, i understand you think that's total hypocrisy, but at the same time, i could be opposed to the idea of giving into some of these funds and having my taxpayers paying for other states to get that. it may be a situation where i'm not in favor of this, but if you're taking money from my taxpayers, i'd like to see it come back to benefit people in my district and constituency but still be opposed to the idea. >> i hear your point but let me be more precise about the hypocrisy. just because somebody voted against the stimulus, you know, they could still want their state to get the stimulus dollars rather than somebody else. we're not talking about those people. what we're talking about is the people who voted against the stimulus but then have been out on tv shows campaigning saying this is doing nothing. it's creating no jobs. it's socialism. and then writing letters on the other hand saying please fund this project because the stimulus will help grow jobs and grow the economy in my district and my state. you can't have it both ways. so you're right. folks could vote against it and still be glad that the dollars are coming to their state. but we have more than 90 elected officials. and that's a breathtaking number who are out there campaigning saying it's doing nothing but then using it to balance their state budgets or handing out the oversized checks and getting their pictures in the paper if they had something to do with it. and if people are doing that, it's irresponsible, and we're going to make it known. >> well, the effort obviously is under way. and with a lot on the line as we continue to debate a new jobs bill as well. governor, i know you've got to run. appreciate your time today. we'll be watching closely. governor tim kaine. >> glad to be with you guys. thanks. coming up, we have breaking news on the way. we've got housing starts coming up at 8:30 a.m. eastern time. plus, a former fed insider will tell us if the debt crisis in greece is going to mess with bernanke's exit strategy. up next, though, we're going generic with mike huckman in na naples, florida. >> reporter: the farmers' $150 billion to the generic drug industry. what it means to companies, patients, investors. coming up next, a report from the annual meeting in naples, florida, when "squawk box" continues. "s" stands for straightforward. as in up-front, honest... total transparency. straightforward is the way td ameritrade does business. simple, fair pricing. no hidden account fees. no shenanigans. just good value. real help. smart people who are easy to work with. that's what td ameritrade stands for. what does your investment firm stand for? it's time for fresh thinking. it's time for td ameritrade. but in business, only two matter: red and black. red, well, no one wants that. black on the other hand, has strength. black is always in style. it's what business looks best in. black is where growth and success happen, and it's easier to get there and stay there in ontario, canada, especially with our competitive tax rate. ♪ ontario, canada - the world works here. welcome back to "squawk." futures looking good, up about a 45 points after the dow gained about 169 yesterday. we haven't had a day like that since november or so. it's up two out of three sessions. and we'll see if this up, down one day, down the next pattern continues over the next few days. walgreen buying new york-based drugstore chain duane reade in a deal valued just over $1.1 billion. duane reade is a big name in new york city and will continue to operate under its own name. the ceo of walgreen saying they're an iconic brand, the center of gravity in our community drugstores and will put it on equal footing with main rivals in the new york metro area. that's news for anybody who shops at drugstores in new york city. also, let's tell you about humana news on the wires right now. humana which is a major health care provider is talking about how it's going to be cutting its work force on a net basis by about 1400 positions. that is roughly 5% of the work force. they say they're going to be doing this over the course of 2010 over the course of this year. they're going to have about 2500 positions that it cuts. it will end up hiring another 1100 additional jobs in areas like medical cost containment capabilities, pharmaceutical management and specialty projects. they say the reductions will come primarily from attrition, efficiencies, outsourcing and position eliminations. again, you're talking about cutting about 5% of the work force. and that's very difficult in this time where we talk about job losses all the time. the focus right now of the nation on jobs for the economy. >> also backing their view is the full year? >> for the full year, they do say they're standing by their earnings per share expectations of $5.15, $5.35. they say that they're just backing that view. >> i think the street is still above at $5.56. for fiscal 2010. >> fiscal 2010. okay. again, this is something that's very noteworthy given the focus on jobs today. almost $150 billion worth of brand-name prescription drugs lose their patients over -- lose their patents over the next five years. that is a big blow for big pharma but is this a windfall for the industry? mike huckman joins us live from naples, florida, with answers on this question. mike? >> good morning, becky. and i'm at the generic pharmaceutical association's annual meeting at the ritz-carlton in naples, florida. i know that sounds a little counterintuitive for the industry, but the group says it got a two-year deal on this hotel prior to the economic downturn. anyway, more than 70% of prescriptions you that are filled in the united states are filled right now with generic drugs, but they account for only around 17% of america's total drugs spending. that answers the question whether there's a windfall. for more perspective, i am joined now by the president and ceo of the generic pharmaceutical association, miss kathleen yeager. good morning and thanks for being here. >> good morning, mike. thank you very much. >> reporter: sure. so this little guy, this is lipitor, my lipitor, actually, viagra, doxycontin, i could go n and on but those are a handful of the brand-name drugs set to go generic over the next couple years or so. how, if at all, is the industry you represent going to benefit from this huge drug patent expiration? >> i think that our industry as well as consumers in the health care system will really benefit. our future is extremely bright. with all these products coming off patents, we'll be able to provide consumers and health care system with quality health care and really reduce prices. so it's a win-win. >> reporter: but for doctors, for pharmacists and for patients who remain skeptical and who still have reservations about generic drugs, how can you assure them that the generic versions of these brand-name drugs that are in so many people's medicine cabinets right now are going to be just as safe and effective as the brand-name stuff? >> i think we can assure consumers very well. because if you look to the food and drug administration, they have all the scientists and all the medical experts there. they approve both brand and generic medicines. and they have to by federal law, they absolutely have to ensure that these products are the same medically. they're going to provide the same benefits. they're going to have the same side effect profile. so in the end they're going to be identical. because fda is going to assure that they are. >> reporter: in what some beltway insiders have called a shocker, your equivalent at big pharma's main lobbying organization, he announced he's resigning the middle of this year. i know naturally you guys didn't always see eye to eye. did health care reform do him in? was it his undoing? >> i think billy, unfortunately billy's departure is really a big loss for the brand pharmaceutical industry. i think billy has done a fantastic job for that industry over the years. he's been there five years. and he's really brought that trade association really up and has done some fantastic, you know, endeavors and really reached a lot of goals. i think that health care was just one issue out there, you know. whether, you know, i don't think anybody knows whether health care reform is going to pass or not pass. what will it look like? >> what do you think? do you think it gets revived? >> i think we just don't know. i think we know that next week we have a situation where we have the president and both parties invited to talk and i think that's a good thing. we really don't know where it's going to go. we know reform is needed. we know we need to provide for affordable health care. >> reporter: you say that because the industry you represent has so much riding on this. increased volume from more people being covered and presumably being pushed onto cheaper generic drugs. you want an end to the side deals, if you will, big pharma strikes with companies that keeps more competition off the market for a time. and you want a road map for generic versions of biotech drugs. have i hit everything that's on the line for your industry? >> i think you covered it very well. but i think what we really do need to know and really what we all need to be doing is fostering more generics. an example, if the medicaid program alone, if we could bring the raitt up to the national average at 74%, we could save an additional $5 billion annually. and that's real money. and that's real savings. and so that would be a fantastic, you know, start here. we also need to know that we need to forge ahead and actually get consumers choice and access to biologics. right now they're out of the reach of so many americans. they cost so much money. we need to make sure we get a strong, workable pathway. and that is absolutely key for our health care system. >> biologics meaning biotech drugs. kathleen jaeger, thanks again for being here. coming up on "squawk on the street," get ready for dr. readies, the coo of a generic drug company in india, becky, where more and more of our generic drugs are coming from. back to you. >> mike, thank you very much. mike huckman. when we return, blueprints, nails, hammers, construction. we're going to find out how many housing projects got started last month. we've got that breaking news at 8:30 a.m. eastern time just a few minutes away. and life after gold. 2002 olympic figure skating gold medalist sarah hughes. how her life has changed after winning at the age of 16. that is coming up right here on "squawk." (announcer) we're in the energy business. 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. if you're wondering whether or not we can continue the rally on the dow yesterday, we're going to try at the hope. green arrows on asia reopened strongly. the nikkei up 3%. europe with some green arrows despite some nasty unemployment numbers in the uk. and futures close to the top of the session, although on a relatively tight range. when we come back, breaking news, the latest housing starts released also the reaction. plus larry meyer on the fed's next move as we get those minutes later today and talk about the dissension which was a big topic of discussion. you all want to run your businesses more efficiently, so we've brought in a team of experts to help. one suggestion is to make your shipping more efficient with priority mail flat rate boxes from the postal service. shipping's a hassle! weighing every box... actually, with flat rate boxes you don't need to weigh anything under 70 pounds. if it fits, it ships for a low flat rate. call or go online for a free flat rate box shipping kit that includes free boxes and our helpful shipping guide. do it today, and we'll ship it all right to your door for free. ok, but i ship all over the country. you can ship anywhere in the country for a low flat rate. ship international, too. and remember flat rate boxes come in four sizes and shipping starts at just $4.95. call or go online for a free shipping kit with a full supply of free boxes, plus the shipping guide. act now, and you'll get them all delivered right to your business free of charge. priority mail flat rate boxes only from the postal service. a simpler way to ship. call or go online now to get started.  housing starts and import prices on the way. rick santelli, steve liesman, dan mudd our guest host. rick, good morning to you. deliver the mail. >> reporter: here we go. there's a boatload of numbers. import prices up 1.4%. that is indeed much more than expectations. year over year, 11.5%. and not only is that much higher from expectations, housing starts, 591,000 seasonally adjusted annualized unit, that's about where we expected. and actually, there was a positive revision last month from 557k to 575. permits gives us an indication, spot on with estimates, 621 seasonally annualized units. no revision to last month. on the starts month over month, that comes out to just shy of, what, 2.9%, 2.8% on increase. on permits, month over month, that actually is a smidge of a dropoff and that's down 4.9%. as i said, matched expectations. we still have 9:15 numbers. and after all that data, have the markets moved much? we're seeing a little bit of a rise in interest rates. a couple of basis points. and in terms pre-opening equities, still up a bit. it really hasn't made a huge difference at this point. and in terms of the dollar, hey, boys, do we see any big changes in the dollar? no big changes. we are still holding a $1.37 handle as the euro corrects, trying to decide if bail yoits are good or not, what's going to happen over the next month or so, certainly seems buying time is the world's strategy for credit issues. back to you. >> nobody can digest those numbers and deliver like you can. stay right there. steve liesman's here, also our guest host, dan mudd. steve, anything that jumps out at you? >> mostly the import price rise was largely due to fuel prices except when you take out fuel, you still have the 0.4% increase. i'm not sure that inflationary pressure is coming from. it must be somewhere in the consumer goods area which is pretty interesting. but largely you had a pretty big fuel increase in the month of january. that should work itself off for the next month because you had that $10 drop. not being picked up. plus you had, by the way, a huge decline in imports. we talked about that last week when the folks from cameron hanover. the other quick thing i'd like to point out on housing is you did have the big drop in permits with rick pointed out, 4.9% jump. when you're up 10% the prior month. so it might have been december's permits became january's construction. the percentage increase was not as much as wall street expected. but the level is where wall street expected. $5.90 when you did have weather stuff. better months to gauge housing as we know are the spring. both on new and existing homes because of the fact that you get rid of the weather problems and march, april, may are the months people start to sell their homes. so from the existing standpoint, that's where you want to see is the housing market rebounding. plus you have the first-time roll-off. >> when you start hearing numbers like this, what does it make you think? >> that housing prices have started to stabilize. i'm a little cantankerous about this. i don't really understand why we celebrate housing starts going up. we need housing starts to stop. with you want them to stop. there are too many houses. we pay farmers not to grow stuff when we have too much stuff. now we want less starts. let's absorb the supply we have. put a firm foundation underneath housing. get the employment numbers back and let's start building houses. that's what it makes me think. >> we don't want to go to zero, dan. come on. i'm relative to population, these numbers are lower than i think they were going back to the '50s and '40s. we have not in a long time produced this few houses. got to be some places that need a couple houses. >> although some people have said what you need to do is blow up that existing supply to get things back on track. >> i don't think we're taking any supply off the market. and i agree with you, long term, the demographics really favor housing and we're going to need all of that supply. but i think, you know, a steady maintenance of the manufacturing side of housing would be a good thing. the spikes upward, not so helpful. >> a quick chicken and egg debate, do you want to get the financing right or construction right for how'sing? because entirely unclear to me is how the private sector once the fed leaves the housing finance business at the end of this quarter, how the private sector will finance mortgages. not on the front end, the back end. >> fannie and freddie. >> that's not the private sector, rick. that's the idea, right? >> reporter: come on! >> let's hope that's not the answer. i would very much like to -- >> reporter: but it is the answer. we know it's the answer. why would we pretend it isn't? >> only if you're being sarcastic. >> reporter: i'm not being sarcastic. if it isn't fannie and freddie, why don't they put them back in shackles? >> well, they'd like to and they should, but what will be more interesting to see what the private sector mortgage-backed security industry looks like absent the fed taking 80% of the new issue. >> this is the problem is we don't have a system. we need to decide who's going to finance housing and what we're going to do to gses. >> reporter: we have town hall meetings and we're spending boatloads of money and we admittedly have no solution. what a plan. >> dan, you're in a unique position to talk about this, the former ceo of fannie mae brought in to clean up the mess. what is the solution? >> i think we need an answer for what we want u.s. housing, finance to look like, one. and with that -- and, you know, everybody doesn't need to own a home. you know? the odds are that 70% of home ownership in america was too high, needs to come down. my view is let's go back to fundamentals. the old 20% down payment put people in houses they can eventually buy and own. we're 1 million miles away from that now, but we need to have a goal if we're going to make any progress. the gses, we've got to figure out -- we all own them right now. so the question seems to me, the government ought to buy them back and then the government ought to say, okay, fine. we bought it back. we'll mutualize it, redrbistribe it out, and we'll get people on the ladder to home ownership and after that they're on their own. >> reporter: a question from the peanut gallery. >> go ahead, rick. >> reporter: our guest obviously has a boatload of knowledge on this, and what he said makes so much sense. have some flesh in the game, put 20% down. my request is why don't you write fjla a letter. maybe they should up the ante. what are they, 3% down and we're still playing this game? you understand. you said it all, a mouthful. 20% down. let's get back to the old tried and true. but yet as we talk about this, it certainly isn't what's going on. >> the approach right now is we're kicking the can down the road. >> reporter: absolutely. but we know it. we keep ignoring it. >> and then at some point we'll have to face the music. and the music is principal is going to have to be reduced. the mortgagers will have to be on a stable footing. then we can start to move forward. >> reporter: sell the houses, foreclose them and move on. >> they're going to do a prepayment on a lot of delinquent mortgages inside the fannie/freddie. $230 billion which is really interesting. it's like they're kind of clearing the decks out and they're going to try to clean up some of these mortgage-backed securities. unclear to me if it's to make new capacity or it's so sort of get rid of the old. >> well, it's a cheaper way for fannie and freddie to handle the foreclosures they've already got. they're going to buy these loans out of the securities, modify them, manage them themselves. they're going to buy them out at 100. so anybody that's above 100 will take a loss. anybody that's below 100 is going to have kind of a windfall gain. the issue is it introduces some uncertainty into the valuations in the mortgage-backed securities market. the markets don't like that. we just need some direction. >> dan, why is it a foregone conclusion we have to look at principal reductions? >> reporter: more home equity loans. they're modifying them. hey, did you buy that boat? you don't have to take it back. just refi that second lien. >> i think the modifications are really kicking the can down the road. i think what we've seen is a very high percentage of the modifications actually failed the second time around. >> which they expected going into it. >> they expect -- that's happening. the banks are having a hard time modifying given the credit worthiness they've got out there. they're carrying too high a load. >> with principal reduction, they have not -- >> the principal reduction is also a problem. the modification stretching it out doesn't solve anything. it just delays the problem for another day. >> right back in. >> back to rick's point, i mean, the idea of just principal writedowns, are the banks going to go along with something like that? are voters? i mean, that's -- >> well, you face some ugly choices, right? if the modifications aren't working, you repossess the house. you're unable to sell the house into the marketplace. i've been in homes that have been foreclosed upon. it's an unpretty picture. that's the worst thing for everybody. keeping somebody in a home -- >> that's almost rewarding. >> there's a lot of bad behavior out there. you've got to pick the thing that's actually going to solve the problem. and solving the problem is having the house be valued for what it's worth. it's just the reality. >> what people don't understand is that what we have avoided so far -- and this is actually a success that's not counted -- we've avoided the government owning the stuff. and that was, i think, an all eastern tif all along that the government could have done an rtc-type deal which it didn't do. it's decided to keep it out there and let the deals be between fannie, which is sort of the government but not quite, and the homeowner or the bank and the homeowner. the alternative is all this stuff goes back to the banks, they get taken over. >> what's happening right now, which is banks are going ahead with short sales instead of foreclosures because they make 20% more on a short sale than they would on a foreclosure anyway. maybe it doesn't keep the value of a home where people would like to see it. but if you're doing short sales and there are byers -- >> but the short sale puts byers on a new footing. the new buyer is in at a value they can afford. that solves the problem. >> so is that an alternative? >> there's no one answer. and in some cases modifications will work. but if that's your only tool, you won't make as many progress. modify, short sale, principal reduction. that's the hierarchy in my view. >> all right. rick, thank you. and thank you for bringing up those points. also great delivery on the data, as always. we'll check back in with you again tomorrow. meantime, we've got to turn our attention to the fomc minutes. they're still ahead today. it's the perfect time for our next guest. joining us now from washington, d.c., is larry meyer, former federal reserve board governor. he's also macro economic advisers' vice chairman. our guest host is dan mudd, fortress investment group ceo, also former fannie mae president and ceo. larry, before we turn our attention to the fomc, can you just comment on what we've been talking about, this idea of what to do with the massive housing problem in this nation? what do you think is the best bet? >> i don't think loan modification -- it's very complicated and very slow. i don't think that's really going to be a winner. and very frankly, i don't have a silver bullet that is going to work here. >> how about a bronze bullet? >> yeah, well, maybe. maybe. i don't have any off-the-shelf proposals to share with you, i would say. >> all right. well, then why don't we start talking a little bit about what you expect out of the fomc minutes we'll be getting later today. is there anything that might be something that really catches us by surprise? >> i don't think so because the chairman in his recent testimony really presented the conclusions of the fomc with respect to additional details about exit strategy, with respect to the discount rate, that they're going to do it very soon and why they're going to do it. so we may get some color around that. we may get some idea of how much of a consensus is there, what the range of opinions are on the committee. the most interesting release today will be the forecasts that were updated at the january meeting. so we'll see whether or not the committee is more optimistic about growth in the near term, whether they're a little bit less confident about a further decline in inflation, and where they see the unemployment rate at the end of this year. all of those will be very, very important in reaching some judgment about when they may raise rates for the first time. >> larry, when do they hike the discount rate? >> oh, you know, any time. i wouldn't be surprised if it was today. you know, 10:00 this morning. >> that's just establishing it, and you would not see that as any change in policy. >> absolutely not. it really goes with the closing of the emergency facilities. that's why they lowered the discount rate as part of that emergency infusion of liquidity. and now they're normalizing it. it has absolutely nothing to do with the timing of monetary policy. i mean, bernanke's not lying, okay? >> larry, i was at a conference yesterday in washington on the deficit. and i think the only correct solution is probably suicide. i'm not sure. listening to the politicians in washington talk about the -- i guess the intractablity of it all. what i'm interested in is the fed. does the fed wait to see what the fiscal policy side does when it comes to tightening, or does the fed start tightening on its own before the treasury does? >> well, it can't wait for treasury because that could be five, ten years. so there's no action possible on the deficit right now. you know, republicans don't want tax increases. democrats don't want sharp declines in medicare. and you can't deal with the deficit unless you do both. >> hey, larry, quickly, there's a story in "the journal" today about how china started selling some of its u.s. treasuries, that japan is now the number one holder of u.s. treasuries. is that a concern? does it make us think china's not comfortable loaning us money? >> well, i think that's certainly a very valid interpretation. and that's one of the things that could cause a sharp decline, even the collapse, in the dollar, as everybody rushes to the exit. i don't think that's imminent, but what we're seeing is some loss of confidence in the discipline of fiscal policy in the u.s. and a failure to put together a specific plan in the near term will, you know, will continue that trend. >> are you taking any solace at all in this new budget panel, and do you think erskine bowles and alan simpson can chop some wood? >> i think they're going to come up with a reasonable proposal. >> is the inflation too low, unrealistic? >> i think this is something that should be on the table. we've had two periods here where we've been driven down to 1% or 0% following significant recessions. and so if we stay at 2%, it means that we're going to be in a situation where maybe every other recession will be pushed down to zero. so i think it's worth talking about. remember that the fed doesn't even have an explicit inflation target. they cannot simply come in and say we're raising our inflation objective. what they have to do is say we're moving to an inflation objective. and it's going to be "x." now, having said that, they've made it very clear that their implicit target is 2%. and the role of an inflation objective is to increase the discipline and the credibility of the central bank with respect to maintaining price stability. so if on the one hand you introduce an inflation objective and on the other hand you raise it relative to what it was earlier, you unwind that sense of increased discipline. it's a very, very difficult choice for central banks around the world. and the first one who tries it will be very tested in how the markets will respond to it. would it be better if we were to hire inflation objective? yes, i think so. >> all right, larry, thank you very much for joining us. we appreciate it. >> my pleasure. >> and steve, thank you. >> more and more talk about what larry was saying. central banks around the world should raise their inflation target as part of a way to talk about monetizing your way out of the debt problem. >> thanks, guys. when we come back, figure skating is a huge draw for the olympic games and it's big business especially if you take gold. sarah hughes will tell us about life after the games. 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. this is onstar reporting a stolen blue chevy tahoe, south on i-75, near exit 5. we're on it. onstar, we may have that tahoe. ok, i'll flash the lights. we got it. it's in the clear. i'm sending a signal to cut the power. we got him. mr. ross, the police have recovered your tahoe. our next guest was only 16 years old, could barely drive a car when she rose to the top of the podium at the 2002 winter olympics in salt lake. she's now turning her gold medal into good deeds. joining us is sarah hughes, winner of the gold medal in figure skating at the 2002 winter olympics. she joins us from new york. sarah, good to have you with us. we were just talking off camera about why figure skating is -- you cannot take your -- it's so compelling. and then reading the piece that you wrote for "the journal," i guess a couple of weeks ago, about how much of it is decided on, as you put if, a quarter-inch blade lands on a slippery how did you respond to how you did in 2002 and do you constantly play that tape over and over in your mind? >> i don't really watch it that much but it's funny that you say that because my grandmother whenever she calls me from florida always watches it and she really loves it. i don't really think about it as much. >> yeah. it's been written that when you went to yale occasionally you would get played in your dorm, right? and you realized watching it how long four minutes can possibly be. right? >> yeah. when you're in the moment and skating it's very different from when you watch it years later on a tape or on youtube. >> how has the post olympic life been? we talked to tommy moe yesterday and it's interesting how he has taken the sport that he loves and managed to incorporate it into his post olympic life giving tours and even speaking. i guess my question is after the olympics is it easier to keep skating and make money by skating or make money, say, by speaking instead? >> well, i think it depends on your sport a little bit. and my life right after the olympics and my life right now, eight years later, is drastically different. after i won i went on some skating tours and i worked with some sponsors where, you know, i was able to skate and do other things that interest me with having a social outreach as well. but when i went to school, i didn't skate as much. i left school a little bit to go and do a national tour but then when i went back it's very difficult to keep that up and live in a dorm room. >> right. you chose to go as we said to yale. was that in your plan when you were a young athlete? was it eventually that you would go back to college and pursue a career outside of athletics? >> well, figure skating, i mean, there are only three people, usually three people who make the team. this olympics we only have two which is only the second time since 1926 where the ladies team has only been a team of two women, so to make the three spots i don't think -- i wasn't thinking growing up and when the trials were. in 2002 i was only 16 so i always had my eyes on college as opposed to just the olympics. >> well, it's an amazing career even at the young age of 16. at the time you were the fourth youngest i think to achieve that and you've done -- anybody who wants to go back and read the op-ed in "the journal" it's a great read. thank you for your time. >> thank you for having me. >> coming up we've got the stock of the morning. for the first time in history, more people live in cities than anywhere else. which means cities have to get smarter. new york has smart crime fighting. paris has smart healthcare. smart traffic systems in brisbane keep traffic moving. galway has smart water. smart meters in dallas, houston... and a smart grid in copenhagen keep energy flowing. smart ideas are happening... all over the world. i want to bring them all together in your city. a smarter paris. a smarter stuttgart. sao paulo. copenhagen. kyoto. a planet of smarter cities. that's what i'm working on. i'm an ibmer. let's build a smarter planet. check out shares of deere. bid/ask quite a bit higher. this comes after the company came out with earnings that were three times what the street was expecting. you're talking about 57 cents a share versus the 19 cents the street was expecting. again, deere at this point is bid at 57.68. the ask is a 57.80 after closing at 53.78. when we return, we'll get parting shots from our guest host today. "squawk box" will be right back. on "squawk" new jersey governor chris christie, his first television interview since taking office at 7:30 a.m. tomorrow. the governor here with us on "squawk." in the meantime our guest host has been with us for most of the morning. of all the stuff to cross the wires and that crossed our desk today i saw you wrote down deere and humana. good numbers and in humana's case good guidance but because of layoffs. >> you're seeing companies make earnings which is a good sign but they're -- the question is, is the revenue growth there, one, and, two, we're seeing job losses. as we tie that into the housing story it's now transitioned to housing prices stable. are they going to remain stable? depends whether people have the jobs to pay off those mortgages. so i think very much -- a big bet is being placed on employme employment. >> we'll see jobless claims tomorrow. >> it's been great having you. >> my pleasure. >> a former ge executive. did you know that? >> no. >> still sane after all those years. >> make sure you join us tomorrow. "squawk on the street" is coming up next. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. half an hour before the opening bell. >> and good morning, everyone. i'm irnl'm erin burnett. futures are higher. it looks like yesterday's run is going to continue. yesterday was the best day we've had for the markets in three months and today housing starts, prices rising mildly in january. nothing to write home about. >> walgreens buying rival for $1 billion. nothing runs like a deere posting a huge beat, raising guidance. we'll go inside their numbers. >> and all this as we work our way up to fed meeting minutes, which are on "street signs" around about 2:00 eastern standard time. we'll find out what they were really thinking in that room, mark.