Transcripts For CNBC Squawk Box 20130913

That rally overnight. You can see right now at 99. 65. The dow is still within about 2 of its record close and on track for its second biggest weekly gain of a year. The futures as we head into this are looking at this point like they are up about 35 points above fair value for the dow. The s p is up by over 1 points and nasdaq up by five. We have a great number of people ready to talk about the markets this morning, including haung paulson who will be joining us in studio at 7 00 eastern time. Plus, we have marc lasry. We are former wells fargo ceo dick kavasovic. Its going to be a big show. Thank you, becky. We have Corporate News this morning, that music when you first saw becky this morning, that tweety bird song, the reason were doing that is because twitter filed for its ipo with regulators. Making an announcement in its tweet, the social networking site following for an ipo confidentially under a new law intends to help emerging corporations with less than 1 billion in revenue go public. Now, Goldman Sachs is the lead underwriter and were going to have more about this throughout the whole forecast. But Julia Boorstin will be live at their offices in just a minute. And were going to talk to a buzz representative who says the twitter ipo could be worth between 10 and 20 billion. Some saying its 16 billion right now now. Jpmorgan reportedly plans to spend an additional 4 billion and commit 5,000 extra employees to fix risk and compliance issues. This comes as the Company Faces a number of investigations by regulatory authorities. Thats a lot of people. The bank will spend 1. 5 million on managing risks and complying regulations and plans to add another 2. 5 billion to its litigation reserves in the second half of the year. And pimco and the blackrock got more than a quarter of verizons billion dollar bond buyout this week. Together they bought about 13 billion of version rienzons bond deal. That means that hundreds of millions of dollars on paper gains were made for those two firms. Joe. Youre not happy about this twitter thing, right . Am i wrong . No, no, no. Youre happy . Yes. Im happy. Im happy. I think its interesting that it is able to do the under a billion thing and its market cap is going to be huge. I also think its interesting from the perspective that were almost seeing a mini its not a bubble, but were seeing a mini sort of 19 mid 90s move in the social media stock that remind me of excite dot whatever those things were back then. Pets. Com or whatever. My point was, and it was kind of i dont rm like twitter. I mean, i try to cut but youre addicted. No, im not. I try to cut down on the number of people that i follow. Most of the people that i do follow i dont really want to hear every waking thought from them. I dont care what theyre thinking, but i sort of have to know. I was saying that i hope the ipo, since it had to happen, i hope its getting to closer to when the whole thing goes away. Five years you cant turn it off. Thats because people you happen, the haters nudge me into responding. Five years from now, are we still going to be doing this, andrew . And if so, will anyone ever leave their house to actually have any actual social contact or will it its great as a news wire. It does work great as a news wire. I know. But you know what . There will come a day when we wont need to have to know about every bit of news and maybe we could watch a sunset. Kim kardashian is getting 10,000 and 20,000 a tweet. One day, you can, too. Wow. Thats ridiculous. What i just said and what you just said, dont you see us rushing towards some apocalyptic ending . Cant you see that the world is going to end badly when this is happening, andrew . This is like this was written about in the bible. I think they mentioned knows tra dammus mentioned kim cash dann when shes making 10,000 a tweet. Look out. Exactly. Meantime, new jersey, information coming into the news wires this morning on two horrible disasters on the shore. A fire destroyed 80 of the boardwalk in what had already been ravaged by sandy. Seaside. It kept jumping from one to the next and the boardwalk is made out of wood. New Jersey Governor Chris Christie did address reporters on the scene. When i got my first full briefing before i left trenton to come here, i said to my staff, i feel like i want to throw up. And thats me. After all the effort, the time and resources that weve put in to help Seaside Heights rebuild, to see this going on i said at the top is unthinkable. Scott cohen will join us live in seaside in the next half hour. And then, where i went to school. They showed the fountain on cu, just flooded which was the main part of the campus. But a lot of boulder, heavy rains, like 7. 5 inches in 24 hours caused some dams to overflow. Flash flooding. At least three people dead. Authorities have called on thousands more people in the city of boulder to evacuate. Its a creek that where all the water collects. It began rising to dangerous levels. Really tragic. I dont remember anything like that in the 70s when i was out there, but they referenced something that happened in colorado. 140 people died in flash flooding back in the 70s on one of these things. So its not like it hasnt happened before, but shocking to see it happen in boulder. And it happened so quickly. People were in their houses, they looked out and it was like a a lake. Yeah. We get flash flood warnings now on the smartphones, all of them pop up and tell you beware. Power outages, about trees down. They come in on, you know, landlines. Texting. Phones ringing. Id never get any, no one contacted me. Then something was going off. And you got caught up in the weather, too. Go to chicago for the day . Go there on business, after youve done you get up at 4 00. You come in late. But then you leave and go on a plane to chicago, do a bunch of stuff, get on the plane last night. Late. And then get on a plane last night. The dow is on track for its second big day of the year. S p futures up by 1. 25 points. Oil prices, which weve been watching so closely because of syria, theyre down by just over a dollar. And take a look at the tenyear note. You can see the yield this morning at 2. 921 . The dollar, as we mentioned, did rally earlier in the session as the nikkei was reporting that Larry Summers could be named as the next fed chief as early as next week. You can see this morning, the euro is at 1. 3292. The dollar yen trading at 99. 59. If im ever nominated, i want the first line of mirror nomination to be the dollar strengthened on reports that blah, blah, blah, blah. That might not have been the case if it was reports of jan the yellen. But that races the question is Larry Summers really left of janet yellen . What is the one thing that every treasury secretary needs to learn how to say . Its like when if the stock goes up on the company that youre ceo of when youre resigning, that is bad. This is what got me. Theyre moving them so as many as 50 sites to make them harder for the u. S. To track. The opening offer from syria was that we would do this and jerry said that is way too long. Did you see robert franks, a piece on putin yesterday . I didnt. Guess what his net worth is. 40 billion. Thats minimum. Thats what they know about. Hes kgb and he was lecturing all of us yesterday on human rights. Look at the situation with gay rights and and i told you how reasonable he sounded. I know robert menendes, our senator in jersey said he wanted to bomb it. You can want to bomb it. Did you think it was then like if a sociopath or a psycho path writes something about all of his murders in an elegant way, do you think it sounds reasonable . Yeah, i do. The problem is its going to influence those who read this in the paper. In all honesty, i was not in favor of this before, bit swayed me. The point that every american is that could happen. Something else that came back, i didnt wasnt that happy about was that, you know, someone gave him that line about not being exceptional. Obama said, you know, people that live there think theyre exceptional. I dont think theres any question. I dont have any selfdoubt. It was late in the history of human civilization. We finally figured ow how to do it. And we put everyone together from all around the world and sat down and figured out how to do it. If you dont believe were exceptional and youre running this country, that is depressing to me because this is what happened. If youre a gay athlete in russia, do you think he understands other peoples point of view . Who, putin . Yeah, putin. Absolutely not. Im talking about obama. That was part of the apiecement tour. Anyway were going to go across the pond, a little closer to russia, time now for the Global Markets report. Carolin roth is standing by in london. Good morning to you. Good morning to you. I dont necessarily have a view on this, but let me tell you what the markets are doing in europe. The xetra dax is off by 0. 1 . Ftse 100 off by 0. 25 . The ftse 100 off by 0. 3 because metal prices have been falling and thats putting pressure on some of the metal sectors and some of the metal stocks. In terms of the bond markets, we have been focusing a lot of the tenyear italian paper. The yield at 4. 53 . It has shot above that of the tenyear spanish paper in all these political tensions. What is the future going to be of former Prime Minister berlusconi . In connection with that, i wanted to bring you comments from the current Prime Minister. He said italy must show it is credible, serious and able to service its debt. Its taken a lot of effort to keep the government in place. There are other reasons for the rise of the dollar in japan. Maybe because the government in japan has upgraded its economic forecast. Its the seventh time its done that this year. Sterling dollar, up by around 0. 10 . Back over to you guys. All right, carolyn, think about it, then. Maybe the next time we come to you, you can just give us a wink or a nod on how you feel about it. Its a pretty touchy issue, so ill still steer clear of that for the moment. You werent fortunate enough to be born here, either. We understand. Thank you. Now back to our top corporate story of the morning. Twitter confidentially filing an ipo with the s. E. C. Julia boorstin joins us from outside twitters headquarters in fran. I was going to tweet something about toss you to you and then i decided im not going to get caught up in this whole mess, julia. Oh, come on. Youve got to tweet, joe. You figured out how exciting twitter is as, obviously, have 200 million other people. So heres the situation, joe. Filing confidentially as twitter yesterday did means that twitter doesnt need to disclose any details about his business in the public just yet. Now, twitter can file confidentially because it has less than 1 billion in revenue. The question then is what is twitters valuation . We have key estimates. At its most recent funding round, twitter was valued at around 10 billion. But based on Light Trading in the secondary market, its currently trading at 15 billion or 16 billion. It could include the likes of video, ads or fees from, say, microsoft bing. Hemarketer expects revenues to be lower. But it projects 950 million in revenue next year and 123 billion in revenue in the year 2015. So who is going to catch in on this ipo . Twitter has raised 1. 16 billion since 2007. Its first round of investors included mark andressen. The next round, a year later, included jeff basos of besos expeditions. And twitters it sounds like we just lost julia. But we do have somebody else who can talk about all this. But joining us to talk more about twitters fans, jeff steinberg. How much do you think this thing is really worth . I hope it stays at 10 or 15. The beauty of this thing is that everybody is getting to it earlier. It will have 1 billion in he are knew the year it goes out. 200 million users facebook has. So this is the company of the future, right . How often do you click on advertisements . If you think lamar is a good company, right, this thing is 100 times better. And when you think about this whole issue, and maybe we can bring julia back into the conversation because i think we got her back, when you think about this whole idea that this has been done confidentially, that is the big twist on this relative. What does that mean . It means were not going to hear about any of the numbers. Three weeks before the road show, the numbers will come out. Normally, when they file for an ipo i think its going to leak pretty quickly. Its too big of a company for it not to. But i think its nice. This can get Companies Going public again. If youre less than 1 billion in revenue, youre not a massive, Massive Company, you can do this with it is a massive, Massive Company with 10 billion, right . Well, on a relative basis. When youre fee, yes, a company can put an ad in your feed. What . If its television, they can put a commercial. I know that. But im not going to look at it, im not going to click on it. You dont have to. You dont have to. Im not going to. Julia. Joe, if you havent noticed, there are ads in your feeds and thats probably a good sign that twitter is doing a good job. Weve talked to analysts in the past day. To a lot of people, twitter ads are less intrusive because they flow less obtrusively than facebooks ads. An advertiser will get to pay less per person who see thats ad if people like the ad, if they engage in it, if they click on it, if they retweet it. So twitter is encouraging advertisers to make ads that are more compelling. If you think media has a future, media generally, young people are not subscribing to newspapers, the average Television Viewer is late 40s, early 50s. Were seeing the birth of media again. Twitter, i use differently. Facebook, i have an account, but i dont check in very often. Twitter im kind of addicted to because it meps with me job. And also, as i say, joe, you said you didnt want to tweet this morning and i gave you a hard time about that. But the truth is that most people would use twitter dont tweet. People come to twitter to use it as a contemporary news feed and they go thereon to get information about entertainment, news, sports, to follow their favorite chefs or celebrities. And people see it to get contest. You do brand recognition. Yeah. Dolean was saying the other day that maybe they will be just a broadband company, right . Cnbc will continue to push out televisions. In the future, maybe youll be putting it out on video, on twitter, delivered over cablevision or comcast pipes. That could happen over the next five to ten years. Twitter could be the new cable network. Everything else could be pipes. Why wont they go to hour long specials . This can take better technology. Becky, even more before we see what jon is talking about happening, we have to look at the partnerships twitter has done with various tv distributors. Look at the Partnership Twitter has done with espn. Twitter has been a lead honor in figuring out social television. Theyre working with espn. Theyre letting espn imbed clips and there are ads in those clips. This is whats going to happen to me tomorrow. Less has been able to get 1 billion in retransmission. Everybody else is blind, but were going to try. Tomorrow night, im going to easily sit down and surgeon on high def cbs and sit down and watch alabama. Why is there not a place for that in there is. Unless you think people get to 47 years old and they just start watching television, thats your possible argument, right . Or people are not going to start watching television and this is how people will get all their content. Maybe it will be add on to the way things that im not getting old. Its not going away, right . But theres no more joe, youre one of a kind. Theres no more joe kernen coming out. Joe, it is an add on. Youre going to be watching tesionaying attention to your iphone, but many other people are going to be sitting there watching the sports game and tweeting about it. Its going to be a wonderful world. One last question. Why is this not going to be facebook . Because everybody got so bummed a year ago. Why isnt it my face . Look at where facebook is right now. To your point, my hope is that it stays at 10 billion. That it doesnt run away. The private market is trading on shares around 15 billion to 16 billion in terms of valuation. And you think it will show up at 10 . Im saying i hope it would be more around that level. I hope it doesnt crash up to 15 or 20 or even 25. The private market is what was blamed for what was wrong with facebooks ipo. But is it the same saturation in the private market here . No. Its a totally different situation. Its a very different situation. Only about 5 of twitter shares are being traded on the private market. Twitter has kept much smaller number of shares total and a tiny, tiny percentage of those are trading. So a huge number of facebook shares are trading relatively. But twitter has kept that trading under control. The issues, if you want to be invested in the future, if you want to be invested in native social advertising, you want to be invested in mobile, you want to be invested in content, this is one of the very few stocks you can buy. So the problem is, people can bid it up because there are so many ways to get in on it. Im not going to tweet, but all right. Jon, thank you. Thank you for having me. Thank you julia in San Francisco for being up early this morning. Jeans are big, too. No one sees me below the desk. So why wear anything, then . I would have worn the suit pants if i was going to be over there. I think its a cool look. Jeans and a blazer i know, i know. I was with cramer last night and now im going to start wearing a tie. Its a thin one, a hip one. Right. But i need someone to you know, my kids are 13 and 1137 theyre not quite im starting to see this. Tweet me anytime. Tweet you . You can call me, but if you want to at reply me can i call you on a landline . I dont have a landline. I didnt think you did. I have a cell phone. You do . Of course. I dont talk on it. Its mostly for data. I think those are a fad. Coming up, california takes you think im the you dont even have a smartphone. No, i dont. Take steps to raise the minimum wage, plus were going to tell you what i like this thing that jim said because i didnt he looks a lot closer than we do at whats happening. And the internals of the market can tell you thing. Its got jim cramer amazed, awed and astounded this morning. And these are his words. Plus, in fox sports news, the patriots starting the nfl season, they just found a way to do it. They squeak out their second narrow victory of the season, holding off the new york jets, 1310. The patriots managed nine first downs and 234 yards total offense, but thats all they needed. First, as we head to break, lets check on the weekend forecast with the Weather Channel oh, you see . Hes back. Hey, reynolds. Hey, guys. Lets take a look at that forecast. Let me tell you, it is still rough going through parts of the central rockies, boulder, colorado, intense flooding there. Ongoing issue for now. Unfortunately the forecast calls for a 100 chance of rain and storms today. In the pacific northwest, hot for the gulf coast and skourms for parts of the northeast. As we march into your forecast for the weekend, it will be cool and dry in the ohio valley. Could see showers and storms still in the rockies. Scattered storms in the gulf coast. Dry conditions at College Station for the alabama and texas a m game. Traveling today in denver, you might have some backups. Take a look in chicago examine atlanta. Partly cloudy skies. No delays to worry about for now. Folks, we have more on squawk box coming up around the corner. Sit tight. Thank you orville and wilbur. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. Welcome back, everybody. Its time for our executive edge. This morning, Washington State currently has the top minimum wage at 9. 19 an hour. Thats an amount that is pegged to rise with inflation. Some city webs including San Francisco, have slightly higher minimum wages, but, gentlemen, the idea of california doing this, to me, it seems like the way to do it state by state versus a federal ruling. I agree. I think its going to be an interesting test because i think weve start to see what happens in states when you raise the wage. You can start to tell when youre going to see more employment or less employment as a result of doing it. Wa bothers me is the last line, that its just by the ap, which is just put forth so normally. They dont even hear it. It comes amid a National Debate over whether it is fair to pay fast food workers, retail clerks wages that are so low. And you remember nixon . Well, you dont remember him, but there were these things that he put on. He was an idiot about certain things. Wage price control. Whenever you set either one, its not the way it works. If theres people that are here and they dont have a job and theyre willing to work 9, theyre not going to get the job that they would have been willing to work for. And then you saw what your buddy achuthan cusper, mr. Twitter said, he was there was never a job i never quit one job before i had another job. He said luck is not luck, its working. Thats where you find luck. I started as an intern. Huh . I xeroxed tables as an intern. Buckeye has issues because she wants to be paid i think theyre privileged to have those internships. He didnt make enough money to pay his driver. He was paying his driver more than what you made. But i do think internships are a wake of making sure that its who you know not what you know and a way of making sure only the most privileged people can get those internship thats lead to the best jobs. And the point i was going to try to make is there are jobs, a lot of people sort of apprenticeship jobs where you might be willing to take less money early on. The issue is, you have so many people working as clerks in fast food and all these other jobs at 30, 40, 50 years old and that was never the intent. How do you deal with that . Here, its just really hard to figure out that if a chain, a fast food chain pays a certain amount and it allows them to raise more money, it allows them to he up more franchises b, allows them to open up more people or more franchises or maybe the opposite happens, it hurts margin webs they have to close, and people dont want to connect the dots of that. Its another knee jerk liberal idea that im going to look on the front en, im well intended here. No one wants to connect the dots to see what the actual outcome is. And i dont know how you i dont know if you can design an actual experiment to test the data. Well, no, but there has been some test. Depending on who you are you look at a city like San Francisco where they have raised the minimum wage and you have not seen job loss. You dont know the counterfactual. You dont. But if you look at a chart, you would say to yourself, why is that the case . You could say thats a strong market. Do you want me to find the other study that shows this, where it did hurt . Everybody has one in their pocket. Another person comes on and i think it doesnt work. I think it depends on where it is, frankly. Think about it logically. Its like when people argue with me about the high taxes dont matter, do you really think that money is better spent by the government . Although minimum wage is out there, it exists, what you think is its better for it to be done on a state by state or landlordlandlord ty locallity by locallity. I a fed minimum wage completely discounts that something that works in california may not work in tennessee or mississippi. When you say prices, it goes back to the 18th century and the invisible hand. Its probably not you know, it sounds good like so many things. Youre going to love this next story because Goldman Sachs is facing pressure over working hours in zurich. This week, offices were visited by the members of the local labor inspector. The Zurich Office for the economy in labor is responsible for ensuring that swiss rules on working times are observed and, guys, we were just looking up some of those numbers. I think in switzerland, the average workweek is something between 41 and 42 hours a week. There are laws that prevent you from having people work more than 45 to 50 hours a week. Id be arrested for the amount of work that goes on in the United States and what we do. But because you do well, you were in chicago last night. Last night, id be ruined. Whats five times three . 15. 15. What is that . Thats your workweek. Three hour show, five days a week. The important part is kidding, kidding, bosses. Bank of america and the intern who died because of the long hours he was putting in. Do we know everything about that . No. Here is a question. Do you think you should work 80 hours . Do you think thats okay . I have. We talked about this, andrew. As weve gone through the centuries, it used to be 80 hours and now its now 40 there are people arguing that we should get rid of mondays and we should do fourday weeks. There are people in europe that work to live, not live to work, and they think that 35 hours is right. And maybe try to go down to 30 as we get this comes back to your idea of the invisible hand getting involved in it. Right. If there are weeks that you need to see more. Theres something called over250i78 people can make for putting in extra hours. If you look at people that dont do anything but have money, their lives do not seem very fulfilled. And then you look at other people, no matter what if you make 50,000, 500,000, whatever you maybe, if you earn success by doing something that you decided you wanted to do, you live a happy life. So anything that sort of makes it sound like you just want to lay around i think is wrong. Cant you just figure that out . And in switzerland, think about it. They make all those watches. So theyre obsessed with time that theyre looking at everything and they make good chocolate, too, though. And good coffee. Lets talk about market news. Something just amazed, awed and astounded jim cramer. 10 of the s p 500 stocks hit a new 52week high. And 3 the 32 of those stocks traded at alltime highs. I have to stand in awe of whats happening here. It sure is unlike any market weve had for the last 14 years. Thats the last time i remember the bdhr of gains. So many sectors are trading higher all at once. Among his examples, oil and gas produce honor are rallying at the same time at plane orders. Plane orders typically come from airlines which are typically loogz money when oil is high. Jim is going to join us last at 8 45 eastern. Jim is looking much more closely than a lot of other people are in finding these trends. I read it quickly and he said you have to be aware of where you have your money. This was a bullish sign, wasnt it . There are times where if you just have a few generals leading and the troops arent following, there are times that i think he was making lets ask him at 8 45. He was making the case that it portends higher prices, not lower. Because if you say it hasnt happened in 14 years, well, were flat for 14 years. So we need a whole new, like, launching pad. Hopefully the launching pad is in the mid 14,000 or 15,000 on the dow because all weve done is consolidate that move from 1,000 to 15,000. Well get the chance to talk more with jim about that coming up in just over two hours. When we come back this morning, theres a new nbc news wall street journal poll that finds republicans are gaining favor on key issues, including the economy. John harwood has the details, right after this. Then in the next hour, not one, but two squawk newsmakers former treasury second hank paulson, five years after the financial crisis. Plus, famed Hedge Fund Manager marc llasry, hes found great success. He will tell us where hes putting his money to work, right now. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Welcome back, everybody. A fire as destroyed 80 of the boardwalk in seaside, new jersey. Lets take a look at what the scene was yesterday and well into the night. The twist of on fate here in seaside park where these areas were just rebuilt after Hurricane Sandy. Just got through sort of abbreviated Summer Season and now this. 50 businesses destroyed. 20 buildings. And were still waiting to determine what the full extent of the damage is and what the cause of this fire was. New Jersey Governor Chris Christie who was here yesterday evening said pretty much what everyone was feeling. When i got my first full briefing before i left trenton to come here, i said to my staff, i feel like i want to throw up. And thats me. After all the effort, and time and resources that we put in to help the folks at seaside park and Seaside Heights rebuild, to see this going on i said at the top is unthinkable. The iconic fun town pier collapsed, it had been restored after the Hurricane Sandy damage appears to have been destroyed. They made a heroic effort to stop the fire, digging a trench, knocking down part of the boardwalk to keep it from spreading, but it did spread from seaside park into Seaside Heights. Were expecting a briefing here shortly and maybe well get a sense of what caused this as, again, this area of the jersey shore tries to rebuild. Scott, i know its still early, but just last week i was talking to some businesses, some people who own businesses down on the jersey shore. They said this Summer Business for a lot of them has been 30 to 35 below what it would have been on a normal summer because the they didnt have as much traffic as they had. My guess is a lot of these businesses were scraping to get by as it was. You have to wonder what happens next for them. Thats right. And the 40 was an improvement from what they were looking at early on where they were down like 80 . That, its a tough, tough climb back. And theyve been jock on canning i and this is literally a punch in the gut. Scott cohen, thank you for that. Coming up, a new poll finding the Republican Party is gaining a Public Opinion edge on several key issues ahead of the 2014 electrics. John harwood is going to bring us the details when squawk box returns. And later this morning, you dont want to miss this, michael dell in a cnbc exclusive, hes going to join maria on squawk on the street at 9 00 eastern time. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . [ male announcer ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the American People. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. Welcome back. John harwood joins us with the findings of the latest nbc news wall street journal poll. Sometimes i see these, john, and i think were on twoyear cycles now as quickly as people change their mind. 2010, 2012, 2014, maybe this isnt is that surprising. No, its not. This is the poll that we had for the fiveyear anniversary of the financial crisis. And what it shows, basically, is that the American Public is still anxious, still worried, still concerned about the economy. Youve got only 27 of the people saying that the economy is going to get better over the next 12 months. Two to one, americans say the country is headed on the wrong track. When you ask people how they feel about wall street, overwhelmingly negative. 13 have a positive view of wall street firms. 42 have a negative view. And it just shows you that the recovery that we have had is simply not robust enough to make people feel optimistic and that theyre sort of back on track. When you look at the two parties and how theyre situated, democrats have a much more positive image than republicans, but on some issues, you see republicans building an advantage. Republicans on the deficit, double digit edge on handling the economy. Slight edge. Thats bounced around a little bit. But when you ask people who is better for the middle class, democrats have a huge edge. So theyre offsetting advantages. It looks like were headed for a very competitive 2014 Congressional Elections that is not going to be a wave election for either side. But the economic attitudes of the American People are still pretty sour. Thats one of those weird things with the middle class. You know . That they that the policies were pursuing are the ones that have left in all right. This morning we have a story for all of you road warriors out there, including andrew. If you have to be in a position where you own your own private jet, listen to this, you could be due for big executive perks. Some companies are paying executives to fly their own private jets. Last year google spent 400,000 to lease aircraft from eric schmidt. Paid more than 2. 5 million to use their personal aircraft for business flights. And Las Vegas Sands chairman and ceo Sheldon Edelson sold his for 34 million. Many of these companies do say their executives are not profiting from this. So you may wonder why the companies are paying out. Well, the companies claim its for security, convenience and even for bargain pricing. For more on business travel, go to roadwarrior. Cnbc. Com. Did you see the story about google planes . Yeah. They were getting much cheaper gasoline . They were leasing they lease a hangar on a government at a government airport, military airport. And as a result the only fuel sold at that airport is sold at a much lower rate because its 40 discount. So for years have been fueling these planes at remarkably low prices. Is that evil . I dont know if its evil. Apparently the government was getting taxpayer dollar . Thats a loaded question. They dont do anything evil. Apparently the government was getting either fair market or at least was not losing money on the deal and it was sort of like it was like cost plus plus. They were using it for more flights than they were allowed to. How do you know it wasnt traded for more nsa access . Think about it. Who knows more than google . Former treasury secretary Hank Paulsons going to be joining us. Also mark lasry. Both of them joining us in studio. Theyre there in the green room. Well be right back. Thank you orville and wilbur. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. Aaah aaaaah theres a guy on the window do something, dad aaaah aaaah what is happening . Theyre rate suckers. Their bad driving makes Car Insurance more expensive for the rest of us. Good thing theres snapshot from progressive. Snap it in and get a discount based on your good driving. Stop paying for rate suckers. Try snapshot free at progressive. Com. [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Coming up, were going to be welcoming former treasury secretary hank paulson. Weve got a big two hours coming up. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. He was one of the master minds behind the governments efforts to save the economy. This troubled Asset Purchase Program on its own is the single most effective way we can do to help homeowners, the American People and to stimulate our economy. Former treasury secretary and Goldman Sachs ceo hank paulson joins us for a very special interview. A squawk exclusive. Hes made billions off Distressed Companies around the globe, now he shares his secrets and tells us why he took himself out of the running as the u. S. Ambassador to france. And with a tweet, twitter goes public. If we wait until tax day, im sure the tax man will show up. You should tweet that. Okay. This guys hilarious, im going to retweet this. Social media is bringing us all closer together. The most anticipated tech ipo of the year is here, but will investors follow the company . The second hour of squawk box begins right now. Good morning, everyone. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernan and andrew ross sorkin. You can see that the futures are indicated higher. Dow futures up by about 38 points. And by the way, we were already on track for the second best week of the year for the dow. In our headlines this morning, japans nikkei newspaper says that president obama will name former treasury secretary Larry Summers as fed chairman. Now, obviously this is not the first time a report like this has been out. But this one has been gaining traction this morning in the currency markets where the dollar has been rising pretty broadly. This report says that the announcement could happen after next weeks fed meeting. Also, twitter has taken the first step toward a widely anticipated initial public offering. Its filed with the sec for an offering like this. Although, the details of its filing remain secret. Thats because allowing companies of twitter size to file confidentially. We have much more on this story coming up later in this hour. New jersey seaside park has been hit with another disaster, this is less than a year after being devastated by Hurricane Sandy and rebuilding in time for the Summer Season. A fire destroyed or damaged at least 50 businesses and several blocks of seasides boardwalk. Officials say that the fire apparently began in an ice cream shop. Our scott cohen is there and well be hearing from him later this hour. Andrew . Thank you, becky. We should say that five years ago this weekend, the nation was on the edge of financial disaster. And our next guest was on the front line. I would say at the front the head of the line helping to pull back the nation from the brink. Joining us now on the set, hank paulson, the former treasury secretary, also the subject of a documentary. Hank, five years from the brink, which is going to begin streaming exclusively on netflix on monday, also the chairman of the Paulson Institute at the university of chicago and has a new prologue to your book on the brink thats also out. Youre a busy man. Thank you for being here. Andrew, its good to be here. Take us back five years, if you could. I remember this weekend like it was yesterday. You probably, unfortunately, remember it was like yesterday. And heres my question, i think of you as an American Hero today. And i hope that history views you that way. However, i know of one person during that weekend maybe watching today. And you had a very special relationship with Lehman Brothers, in part, something you write about in the book with your brother. Who worked at Lehman Brothers and you had to call him that weekend. Tell us about your relationship with dick fuld. I dont think people understand it. First of all, the call to my brother that weekend, it was the following friday. So that Lehman Brothers went down on a sunday, and the week afterwards was like nothing ive ever experienced. We were juggling multiple balls, we had the money markets, had aig, we had concern about other institutions, the big emphasis to go to congress and get the t. A. R. P. And it was really i called my brother dick on the friday morning. It just occurred to me, with everything going on and i had not and called him. Hes a good friend, he was my best friend, Senior Vice President , veteran fixed income salesman at Lehman Brothers. What i remember best about that call, it was quite an emotional call for me. I was calling to explain wed done everything we possibly could. He just didnt want to talk about that. He said i know you did everything you could. How are you holding up . Because he knows i dont take defeats easily. What was your relationship like with dick fuld, though . Theres always been a perception that you either didnt like him or he didnt like you. Im not arguing that played into it. But tell us about the relationship. I know you spoke for many months before the actual collapse. Well, he was a i knew him as a tough, able, competitor when i ran Goldman Sachs. And so you dont have a close personal relationship with a competitor. But i clearly respected him. And then obviously when when im treasury secretary and i sever the relationship with Goldman Sachs, im thinking, you know, about the Financial System, about the United States of america. And the way i would describe the relationship is from the moment bear stearns was going down and we learned that we didnt have what it took to rescue or keep a failing Investment Bank out of bankruptcy without a buyer from that time on we became very concerned about lehman. It was obviously the next most vulnerable Investment Bank. And from that time on, we started when i say we, it was ben bernanke, tim geithner and i. As i say in the prologue. Incidentally, the publishers making available free online. 8,000word prologue that the that, you know, wasnt too long after bear stearns went down that ben bernanke and i went and talked with barney frank who was terrific during the problem. And wed asked said we needed Something Like this. And barney explained it would be virtually impossible. Of course, he was right, look how long it took president obama to get these authorities. It would be hard to get them from Congress Without saying we have an emergency. And from that time on we talked and i talked quite regularly with dick. Encouraging him to raise capital. You think he didnt understand . He called you the day after trying to undo the bankruptcy. It was very sad. Can you think of anything sadder than someone running a firm it was their firm. It was his firm when it failed. My view, ill say this just generally about the ceos because i interacted with a lot of ceos running major firms during the crisis. And i looked at some of the ceos more able than others. I think they were all good men and they were dealing with a crisis of which they havent seen in a lifetime. The excesses have been building for years and years. And most of them performed very, very well under stress. Most of them did everything they could to cooperate. One of the things we talked about a couple of weeks ago when i was working on the column. Probably one of the first times id ever heard you say it was you were upset with the bankers and some of the ceos, ultimately for the fact they paid out those bonuse bonuses after the bailout. Why hadnt you said anything earlier . The reason i had focused on what i thought the positive was, which i think is a huge positive. I think that the Capital Program we designed and to get out and put capital into hundreds of banks very, very quickly and recapitalize the u. S. Financial system is a huge success. And the money has come back. Plus 32 billion, so ive focused on that. And i focused on some of the other things. I havent been speaking publicly. So how much have you seen me out there . So you asked the question, the question got asked also in the documentary. And i i told the truth. I was after the fact and this didnt have anything to do with legality. It just to me, i thought it showed a stunning lack of awareness and sensitivity as to how this would be viewed by the American Public and rightfully so. And but, to me the big story is, remember, the reason this Program Works so well, it was voluntary, it was getting to some firms had more stress than others, some that had much less stress while they were healthy before they were failing. Historically, i think every other time that that during crises when capital is injected, its injected as banks are failing, after they fail and then you can put all kinds of conditions on. Mr. Secretary, i want to thank you too. I cant tell you how fortunate we were as the American People to have had you in that position when this all happened. You just pointed out that a lot of the ceos were very capable and very qualified. It does bring up the position you have to have people who know what theyre doing and understand the markets. And i guess my question becomes five years later, we have different people who are the treasury secretary. Are you confident in the people who will be in those positions will be able to handle a similar situation if it were to arise again . Well, without first of all, we dont know who the fed chairman will be. This is a very big decision that the president will make. Its president bush, i think one of the very best decisions he made was one of the most important decisions was choosing ben bernanke. So this is a huge decision for, you know, for president obama. Hes got some qualified candidates. I think you learn first of all, i think people rise to the occasion. Ive had an opportunity to work a bit with jack lew, worked and talked with him about u. S. china relations. And ive watched him work there and interact. With the chinese. And hes a very able man. Now, what you what you learn when youre treasury secretary, relationship with a president is very important. Youre able to do what the president lets you do. Thats where your Authority Comes from. And what people sometimes forget is i had a year to build a relationship with president bush. And he was a terrific boss during the crisis. He didnt micromanage, we didnt have a lot of debating with the white house staff. I had great access to him. Early, late, he always knew what was going on, he delicaegatdele. So a lot will depend on the guy at the top, what happens there. Then, you know, with the with the fed chairman, this is just an enormously important job. If you had to pick one. You know larry well and janet well. Well, i know larry a lot better than janet. Theyre both able. Im i declare myself. I like larry. I think larrys very able guy, im a friend of larry. But this is, again, this is the president s decision. When you say youre declaring yourself. Youre supportive of larry . No, im declaring myself as someone who knows larry well and likes him. That sounded like i am im writing that down. Hank likes larry. I am not entering into this. And the reason im not, quite frankly is because ive been distressed as to the extent its been politicized. I really have been. I dont know how this happened, but it shouldnt be. Never before. It shouldnt be. Its too important a job. Can i ask you one real quick thing . And that is, your actions that were taken that really averted the near term crisis. And then theres been a lot of things since then. Theres been the Stimulus Program, 800 billion. Theres been fed one, fed two, fed three, qe1, two, three, four. Theres been all these things. Was it all in your view necessary . Or did it prevent clearing the system which wouldve allowed us to have a quicker recovery . Well, i would say there is great policy continuity with a Capital Market stabilization programs. Tim geithner worked hand in glove with me of putting those together. So when president obama picked him, i think that he resisted temptatio temptations. That worked. In terms of the way i would characterize what came after is i am a believer in the ben bernanke Stimulus Programs in the sense that i think its remarkable even though we have low growth. This economy has been growing at 2 since the end of 2009 while weve undergone this sort of massive and necessary deleveraging. Look at the leverage that was necessary. But we need to look toward the time. Theres all this focus on how will it end . When will it end, et cetera . But we know for certain and ben bernanke knows for certain we cant keep these extraordinarily low Interest Rates forever. It is going to end. Were going to be looking to the day. They trade by what are their returns on those assets . Economies economies are going to, you know, be judged by fundamentals. There werent any that caused this recovery to be slower . Im not going to speculate. Im not an economist, but i would say this, i happen to believe, joe, that what happe d happened, although housing was a huge part of it, this was a massive credit bubble that burst. I think were fortunate to be where we are right now. Now, that isnt to say that i dont think we need to do some really fundamental things to get this economy growing where it needs to grow. Like what . Well, like tax reform you werent talking about another Stimulus Program . No, we need immigration reform, tax reform. Im talking structural. Structural reforms. Everywhere around the world. Brazil, their economys not going to continue to be driven by Commodity Prices and low Interest Rates, they need reforms. We need labor reform in europe. But to restore competitiveness, were going to be talking about fundamentals. You can only do so much with low Interest Rates. We could take this right till monday. Were going to see you in chicago in a couple of weeks. How many things one final question, and its about the banks, though, the risk in the banks. Its something you said in the documentaries. I never heard you say it either which is that you now seem to be concerned about the concentration in the banks. And i wonder given jpmorgan today, now spending 1. 5 billion just to deal with regulatory matters. Are these firms now too big to manage . Well, i i had said in the on the brink, that i thought size and complexity. But when i take a look at the fact that weve got these, you know, these liquidation authorities to deal with failing banks, look at the capital rules, i am much more concerned about other big issues. We need to fix fannie and freddie. And the biggest thing that is not getting enough attention is weve got five regulators all competing with each other falling all over themselves dysfunction. Hank paulson, the book is on the brink, the movie is hank five years from the brink on netflix starting on monday. And well see you in chicago in three weeks. I look forward to that. Awesome. I look forward to it. Thank you. Thank you. If that wasnt enough, that interview, a big show still to come. With a tweet, twitter starts on the road to the next big ipo with over 200 million users and some 400 million tweets a day. Im not going to go 400 million and one, im not. Im not going to do it. Although i might tweet paulson picks summers. Thats a lot of eyeballs you can tweet whatever you want. Does hank have a twitter account . Thats a lot for potential were going to take a closer look at the twitter ipo and what it would mean for investors. Up next, hes the largest stressed debt investor in the world. He was in the running to be the u. S. Ambassador to france, marc lasry will join us for the remainder of the show. Welcome back, everybody, weve been watching the futures this morning. The dow already on track for the second best week of the year. This morning, the futures are indicated higher once again. 42 points above fair value. In our headlines this morning, jpmorgan reportedly plans to spend an additional 4 billion and commit 5,000 extra employees to fix risk and compliance issues. This comes as the Company Faces a number of investigations by regulatory authorities. The journal says that the bank will spend 1. 5 billion on managing risk and complying with regulations and plans to add 2. 5 billion to regulation reserves. Banks already paid about 18 billion in regulatory issues since 2008. Guest host this morning is one of the pioneers of the distressed debt market and up over 60 coming out of the financial crisis. And since then the firm has made billions of dollars for investors across the global funds joining us is marc lasry, chairman and ceo, the fund is over 12 billion in assets under management. Marc, great to have you here. The other day, we had a conversation about how t. A. R. P. Had worked out. How much money the government had made. And we made the point that when its darkest and theres no market that these securities go to levels that really dont represent what their true value is. And youve made a living out of doing this. But its the idea of buying things and i dont know, i dont think i could scares me too. I dont think i could do it. But, you know, hedge funds do different things, long, short, all that stuff. You make it your business to go find distressed problems. Its been unbelievably profitable. How, why . Its amazing. I think weve been lucky. Weve gotten pretty lucky. When you think back to the financial crisis, i remember we started buying a security, and we thought it was actually good and we started buying it at 70 cents, then it got 60 cents and we started buying it at 50 and all of a sudden, the trader asks us, theres 50 million for sale at 50, what should we do . And do you think were going to get hit . And he says, no im not that worried about it. I think its fine. We end up bidding for 50 million at 50 and all of a sudden were told good news you own it and you werent really dying to own it and this is sort of in the heart of the crisis and right after we bought it, the next bid was 30. And you like to think that youd like to buy things when theyre going down and you actually do, but trust me, it doesnt feel good. Theres an expression about a falling knife and throwing good money at bad. And we were catching the knives. And i think during the crisis, a lot of it, at least for the firm, and for the team, we sort of believe, look, we think were right and we think were right longterm. And the problem ends up being you never like buying something were going to take a break and continue this after. But one thing we have learned is that if you cant step up to the plate, maybe mark to market wasnt really real. Maybe it was just no buyers. No buyers. And mark to market may be a figment of the imagination. May need to just really take a step back and think what is the inherent value of this . But we had to do it. Youre sort of put in a position where youve got to market the last trade, and we ended up buying that and became one of our biggest positions. Nice. Over time, it went back to par. Well be back and talk more about this and get some sectors in parts of the world that look good. Okay. Also, well talk about twitter taking the first steps for following an ipo, but keeping details secret, squawk will be right back. Time now for todays aflac trivia question. Which computer game first made it into space . The answer when cnbcs squawk box continues. Okay, who helps you focus on your recovery . Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. 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Which computer game first made it into space . The answer, star craft was sent aboard Shuttle Mission sts96 on may 7th, 1999. Aflac. Wondering how much twitter might be worth . You may have to wait for that info. I dont know. A new rule under the jump start our business startups or jobs act, companies with less than 1 billion in revenue can keep the details of their finances hidden. I think back to the go go years of the internet, eamon javers, and there wasnt a single one of those companies. Not a single one had i dont think they had 100 million in revenues and its kind of the same case here with 1 billion limit on twitter. Yeah, thats right, joe. There are a lot of unintended consequences from things they do here in washington. This is one of the intented consequenc consequences. This is what they actually wanted to happen when they passed the jobs act. The whole idea of this obamaera law is it would jump start ipos from Tech Companies and they would use the proceeds to create jobs. So what exactly does this jobs act do in reference to the ipo process . Well, take a look at some of the key points here. Signed into law on april 25th, 2012, it allows the secret ipo but only if the Company Earns less than 1 billion in annual revenue. We can assume thats where twitter is at this point because they filed this confidential filing. It allows the secret filings until 21 days before the road show. They will have to make it public at some point, just not yet. Its all about creating investment, creating jobs and jump starting the economy. Well have to wait and see if this has this effect. The idea is these companies will have to raise a lot of money and theyll spend that on hiring. And youll assume thats what twitter will do. The problem as you guys know, these Tech Companies, they raise a lot of money but they dont need enormous staffs. A lot of these companies are technological and dont need a lot of human beings on the payroll. Whether or not this creates jobs, well have to wait and see. Thank you, eamon. We should note tonight that carl quintanil quintanillas documentary will be on twitter revolution. A lot more with marc in a moment. Especially today, as peoe are looking for more low, and no calorie options. Thats why on vending machines, were making it easy for people to know how many calories are in their favorite beverages, before they choose. And were offering more low calorie options, including over 70 in our innovative cocacola freestyle dispensers. Working with our Beverage Industry and restaurant partners, were helping provide choices that make sense for everyone. Because when people come together, good things happen. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Welcome back to squawk box this morning in the he week for economic numbers. Were about an hour away. Well be getting the latest numbers on retail sales and Producer Prices. Economists looking for a rise of. 2 for the august Producer Prices and. 5 increase for the august retail sales. Also, gold prices, theyre down again this morning headed for their biggest weekly drop since june. Gold falling on receding fears about a serious strike in anticipation of what the fed will begin tapering its Stimulus Program next week. Perhaps thats the expectation, at least. The california legislatuor has approved a bill that will raise the minimum wage to 10 an hour within three years. And governor jerry brown says hell sign that legislation. Lets get back to our guest host. Marc lasry, Avenue Capital chairman and ceo. This fund has over 12 billion in assets under management. And marc, we were talking about how during the financial crisis, you were one of the people there catching the falling knives. Really difficult to deal with. Joe said he couldnt stomach it. How did you handle it . Oh, trust me, i think its hard for everybody. In retro spect, you like to make believe it was really easy. But i think it was probably one of the most difficult times for us as a firm and for me. Just every day youre constantly being told by the market that youre wrong. And thats just really hard. I mean, every time you buy the markets telling you that was a stupid buy because every day it was going lower and lower and lower. So its not, trust me, its no the that easy. I think a lot of it is you have to have a lot of confidence in what youre doing and youve got to believe your analysis is correct over the longterm. And most of the time, we are. And sometimes even though we think we were right turns out we were wrong. 12 billion you have. And i dont know how you raise 12 billion. Dollar at a time. And youre known we introduce people as billionaires. Were not going to introduce you as a billionaire, but you are. Youve got to be right. People complain about the 2 and 20 and all that stuff but the only way for it to work and to grow to 12 billion, you have to do the leg work and the Due Diligence to be able to be right or else it doesnt work. Yes. You had a down year, but the next year you made everything back plus another plus more. Plus more. Yeah, right . I think at our peak we were about 22 billion. We ended up returning about 10 billion around 2010. Look, a lot of it what you said, the way you grow, the only way to get big in our business is by doing well. The better you do, the more capital you end up doing. I think for us what we try to do is when we see opportunities, we end up going out and investing in those regions. And the reason i preface it with that because youre saying things that i would not have figured out. And one of them is that at this point, there are Many Companies in the United States that are running out of time because theyre leveraged. Now, see i thought that at zero interest rate, i thought everyone had gotten their house in order. There are still places that are hoping for economic growth, they needed economic growth, it hasnt come and theyre not going to be able to could they not refinance . Why cant they refinance . But there are going to be more opportunities as thee Companies Run out right now you have about 1 trillion in the u. S. Markets of distressed debt or defaulted debt. Your questions actually a great question. Any company that could refinance has already refinanced. So the problem youve got right now is for all those companies that are out there that couldnt refinance, theyre going to be hitting a wall. Whether theyre hitting the wall this year or next year, its because the market isnt lending them money. And the main reason for it is they borrowed too much money and borrowed money on a belief theyd have rising ebitda and that hasnt happened. Ebitda remains constant or gone down. So as that debts coming due, theyre not able to refinance. Thats the problem. So how do we how would someone at home figure out how to try to do something similar . Can you tell us sectors . And what would you do . Go in and buy it on pennies on the dollar and restructure . What do you do . I dont think its first of all, some of this isnt pennies on the dollar today. Theres a lot of debt trading around. The most we can buy is probably 12 billion. Are you going to play in this market . Are there more attractive opportunities . Because youve got great comments about europe and whats happening there. I think theres quite a bit to do in the u. S. Theres more to do in europe. And the reason theres more to do in europe, their Financial System, the banks are actually still net sellers. And one of the things hank was talking about i think on the Banking System, the banks have been increasing sort of their Capital Requirements and they need to. So europe is still a net seller. The problem is in the u. S. , we sold all of our debt and we cleaned up our Balance Sheets over two or three years. In europe its going to be over a sort of five, tenyear process. If theres 1 here, how much is over there . Well, theres as much if not more. The 60 cents on the dollar, are those the opportunities in the United States or is that europe . No, here in the u. S. , somewhere between 60 to 80, in europe, ends up being around 50 to 70. And during the depths of the recession, you were talking about what . 20 to 30 cents . 20 to 30 cents on the dollar. Those opportunities were have you ever seen, once in a lifetime opportunity to see things like that . You saw you saw it in 2002 when enron had gone under sort of the on when you had all the fraud. You saw it in 98. But i think probably 2008 was the greatest it ever was. What you had in 2008 was literally 85 of the highyield market was trading at stress debt levels. The stuff in europe is trading at 50 cents on the dollar. Does that come with greater risk too . Absolutely. Its greater risk, its more liquid. Its much more restructuring. Youve got different Legal Systems so it ends up being much more difficult. One of the things hank said is we will have another crisis. Right. Are there things you are nervous about . When you think about where we are the real risk youve got is much more in europe. I dont think you have risks much here in the United States. I think our banks are fine. I think in europe is much more of a sovereign risk and that risk is there. Its gone a lot lower because of European Central bank. I think if youve got low gdp, negative 2 or 3 , it ends up putting more pressure on the banks. Did we have a tenyear runway . I think youve got five years. Because theres not too much debt in the system . Do we think the debt is ultimately the thing that yeah, i think its about leverage. I think its really leverage. And one of the things people dont want to talk about the reason we had the crisis is you had sort of Lehman Brothers that was i forget, 35 or 40 times bear stearns. So everybody was levered to the max. Today that lever has been taken out quite a bit. So people are levered about 10 or ten times or 15 times. Remember, back then, if youre levered 40 times, all you have to do is lose 2. 5 , and youve lost all your capital, right. Its just people dont focus on that, but thats the big risk. How levered is your fund . We dont use leverage at all, we never have. You play in asia. Yes, we do. But you dont want to play in asia now . No, we dont. Well, were still investing in asia. I think therell be much more opportunity. Asias actually had a great run. Chinas slowing down a little bit and you can buy distressed debt in asia today at 80 cents, not something we want itll be a replay of what happened you may be buying wed like to wait. What about japan . Is that a special situation . We havent played in japan, havent invested in japan. I think you need to be there and its very hard. You have to be a local. So we havent really invested there. But the points youre making is this growth, the weak growth were seeing in u. S. And europe, that will hurt these emerging markets in asia. Yes, it will. And that will cause as much as a twoyear sort of hiatus before we see a resumption of all that excitement in that area of the world . Yeah, i think itll take another couple of years for things to start because of us . Yeah, were having the growth theyre not having the growth. Not enough to help them. Youll see maybe next year or the year after. I think what the projections for next year is 3 gdp growth. Yeah. And you are well talk more to you, but youre a friend of bill. As a result, i figure youre a good friend of larrys. Will you say outright, larry should be the guy . Im a big fan of his. So, yeah. Do you know yellen . I dont know her. I was curious. Larry might have to build more consensus, but hes brilliant and he can respond to things. Look, everybody who has met larry knows hes absolutely brilliant. I dont think thats an issue. I think hes an exceptionally smart guy and hes look, hes been treasury secretary, head of the National Economic council. So he knows the president. And i think hanks point was really well, knowing the president and knowing him well is a huge plus. All right. That last you know, one of the last great republican president s, bill clinton. As you know. Now we know what a democrat is. Yes. Well have more from mark, a lot more sorry. I couldnt. When we talk about youre such a good friend with that side if i had just another couple of minutes with you. Were going to leave the lights on. To come home to the other party. To the party . When we come back, twitter files for an ipo. Were going to talk more about the filing and what investors can expect. And make sure you catch twitter revolution tonight on cnbc. It starts at 8 00 p. M. Eastern time. Squawk box will be right back. Its official joe kernan is cnbc. Yet another reason why you need to watch squawk box daily. Rock it out. I feel like i grew up watching you even though i probably didnt. Squawk box on cnbc starting at 6 00 a. M. Eastern time. Profit from it. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. When we return, less than one year after Hurricane Sandy, destruction hits the jersey shore again. Scott cohen is in Seaside Heights. Looking at pictures of seaside park where this fire began yesterday. Well have the latest on the fire that destroyed more than 50 businesses and six blocks of boardwalk that has been repaired after Hurricane Sandy. Squawk box will be right back. A raging fire strikes at the heart of a new jersey town hit hard by superstorm sandy. Just a week after the tourism season comes to a close. Scott cohen is there on the ground, they were able to see what happened last night. Reporter well, that is the business at hand, becky. Even as they put out the hot spots and still try and get this fire completely knocked out. Investigators from the Ocean County Prosecutors Office are on the boardwalk now. And this is standard procedure and their task is to find out what caused this fire. And theyre doing that even as firefighters try to make sure the last of the embers are out from this fire say it looks like a bomb went off. Take a loan at the scene. A fire chief says it was more like a forest fire last night, 30mileanhour winds out of the south just push that fire, whipped it along, sent embers from one building to the next. 50 businesses knocked out, at least 20 structures destroyed. Total destruction, they say, on about four blocks, at least of the seaside boardwalk. And in the back of their mind as theyre fighting this fire last night, these are areas that were only just rebuilt. I feel bad for all the Business Owners here. After what theyve been through with sandy and trying to get themselves reopened, you know, and now to go through this and start back all over again. I couldnt imagine being in that situation. And that is going to be a huge task now. Obviously this area all just rebuilt after sandy. Businesses struggling to get on their feet, weighed down, obviously, from a year ago because of the sort of shortened Summer Season. And now theyve got to start rebuilding all over again and the headaches and the issues theyre going to be dealing with just boggle the mind. Back to you. Scott, thank you very much again. Thats scott cohen, and we will be checking in with him throughout the day. Coming up, could twitter have a growth problem . Its the big question. Raising the question as twitter prepares for an ipo and were going to speak to him in the next hour. And then the Global Market perspective from gary parr the financial crisis five years later and where he Sees Opportunities in every corner of that crisis. Were going to have him in 8 40 a. M. Hey lady noooo no [ tires screech ] nooo nooo nooo hey lady, thats diesel i know. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Twitter filing for an ipo. Number sign, time to hold them pants up. Hashtag, exactly. Were going to ask analysts how much the companys worth and how soon we could see an offering. Former wells fargo chairman and ceo joins us five years after the fall of lehman. Well get his reaction to our interview with former treasury secretary hank paulson. I think that the Capital Program we designed is a huge success. Breaking Economic Data on inflation and the consumer. Cpi and retail sales hit the tape at 8 30 a. M. Eastern. It is friday the 13th. And the third hour of squawk box begins right now. Were thinking about, you know, putting animals on the set, andrew wants to get a parakeet to tweet. But you wanted a monkey. Ive wanted a monkey for a long time, squawk chimpanzee. Welcome back to squawk box here on cnbc first in business worldwide. You had no idea what i was talking about. Guest host this morning, marc lasry, chairman and ceo. But first, andrew has it was a good idea. Because dart throwing monkey, i dont think you can train a dart. What if it throws it at you . I dont think keep it over there. They also dont need privacy to gratify themselves. And we dont need it either. In the meantime, lets take a quick check of the markets. The nasdaq would be up close to seven points. Also this morning, the u. S. Dollar gaining against the yen, after japans nikkei newspaper reporting that Larry Summers could be nominated as the next fed chairman as soon as next week. The former chairman and ceo of wells fargo. Then at 8 40 a. M. Eastern time, gary parr will join us and he was behind the scenes throughout the financial crisis five years ago. Twitter filed an ipo, the Company Making announcement, of course, in a tweet. The social networking site filed for an ipo confidentially under a new law well have much more on the twitter ipo filing in a minute. Two horrible disasters. In new jersey, a fire has destroyed 80 of a boardwalk. Three dozen businesses have been destroyed. Chris christie addressing reporters on the scene. When i got my first full briefing before i left trenton to come here, i said to my staff, i feel like i need to throw up. And thats me. After all the effort and time and resources that weve put in to help the folks in seaside park and Seaside Heights rebuild. To see this going on as i said at the top, its unthinkable. And in colorado, days of heavy rain caused flash flooding. Nearby creek began rising to dangerous levels. Back to our corporate story, twitter filing, and Julia Boorstin with more on the west coast. Reporter they did final confidently for an ipo, that means we dont have any financials from the company just yet. All we do know is the fact that twitters revenue is less than 1 billion. We do have some very good estimates. Now, emarketer projects that twitter will double the revenue and bring in 538 million with revenue of 950 million next year and 1. 3 billion in 2015 revenue. Now, mobile is expected to be about responsible for over half of twitters revenue this year and expected to contribute a growing percentage moving forward. So the question then is whats twitter worth . Its last round of funding put it at around 10 billion. The recent Light Trading in the secondary market values the company at more like 15 billion. Cashing in on this ipo include cofounders chairman jack dorsey plus Evan Williams and stone no longer working a the the company. Since 2007, twitter has raised 1. 16 billion. Its first round of investors included marc andersen. Now, twitters other investors, include union square ventures, Morgan Stanley as well as the big facebook investor, dst global, well have to see who cashes out at the ipo. Maybe an investment in hair club for men for those guys. Did you see those three guys . Did you see those three guys . Isnt it a masculinity . Look. Cant they do a startup with sperling or something . They say no hair, more testosterone. Thats what they say. I dont think thats true. Joining us now to talk more about the twitter ipo and the filing, asenior editor. You more than made up for it. Roccos got it all. Hes got it in his head i dont have any makeup on this morning, my dome would be shining if i didnt have hair. Social media director and really a keen eye for talent with news people. We noticed that yesterday, rocco. In fact, after you said that about me being cnbc and all, i dont know if you notice, we called you the very next day to come back. What are you doing . I dont mind driving here at 3 30 in the morning. We will see you monday. Guys, i guess this is not a surprise. Its kind of neat to do without tweeting it, isnt it, mike . Yeah, i guess it sort of speaks to exactly how twitter sort of operates. They want to be in the public sphere, they are the platform to go and speak your global town square. I thought its a cute way to announce their intentions. Its not completely surprising because weve been expecting Something Like this for a little while. Rocco, youve seen what happened with facebook and where it is now and linkedin. When it finally comes, where could we be if it catches fire. We could be over 20, if it gets in . That would be 200 times earnings. Yeah, probably somewhere in the middle. I think this is great for the employees, great for the investors. From that standpoint, im happy. I like to see these people be successful. I dont begrudge them for making money on the ipo. And the stock will probably do well. We learned from facebook and now facebook is flying. But twitters further along, at least in terms of having a more mature mobile advertising business. I think investors will give them a pass at the beginning and not scrutinize the businesses as much. I think the stocks going to fly, but im not about today. When youre twitter, facebook, pandora, it scares me. When you look at facebook and pandora, they both have sold their souls. What happened to the social mission that zuckerberg had at facebook. He still talks about it, but come on, this wasnt a business when they had thinker s1, all of a sudden this he said that yesterday. He said i thought being public was going to be he said hes worth i dont buy that. When you log into your facebook feed and the video, the ad auto plays, which is going to be happening down the road. I mean, this is a business. 110 . And thats fine, thats great for wall street, thats great for investors, but does it degrade the User Experience a few years down the line and maybe not make them a great longterm play . You cant create these businesses if theyre basically running as nonprofits forever. I dont disagree, but its a doubleedged sword because shortterm results to pump the stock and get wall street happy. Again, hurts the User Experience so youre not a company thats going to be around for five, ten, 15 years or as successful. Go ahead, mike. I think right now, i was going to say, i think right now the big problem for twitter is actually understanding how to use the service, right . Your mom or your dad can easily figure out facebook. But, you know, for the past five or six years, twitter, you know, theyre still trying to figure out what or hashtag is to some people. I am that person youre talking about. In fact, i dont have the facebook thing you said i know how to do. I dont know how to do that. Dont make me whip the bald testosterone out. Im not really doing it so you go anywhere. Its just sort of making thats the use for it. Thats the ironic hashtag. It isnt really to aggregate anything i know how to block people. I dont block them anymore, i report them as spam. Do they get in trouble . Do they get in trouble . Yeah. They have police. What happens if you report them as spam . I believe that twitters user Protection Team checks them out and actually sees if theyre checking out hundreds of people ive done that to. Hundreds. Youre the guy misusing the 911 system. I am. Ill tell you what you gentlemen were talking about what will probably do well. Does anyone see that suddenly social and mobile and media is reminding me of where people dont even look at metrics anymore . Marc mentioned, our guest host, apples at ten times earnings and people will only be happy to pay 100 or 200 times earnings again for a story stock, mike . Yeah. Well, i mean look at the, you know, the facebook ipo. Again, at the shareholders meeting. Facebook got above 38. Well, i think thats one part. I think thats one part. But i also think, like investors are, you know, sort of armchair investors werent looking at, you know, earnings back then. They were hearing what their kids were saying and, you know, facebooks ipoing, youve got to get on it. I think twitter will be the same thing whether you look at revenue multiples or not. One thing, guys, were not talking about one thing, mobile advertising has a handful of players. Youve got google, pandora, facebook, twitter. In a few years, the big media will come in. Time warner, comcast, theyll get mobile dollars. I dont think the growth of these social companies will be as great as people think. Once these Big Media Companies get their act together and start doing more mobile and digital. Thank you. You got that release form for that were going to put that in the cold open. You know, you talk about me and everything. Youre good with that, right . Ill waive my normal royalty fee for you. Youre in the cold open of the show. Thank you. He was today, actually. He was. No, it was his own little there it is. You should make sure to catch the twitter revolution which is tonight on cnbc starting at 8 00 p. M. Eastern time. Carl quintanillas terrific documentary on that company. Is that one of your favorites . Carl is one of my favorites. Is it one of my favorite docs . It actually is a really, really good doc. Thats what i mean. When we come back, former wells fargo chairman and ceo Dick Kovacevich will join us. This was a massive credit bubble that burst. And i think this was a major dislocation and were fortunate to be where we are right now. Get paid to do something wd you really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . All week weve within recapping the Lessons Learned in the five years since the fall of Lehman Brothers. Earlier this morning, we spoke to hank paulson. I think that the Capital Program we designed and to get out and put capital into hundreds of banks very quickly and recapitalize the Financial System is a huge success. And that money has come back, you know. All that plus 32 billion. So i focused on that. Joining us now is Dick Kovacevich. He was in those closed door bailout discussions during the crisis. And thank you very much for joining us. Good morning. I know you were there at the time and i know you have a slightly different opinion than hank paulson does about t. A. R. P. Why dont you tell us what you thought about it . I think it was one of the worst economic decisions in the history of the United States. Everybody was well intentioned. But the proposition that hank put before us was if we took this money, the confidence in the industry would go up. And i was arguing that day until i was told to be quiet is the opposite would happen. And lets look at the facts. Shortly after t. A. R. P. , the stock market fell by 40 and the Banking Industry stocks fell by 80 . So how can anyone say that t. A. R. P. Increased the confidence level of an industry when its stock market valuation fell by 80 . I think it caused the crisis to get much greater than it would have been if it would have been handled differently. And i think as we look back, you know, we couldve handled it differently. And i think the facts support that handling the crisis differently would have made the crisis less severe than it actually was. You know, dick, theres no question that the crisis put a lot of companies in the position, a lot of banks in the position where they werent going to be able to continue to function. If t. A. R. P. Wasnt the right answer, what was . Well, see, what you should have done in my opinion is that most of the Financial Institutions after bear stearns and lehman were having a liquidity crisis. Because they were not they were funded with wholesale funds and therefore in the markets were seizing up. So i think what they should have done is to say that because of the seizing up of the markets, the fed and the treasury is going to provide electriciliqui those institutions who we do not think will fail but who need support at this time from the liquidity standpoint. And therefore you should have done that they could also have said so that, you know, you dont convey that there are safe banks and unsafe banks. You say the other institutions, at least at the moment are not suffering from liquidity. However, if they should, we are prepared to help them, as well. And if you would have done that, you would have then not conveyed as you did with the way this was operated is that the entire industry is in deep, deep trouble. The world is coming to an end and even banks that were aaa rated the day before now need 25 billion. The market reacted as you would expect it would and that i would argue that it would. It would be devastating and the confidence would decrease significantly not increase. What do you make of this argument . A, that you would be putting a Scarlet Letter on those banks that were in trouble . And, b, that we would be following the model of japan and the uk where we serially, serially bailed out banks only when they needed to be bailed out but it took a much longer time. When you look at their economy and, frankly in the uk, i think you could argue and in japan, it took too long and the idea of recapitalizing the whole system at one time, even though i recognize you think it was a liquidity issue, there was still a capital issue, at least for some institutions. Well, it was only a few institutions that were capitalized. How can you have an industry that could come back within six months of receiving this money and paying it back. And within a year, practically everyone paid it back if, indeed, it was other than a liquidity crisis. We had record earnings in the First Quarter of 2009. You think the reason we had record earnings in the First Quarter of 2009 was because we received 25 billion in capital in october . The difference is we werent in as bad of shape as japan. And my point is you always have the opportunity to do something differently if its not working. Everyone knew there was a liquidity crisis. What they what you dont understand is that everyone understood who needed the money and why. What shocked the market is that institutions they thought did not need the money that were performing reasonably well who didnt take the risk that other companies took in the crisis also needed money. Oh, my god, the whole system is in bad shape. Paulson described the program this morning as a voluntary one. I take it you take issue with that too. Come on. He even says in his book about me as i was saying i dont want the money. He says he looked over at ben bernanke and said that if you do not take this money, your primary regulator is going to call you capital deficient on monday morning. Is that voluntary . No, it doesnt sound like you have much of a choice there. Lets talk a little bit about the fed. Next week, the fomc is meeting and the market is speculating, at least, they will begin tapering. You think its about time . They have to taper now. The price has already been paid. Its built into the market today, it would be shocking to the market if they do not taper. So they have to taper. And the amount is not relevant, just do something. Whatever you think, the minimum amount, if youre worried about it. I dont think that the qe3 is working. So, you know, i would definitely do 20 billion. But if you dont like 20 billion, do ten and do it in treasuries because thats the least valuable. But you have to taper because the market is expecting it. And the market will not understand anything if they do not taper in september. One question i have, back to the Banking System for one second. Its a question im asking all week its about concentration. And all of the mergers that took place during 2008 really to get through the night to the extent you believe that was the right decision, id be curious about that, as well. But, you know, now given where we are, wells fargo, your former bank now controls about 30 of all mortgage origination. Does that make sense for the country . From a policy perspective . Well, yes, in this sense. We really dont control 30 in fact, it was probably 25. But half of the mortgages half of our market share, mortgages originated by us through our retail network. The other half of our business is simply helping other originators by channeling multiple originators together to get enough of a volume so that they can be given to fannie and freddie and put out to the market. So its a wholesale function and someone has to do it. So the real concentration, if you want to call that, is the originations that you do yourself and thats about a 15 level for us. So its still very diverse in terms of retail originations. Dick, i want to thank you very much for joining us today. And we hope to see you back here onset again soon. Thanks, becky. Thanks, dick. Before we take a break, dow jones is reporting that the white house says reports in Japanese Press today suggesting that president obama is set to name Larry Summers next week are wrong. The white house says the president has not made a decision about the position. Cnbc has reported and continues to report that the job is Larry Summers to lose. Thats come to us from our john harwood. Yeah. You know, so itll be, you know, a week from monday. You can say its wrong but you never know what they mean by saying its wrong. Probably the idea theyre going to announce it next week. That might be whats wrong. Thats what i p meamean. Thats the part i dont believe. The white house is saying i havent decided, but john harwood has announced that its Larry Summers to lose. I still want Dick Kovacevich to call in next time we have hank paulson on. Were going to get retail sales and Producer Price index numbers. Also known as, becky . The ppi. Im not going to say it. If you want to say it, go ahead. And hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Welcome back to squawk box, everybody. In our headlines this morning, the white house is expected to announce the departure of Gene Sperling today. Hell be replaced by jeffrey zients. When we return, the last major data points before the start of next weeks fed meeting. Were a few minutes away from retail sales and the ppi numbers. Squawk box will be right back. The most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. [ male announcer ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the American People. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. Welcome back to squawk box, everyone. Were just a few seconds away from the retail Sales Numbers and the ppi figures for august. Rick santelli is standing by at the cme in chicago. The futures have been indicated higher. Well see what happens after we get these numbers. And here we go, up. 3 on ppi if we strip out the all important food and energy, unchanged, no revisions of any type. Lets move over to retail sales, shall we . Up. 2. Much less than we were looking for. Now, lets do the xs, autos, up. 1, autos and gas, up. 1. They call a control Group Blending it together in the mixer and letting go. Theyre positive numbers, positively smaller than expected. Ppi a little hot on headline. Not a little hot when you strip out the things we really are worried about paying the most for the most in fuel and energy. And obviously theres been a boat load of volatility, a lot of it based on Foreign Policy regard to energy. Up 23 in dow futures, yields, still hovering around a super important, one of the first significant tops. And the auctions are behind us, and we now know who may have the biggest belly full of those verizon bonds. Just who youd expect, the big bond funds. Well continue to monitor verizon, governments, back to you. We were just talking a little bit about a story earlier that had moved to the dollar. Itd strengthened the dollar on a report in the nikkei newspaper in japan saying that Larry Summers summers . Yeah, summers will be named as early as next week. The white house has since come out and said that report is wrong that the president is Still Deciding what is going to happen. But as john harwood has pointed, the job he thinks is Larry Summers to lose. What do the markets really do . The dollar was up earlier on this report. Yeah, you know, listen, i guess i understand why the dollars up because i think in this theater of whos coming next that the notion of him contrasting what the quote, unquote, dovish yellen puts them in a more hawkish role. Im not sure i buy any of the gentlized labels. And im not sure that whoever you place in that job whoever it is is going to need some real guidance from above. Rick, we had paulson on talking about what the t. A. R. P. Did for the country and we had kovacevich on. It was like night and day. Really. One is that we may not we might all be dead if we didnt do the t. A. R. P. According to one side. And the other side said it ruined the Banking Industry and caused the banks to lose 80 of their value because they all looked like they were ready to go under. Did you watch any of that . I caught a bit of dicks comments. And i was lucky enough not too long after the crisis to be on a stage with him. I, obviously, see it his way. And i think that, you know, mr. Paulson in many ways, you know, is going to be the most famous treasury secretary in history and i really do think his hearts in the right place. But to me, you know, we ended up creating a dynamic where the banks ended up sleeping with the government. And from this point forward, first of all, i dont know id ever totally believe anything that comes out of a headline from any of the bankers that received 125 billion. Some of the antagonism i used to enjoy i dont see as much anymore. But more importantly, you know, once you save them, now you end up kind of tinkering with them and making rules about them and wondering whats too big and whats too small. If youd just used the only regulation that ever worked, what i call the 11th commandment, failure, you wouldnt have any of these issues. Yeah, i think George Hamilton was, by far, more famous than was it not george. No, im thinking all right. He is pretty cool, though. Always looks the same. All right. Well continue to hang out with our guest host this morning. Marc lasry, the chairman and ceo. Weve talked a lot about the investment themes. I want to talk about the Hedge Fund Industry at the moment. Right now feels like the industry has not kept up with the major indexes by a long shot. You may have but others not so much. Weve also heard that thieves have come under pressure in a meaningful way. People have been talked about fees coming down and a shift in the industry, but it hasnt happened yet. Is that something i think it has happened, actually. I think what ended up happening is its come down, whether its 1 in 20 or 1 1 2 and 20. The people that arent and if youre making money, you can still stay. I think you can still end up charging that, but ultimately youve got to make money. The whole industry was 2 and 20. I think what youre going to find is there are more and more money going to people who are doing well and youre going to see more and more failures over the course of the next couple of years. Or people just money being pulled out of guys. The journal had suggested it was closer to 1. 6 id say 1 1 2. Maybe 16, 16. 5 , Something Like that. I dont see the reduction as much on the incentive fee. I think the reduction is much more on the management fees. Right. Do you think you could start your funds in todays market in todays environment . No, i think its i think its exceptionally hard to get started today. Because . I think to raise money today is very, very hard. People who already have capital have a huge advantage. And the reason for that, nobody wants to take sort of risk with the new managers. So the cleverist kid working at Avenue Capital now who wants to spin out on his own, will have a much harder time today . A much harder time. Youre not leaving used to be, you could go out and raise 250, 500 or 1 billion. Today youre leaving with 50 million or 100 million and its much harder to gain traction with that. Think of it this way, in 2008, the riskfree rate, right, so threemonth libor was 5 . So all i had to do was four times the risk free rate and i was viewed as doing well. Making 20 . So for me to make 10 , ive got to do 40 times the riskfree rate. Its so much harder. And if im in cash, not investing, im not getting anything. Whereas before, id be getting 5 . So the pressure is so much greater on you to succeed that youre if youre an investor, youre going to go with people who have proven themselves. One of the other issues were talking about last week, i thought it was an article in the journal, we were talking about Pension Funds, a number of Pension Funds have started and have decided at least in the private equity space and other spaces that theyre going to invest for themselves. Theyre better off and not paying the fees at all. T does that make sense to you . Would you decide were going to do this on our own . Or do you think the allocation of money makes ultimately is and the talent, the other issue is from a policy perspective, cant pay people the same way you can pay people. Thats correct. What does that mean . Theoretically i should be able to have more talented people, our industry should have more talented people. Saying we want you to manage, but were going to end wed like you to charge us lower fees. I think for them to manage it, i think its much more difficult. But i think theres a lot of political pressure on these organizations to do that today. Do you think bernanke could stay in business as a distress debt Hedge Fund Manager . No, i dont think thats his forte. But do you think hed be good at it . Do you think hed know how to do it . Because hes kind of doing it for all of us, isnt he . I think theoretically hed know. Its our Balance Sheet that hes messing around with. And hes done a great job. And well be able to get out of this okay. You think he could be a hedge fund guy. Will you hire him as a consultant . I would hire him as our head guy. Come work at Avenue Capital. Wow. Wow. Why not . But we also talked off camera before about everything the feds holding right now. Right. Weve seen the upside. Weve seen the good part of this already. The bad side of the trade is already to come. The fed is going to lose huge amounts of money. But hopefully thats offset by increased revenue because youve got an economy thats doing better. Im not an economist, but its definitely going the other way, it has to. Yeah. Thats a big hope, marc, you know. It just seems i dont know. You dont see a disaster as they exit . No. Okay, good. Ma marc is going to be here for the rest of the show and well await to see if ben bernanke will give you a call before the end of the show. Does he go back to princeton is that what happens . I think so, yeah. Coming up, lessons from the crisis, fed tapering and the next fed chair. Well cover what weve been talking about already, but with gary parr. And big news after a short hiatus, the talking squawk blog is back. Does it talk . Get all the buzz behind the scenes on the week that was and the week to come. Go to squawk. Cnbc. Com. [ male announcer ] lets say you pay your guy around 2 to manage your money. Thats not much, you think. Except its 2 every year. Go to etrade and find out how much our advice and guidance costs. Spoiler alert its low. Its guidance on your terms, not ours. Etrade. Less for more for you. The world is changing faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but run different. To give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because now more than ever, the future belongs to those who challenge the present. Welcome back to squawk box. Making headlines, a poll by the wall street journal now expecting a tapering announcement from the fed yesterday. But despite weeks of speculation, nearly 40 of those polled forecasters dont think markets have fully priced in a move in september. Thats surprising, at some point we should also talk about the bond move. Bonds already moved and, anyway, longer conversation. Earlier on the show, you probably saw former treasury secretary hank paulson. He talked about the Lessons Learned from the financial crisis. I think that the Capital Program we designed and to get out and put capital into hundreds of banks very, very quickly and recapitalize the u. S. Financial system is a huge success. And that money has come back, you know. All that plus 32 billion. And so ive focused on that. Joining us now with his reaction as well as what advice he has for treasury today, gary parr, vice chairman. Gary, thanks for coming on. You know, you heard what hank said and, you know, my atm card still works. It was a rough four or five years, but here we are. But the point that kovacevich made. Bankers are still probably less popular than, you know, funeral home directors. Even at this point. So was it the right move . Well, good morning, joe. I think it was the right move. One part of the Banking System is confidence. Thats so important. And we were at a point in time where people lacked confidence. Including whether their atm card would work at the point in time. So i think hank paulson did the right thing to do something very big to remove the risk from the system so that people believed and had confidence. And i think trying to fine tune that or tweak it, there may have been a more elegant answer. But the most making a decision g it. We have time to figure out more Elegant Solutions now. But its hard to second guess. And when youre in a battle making that field decision, yep. Yeah. What do you go ahead. No, i was going to say, joe. I think interestingly if you turn the calendar forward five years to where you were headed with the second part of your question was regulators have made a fair amount of progress on some number of fronts to anticipate the next time. But i must say, im disappointed that they are now bogged down in the weeds. They seem almost lost in the weeds. You know, roughly 40 of dodd frank is done, so much is left undone, including fundamental issues like Rick Santelli talked about earlier. Okay, if someones going to fail, are we ready to let them fail . Do we have methodology in place . Have something to the rest of the system is protected . And five years on, i would suggest that hasnt been fully figured out. People are now lost in drafting pages upon pages upon pages. And all the fed action and with the upcoming, you know, decision next week, did qe1, work, qe2 . Did they all work . None of them work . From a Financial System point of view, i would say certainly one and two helped because they pushed liquidity into the system, brought rates down where people would have confidence that the financing markets would work. Im not sure its the most effective mechanism for making the economy grow but it did stabilize in the early days, stabilize the system. That was useful. I think it then passes the useful life. Are you ready for life without qe . I think, again, not an economist, i will say one of the risks to the system you all just touched on it a bit earlier with mark. And that is rapidly rising Interest Rates. Were they to go up quickly, and they did jump quickly here in the summer, if they were to jump again or continue to move quickly, a lot of Financial Institutions are not well positioned including the fed for a rapid rise in Interest Rates. A slow rise is more manageable, people know how to deal with that, but a rapid rise in rates is one of the risks that exists in our systems today. The prevailing view on wall street is that Larry Summers is going to get the job as the new fed chair. Where are you on that issue . Im, i know him, i know larry, i do not know her. Its not fair, i dont have a fair comparison between the two. I like the way you said that, though, that its fair to say that the fed is not well positioned. Sharp rise in rates. Yeah, saying it, well, theyre not well positioned. Could it get ugly . Its how fast, how quickly. Theres real risk. By the way, theres more risk in the Banking System than there is in the fed. But i just identify that. Now the fed does have a couple of risks. And, indeed, it is hank paulson earlier said weve done well as an economy with the delevering of the system. But, again, one party has taken on massive leverage in the meantime and that is the fed. Now the fed has to delever. Gary, real quick, news this morning about jpmorgan and jamie dimon. Theyre going to spend 1. 5 billion to bolster the lawyers and all the people dealing with regulators. Does this make sense to you . I dont think thats unique to them. I was three weeks ago i was in china talking to the head of the central bank of china. And one of the discussion points was that we were complaining that the chinese banks were complaining about too much regulation and oversight and i posed a question to him, how many banks in the u. S. Do you think spend over 1 billion a year in dealing with regulation . And the answer is at least six if not 15. Spend over 1 billion per bank dealing with regulation. So jpmorgan is not alone and having this large expense. And im not saying thats necessarily bad, but thats reality. All right, gary. You would make hes an elegant man. You would make a good character actor in a lot of did you notice that . Im waiting for the offer, joe. From your lips have you really . Gwyneth paltrow. Has a good memory, yes. I did make a few movies along the way. Phantom of the opera. Are you not no, the new york philharmonic. Im adding him to my list. I have my band. Again, i have my band as joe has his. Ive got richard engel, tom brady, im adding zblaung, joe. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Welcome back, everybody, we have more on the twitter ipo filing. Kayla tausche is with us onset. There are a few things we dont know. Lets run thing and handicap what we do know. Theyll add more banks over the next few months to help allocate those shares. We know some are valued over 10 billion and thats likely the valuation where theyll go public and look to raise roughly 1 billion, possibly as much as 1. 5 billion depending on demand. The big question, though, is when. Ive heard from my sources the window for twitter to go public is anywhere from november until the end of the First Quarter of next year. Going public by the end of the year may sound soon but its the jobs act makes it possible. Heres why, they can fill in a lot of the information like additional banks and additional finances as it goes and it has realtime feedback from the sec. It took facebook, for instance, roughly six took facebook roughly six weeks to get feedback from the s. E. C. Every time they made a change to the s1. The full thing needs to be filed three weeks before the road show. If twitter is motivated to go public before the end of the year, that expedited information flow is whats going to be possible. Lets bring in jim cramer from the new york stock exchange. Jim, i wanted to ask you about the shock and awe in the markets last night. First of all, what do you think about twitter . I think this is a very important deal. I think its going to be more like 20 billion than 10 billion. They do have whats known as native advertising. This is a way to reach 200 million people, go into 400 people. It is a featured way for advertisers to connect with young people. It works. Wow. Is that going to be not a way to connect with us, though, jim, unfortunately. You said young people. Its interesting, because i had john on last night from buzz feed. He regards it as the railroad that. Has to go through. They apparently do not want to be bought by anybody. They do have great ambitions. They made a lot with this documentary. Theyve made a lot of roads to become the other than facebook way that you can advertise. Do we know if its a dual class share . We dont know. And we dont know whether theyll let employees cash out. That was a huge issue for facebook. The market was flooded with new facebook shares. I would think they would try for dual class, given just the facebook and everybody else. I dont know if they have time to build that and iron out all the details. Jim, what is youawing and amazing you right now . Everythings going up at once. Its not supposed to happen you shouldnt have the oil stocks going up when the Airline Stocks go up, shouldnt have oil going up and people going out to restaurants and those stocks going up, defense stocks with the sequester, Health Care Stocks going up at the same time as the big industrials . I mean, this is 1983, this is 1992. That was a really good year. Those were fabulous times. Everything was on fire. They go on for five years. For once i thought you were making the point it was just the generals moving but youre saying because its so many different sectors that maybe this has some staying power. Weve had since 2001 if you have one group going up, its been zero sum, the money comes out of another group. You have the Verizon Group taking a huge amount of moneys are doesnt seem to matter. Theres a lot of money going into the market. You should not have the Health Maintenance organizations going up at the same time as the rails and the airlines. China and europe are coming back, the United States some are slowing so theyre buying a lot of health care but this is unprecedented for the millennium. Its not unprecedented from the 80s and 90s. Jim, thank you. Well see you in a few minutes. Kayla, thank you. When we return, well give mike lasry the last word. If you have the audacity to believe in straight talk, not doubletalk. If you have the nerve to believe that in a puzzling financial world, clarity is king. [ man ] if you believe nothing beats a sitdown for knowing where you stand. [ male announcer ] join the nearly 7 million investors who think like you do face time and think time make a difference. Join us. [ male announcer ] for 90 years, its how edward jones has made sense of investing. [ male announcer ] for 90 years, sheand you love her for it. Ide. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. 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We dont have a lot of time left with our guest host mike lasry. I thought of one last question. The entire planet five years ago was a distress situation, distress debt. Were not anymore. Is the fed taking on all the leverage or is it a totally fixed situation, different than it was . Well, you always have problems. Its sort of what i talked about earlier in 2008, 85 of the high yield was either distress or defaulted. Today now its about 15 . So were in much better shape. Much, much better shape. Nothing looming, no black swan nothing that i can see. Thank you for being here. Always a pleasure. Have a great weekend and join us on monday. Squawk on the street starts right now. But youve given no clarity as to which path u might take. For all we know, you could be private forever. Mmhmm. You could be private forever. I think were going to continue to keep our plans to ourselves. The ceo,