Transcripts For CNBC Squawk Box 20091019 : vimarsana.com

piling on a little bit about you being out during earnings season given how much grief you give him for when he s out. so fair is fair. if you want to pile back on today, go ahead. we ll wait till wednesday when he gets back. a lot of numbers last week, a lot of numbers coming back. very heavy earnings week. before the bell this morning, we re getting numbers from hasbro, gannett, and many others. then after the close, we re going to turn our attention to technology. some of the headliners include apple, texas instruments, boston scientific. this is going to be a huge earnings week and the numbers are going to be fast and furious so you better be paying attention. also a number of big economic releases coming out this week. tomorrow housing starts and the producer price index, the ppi. on wednesday, mortgage applications come out, also the fed s beige book. on thursday, jobless claims and leading economic indicators and finally on friday, existing home sales, as well. that s right. ben bernanke says the recent financial crisis that has shown the importance of dealing with global imbalances and trade and capital flows. he spoke at a fed conference in asia yesterday. he didn t mention china specifically in his speech. some u.s. officials have looked to pressure china to allow the value of the currency to appreciate against the dollar. speaking of china, a top economic official there says the country s economy expanded more than 7% in the first nine months of the year. and will certainly surpass the 2009 growth target of 8%. remember a long time ago they said 8 was the magic number for them. china s scheduled to release that official q-3 data on thursday. do we believe these numbers? how much faith do we put in them? we ve had guest after guest come on and say they re highly suspect especially the way they account for durable sales, washing machines that go to people who don t have power to plug them in. well, maybe it s not so accurate, maybe it shows a trend. a trend line. which direction or another. and there are all kinds of people say you have to look at energy and all kinds of numbers. did you see barron s over the weekend? yeah. talk about there s not a long article. nope. but they got people s attention. apparently saying the economy s strong enough to handle 2%. i guess this is one way to get the chairman s attention, as well. if my picture was on the cover and said it s time to raise rates, becky yeah. if any event, we ve also been watching as there has been a return to at least to energy prices, those oil prices spiking above $79 a barrel overnight. that s the highest level this year. crude had been trading between that range of $65 and $75 for the last five months, but last week things changed. you started seeing it push above. and setting new records for the year just about every day. analysts are citing the weak dollar also expectations that oil demand will recover as the global economy improves next year. and that s the big question. is this a weak dollar story or an improvement in the economy? we ve got some analysts today to help us dig into that, as well. in corporate news, citigroup could be forced to sell mexican subsidiary banamex. and as you know, the situation with citigroup is now a big chunk owned by the u.s. taxpayers. reporting that opposition senators saying the u.s. government meaning that banamex is no longer following this law. a ruling could effect aig, bank of america, and rbs and these are some of those unintended consequences that pop up. the government involved. you got that right. a commercial finance company cit amending the restructuring plan with bondholders. including a way to accelerate the repaying of notes. the cit saga continues on this month. meanwhile, the market s not looking too bad, we dipped below, in large part because the bank of america numbers weren t too strong. other things clouding the earnings picture. but we ll see what happens today. we re going to pop back above it in the early going. the future s about 30 points above the fair value or so. and bond markets, the ten-year note has been yielding what, somewhere in the below 3 1/2. dollar is an interesting story. the euro under a near 14-month high against the green back. and this was the story about every day last week too. really? higher oil prices every day, weaker dollar every day. oil s up, i think eight straight, gain $9 last week alone. but you can see the euro there right below the 1.50 level that psychologically important 1.50 level. and gold, no surprise to see gold adding some gains. up 4.60 this morning to $1,056. let s go check with christine tan, she s in singapore. happy monday morning, steve. yeah, happy monday morning to you, as well. very interesting look at this market. i can t work out really why we re up 1.2%. you ve got a whole host of sectors up a couple of percent. food and beverage, but no real obvious leadership today, certainly not coming from the likes of the oil stocks despite the fact as you say we ve got near high levels for 2009 on the oil pp. but we lost a bit of momentum on friday because of the earnings out of the united states, including our parent ge and now we seemed to retrace that. up a mean 1.2% on the major indices. ing this morning actually says the momentum is starting to fade from the european banks but there s no obvious sign of reati rotation. which could mean despite concerns about a stretched earnings, we could go from here. we ve seen a lot of rights issues, m & a coming into this market and now more on ipo activity aviva one of the largest insurers in the united kingdom is saying it s going to ipo around $1.8 billion. the dutch operation is actually going to be the largest western european ipo. still only $1.8 billion. the largest this year, again, another sign of help perhaps in these markets. elsewhere the swiss engineering group. all kinds of companies in the last year or so, this one reducing its provision and that s going to boost that bottom line by around about $1 billion. basically less money is going to be needed to be put aside for the compliance tax and restructuring. in the united kingdom, housing starts, home sales later in the week. if fsa, the regulator getting a little bit tougher on the housing market. basically now it s going to afford, affordability tests on and ban certificate mortgages. you didn t need any evidence. common sense at long last. that s the european market. let s get out to christine in singapore. steve, well, asian markets fell after disappointing results. late session to close higher all with the exception in japan, nikkei slips .2%. in south korea, the kospi rose 0.5%. electronics higher. a nice day for spirits, reviving the jinro. what you know as rice wine. and china getting a nice pop today of optimism that the country is on track to meet the government s economic growth target of 8% for the full year. all eyes on third quarter gdp data coming out on thursday which some say could go as much as 8.9%. the shanghai at 2.2% breaking the psychological barrier of 3,000, also expectations of stronger third quarter earnings. and that helped to lend some support to the hong kong market. the hang seng rose 1.2%. chinese oil companies like cnooc and pet tra china rose. becky, back the you. thank you very much. right now, we re going to take a look at the u.s. markets right now. joining us is president and chief investment strategist at point view financial services. also jay brooison joins us, chief economist at wells fargo securities. david, let s start off with you. you say at this point a correction is overdue? yeah, i think so. we re in a situation up 60% from our march lows. we just had the best third quarter in since 1998, we re up eight of the last nine days, clearly overbought. juxtapose against that, the ninth quarter in a row of negative year-over-year earnings. meanwhile your fundamentals in the economy still are not good. 9.8% unemployment, that s going to go above 10%. and the effect in corporate america, look at bank of america s earnings on friday, weakness and losses in their real estate lending aspects, consumer credit and so forth. and this higher unemployment is going to put continue to put pressure on that. and so we re cautious. you looking for a big pullback? not a big one, quite frankly because the flip side, of course, is where are you going to go? the money market yields are nil. you ve got almost a bubble, i think in credit markets. muni bond yields, junk bonds up 50%. as long as the confidence does not completely evaporate, i think a lot of investors are going to continue to look at any pullbacks as a buying opportunity to get on board. all right. jay, i don t know if you heard us, but a few moments ago, carl and i were talking about that barron s cover that says it s time to raise rates and a big picture of ben bernanke on the cover. what do you think about that story? i would say it s a little premature at this point. i don t think the economic backdrop would suggest higher rates are appropriate at this point. yes gdp growth in the third quarter will above 3% and the worst is probably behind us and probably have positive gdp growth. but on the other hand, the domestic demand outlook is not all that strong. there s hardly any inflationary pressures in the pipeline at this point in time. i think it would be a little premature at this point. because of all of the same reasons, unemployment ticking towards 10%. that s right. if history s any guide here, the fed has not raised rates until the unemployment rate has peaked and on its way down. you can also argue we ve never been at almost 0%, and that s certainly well taken. i would think the fed would probably start to move a little bit quicker than they have in the past, but they also realize that back in 1936 and 1937 the withdrawal of stimulus caused another recession here and prolonged obviously the depression of the 1930s. david, the point also made in barron s, somebody s got to move in and stabilize the dollar. i think that s right. on the other hand, a weak dollar s been a great tool for policy makers to drive demand in this country. it puts everything we sell to the rest of the world on sale. so i don t think a weak dollar is something that policy makers really want to get rid of too quickly. but you know on the other hand, weak dollar pushes ul gop gold oil. the price at the pump is probably the most important price in the economy. and as oil prices go up, gas prices go up. another reason to be cautious. do you think portfolio managers are chasing the market at this point? or have enough of them enjoyed the rally so far that we can t count on more inflows lifting the market more? i think both. i think there s a lot of people chasing the rally. it s hard to look at just priced to earnings ratios are now at thi the highest point since 2004. well, that s okay, though, if earnings and top line growth catch up with multiple expansion, right? absolutely. but that s the big if. we re going to see a lot more we re going to learn more about that just, for example, today with apple. the company s talking about $1.23. $1.42, the whisper number s $1.60, a stock that s moved up 93%. what are we going to be facing tomorrow? those are the risks the investors need to be cognizant of. jay, more on that weak dollar oil trade. we ve been trying to figure out, it seems like every day somebody s saying it s only because of the weak dollar. others are saying no, it s because there s a turn in the economy and we can see it coming. the economic numbers you look at. do you see any evidence of that? well, you ve got to keep in mind that oil is an internationally traded commodity. and this week china will report the third quarter gdp numbers and it s expected to be in excess of 9%. most other asian economies are growing, as well. and so, you know, is there growth here in the united states? yes, it s rather weak, but when you look around the world in places where oil demand has increased dramatically over the last decade, you do, in fact, see signs of stronger growth. is the growth when you talk about countries like china is it coming because of government stimulus, or is this real demand that s bubbling up? it s all of the above. certainly there s been a huge increase in government stimulus in china and most other asian economies. most of those economies, they got through the crisis okay. never gotten levered up to the same extent that united states or western europe did. they were hit when global trade finance dried up and caused the exports to dry up, as well. now the global trade finance is back again. you re starting to see those economies recover. i would say those economies are in real recoveries rather than just being pushed along by government stimulus at this point. david, you like talk on stocks right now. why is that? the yield. at&t, verizon, all offer yields between 6.3% and 8.3%. certainly no question about it, the concern with the higher dividend paying stocks, can they maintain the dividend? you ve got the validation, the bond market saying these companies are good credits. and i think this could be something that could drive stocks further as investors move from those lower bond yields into the stocks to take advantage of those higher yields. plus with that strong dividend yield if i m right and there is a correction, i think that s going to give them a little resiliency unlike other stocks that don t have dividend yield. thanks for coming in today. when we come back this morning, the greatest risks to slipping back into recession. we ll talk about that. but first as we go to break, let s get a look at last week s winners and losers. national car rental? that s my choice. because with national, i roll past the counter. and choose any car in the aisle. choosing your own car? now, that s a good call. go national. go like a pro. welcome back, everybody. let s take a look at some of the headlines this morning. the cme group is reportedly in talks to take over the chicago board options exchange. crane chicago business says that a deal here would actually value the largest u.s. options market at up to $5 billion. symantec says that tens of thousands of u.s. computers are loaded with scam security software. this is software that owners may have paid for but which only makes machines more vulnerable. cyber thieves actually plant fake security alerts to pop up and offer security software sometimes for free and sometimes for a fee. ubs reportedly sending registered letters to account holders warning that details may be given to u.s. tax authorities. a swiss newspaper says the use of registered mail could help authorities trace customers wanted for tax evasion. well before their details are handed over under a u.s.-swiss agreement. the president s economic advisers hitting the talk show circuit. everything is on the table when it comes to creating jobs, including another stimulus package. in the meantime david axelrod regarding bank bonuses and financial reforms. there are a lot of small businesses credit worthy businesses around this country who still can t get the capital they need to grow, which is important for our economy. and you ve seen the same institutions spend tens of millions of dollars lobbying the congress to try and stop financial regulatory reform. to stop the kind of reforms that we need to prevent the disaster we just saw. that bothers me a little bit. watch cit continue to slide. if you want to fix what the loans of small business, maybe you should focus there. why did you just draw a line in the sand? john, i guess after a week in which goldman posted those numbers and posted the bonuses more importantly, they had no choice but to come out and say something this weekend. the journal s take this morning is that the criticism s a little more muted than it has been in recent quarters. yeah, i think they feel a need to generate a little bit of heat to respond to the concerns among certainly president obama s base. but also other americans who look at these bonuses being paid a record $140 billion on tap for wall street plus goldman profits and say, hey, wait a minute, didn t these guys get a bunch of our money not long ago? but the interesting thing to me in hearing about valerie jarrett saying everything s on the table in terms of a second stimulus and also david axelrod sort of hitting the pay practices of wall street. it s in counter point to the interview i had with larry summers late last week because larry summers seemed to be a little bit cool toward the idea towards second stimulus. but he said he wasn t taking a position. and look at the financial regulation plan they have in front of the congress. they don t have dollar limits on compensation. right. do you agree with critics who say the banks are throwing everything they ve got at watering down barney frank s measure levered measure to make sure that they re not they re not subject to strong oversight? they are certainly trying to water it down. you ve got a couple potential targets. one of them is the consumer protection agency. that s drawn the most fire from groups like the u.s. chamber, which says that it would subject businesses to sort of regulation. you ve got to answer to the protection agency. the obama administration is not going to give on that. people may realize there s some exemptions carved out and that s already happened in the house process. but they re going to stick with that process. the other question has to do with bank regulation. how much streamlines you get and whether, in fact, you reduce some of this alphabet soup we have in washington to avoid letting people shop for their regulator. that s still in play. yeah. was that your coffee mug becky is convinced you ve just dropped a cup of coffee. is that your coffee mug? here s the thing, i ve got this water thing and the guys on the crew helpfully put a cap on it to protect me from germs, but it s kind of vulnerable and it just goes right over. swine flu s a big concern, even in washington. you talk about the valerie jarrett thing, though, john. how seriously should we be taking further big macro steps to stimulate the economy? is that your classic trial balloon? or is what summers told you the real deal? well, i think there is likely going to be some action, but i think it s going to be fairly small. they re very concerned long-term the obama administration about the size of the budget deficit and expanding it much further. fundamentally, they believe the economy s turning around. larry summers said he thought we were going to turn the corner, pick up speed and have solid economic growth over the next year. and in that environment, if you believe that, then the question is going to be how long can you stand the heat from the fact that unemployment isn t coming down as quickly as a lot of voters would like in the 2010 election? i think the white house s position is going to be to try to wait as long as they can and do as little as they can to try to keep the deficit from growing. hey, john, we ve been talking about it this morning. barron s cover, it s time to raise rates, ben. there are some people including the analysts we ve spoken to this morning think that s a little premature, but others say hey, this is exactly when need to start. did this generate talk in washington? i know it s early before people get back well, it s a second echo of that op ed a couple of weeks ago that we re going to have to do this sooner than we think. this is one area where i think the obama administration out of concern over the pace of recovery is not likely to embrace the idea of raising rates now. they ll wait a little longer, risk inflation a little bit longer to try to make sure that we ve got as robust a recovery as is possible to have. the other argument is the economy better be pretty weak not to withstand 2%. that s historically low. the dollar you re going to want somebody to come in and reassure people the dollar s worth investing in. and i guess those are the two big arguments. it s hard to disagree with those. it is hard to disagree, but these economy is pretty weak. and as far as the dollar is concerned, i don t get the impression that the obama administration is all that concerned about the decline in the dollar. remember, what they re trying to do is rebalance this economy to one where we ve got less consumer spending, more export led growth. and what is the consequence of the falling dollar? exports. there s a good piece in the times about a company in upstate new york who sells a lot overseas about to sign a multi-million dollar deal in europe because of the weak dollar, it s going to allow him to rehire his workers back here in the states. there you go, job stimulus there. it ll be an interesting week in earnings and on your front, as well. we ll talk to you later. john harwood. coming up, more of this morning s top stories. plus the picture from the future pits in chicago. and then as tough as tech. this is a sector that s a big market driver, at least it was last week. right now we ve got new evidence that the economy could be soon behind. powering a recovery when squawk box comes right back. yes, you re lovely. what do you think? hey, why don t we use our points from chase sapphire and take a break? we can t. sure, we can. the points don t expire. there is nothing for me. there s no travel restrictions. we could leave tomorrow. we can t use them for a vacation. you can use the points for just about anything. i know. the way you look tonight chase what matters. get your new chase sapphire card at chase.com/sapphire. tdd#: 1-800-345-2550 if i m breathing, i m thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn t matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don t know, fish and chips. tdd#: 1-800-345-2550 i ll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i m onto something i ll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that s when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i ll talk with somebody tdd#: 1-800-345-2550 who knows what i m trying to do. tdd#: 1-800-345-2550 (announcer) switch to schwab today. tdd#: 1-800-345-2550 you ll get the tools, the technology tdd#: 1-800-345-2550 and the support to trade your way. tdd#: 1-800-345-2550 go to schwab.com/trader tdd#: 1-800-345-2550 or call 1-800-540-7304 tdd#: 1-800-345-2550 right now. tdd#: 1-800-345-2550 but opportunities can vanish like that. tdd#: 1-800-345-2550 .so most days, i m right there tdd#: 1-800-345-2550 when the market opens. good monday morning, welcome back to squawk here on cnbc, i m carl quintanilla. earnings central in full swing this week. before the bell this mortgage, look for numbers from hasbro, gannett. and bb & t corp. among others. headliners include apple, t.i., boston scientific. much less interesting without that music. without dire strait. later in the week, caterpillar, thursday s a bunch of dow components. 11 dow components this week? yeah, 11 for the week and big names. today is, as well, is the 22nd anniversary of the 1987 crash. i did know that. october 19th. black monday. a lot of people don t really have huge memories of this. no. people who are newer traders. we ll have garthman here later on. i bet they ve got some stories. bernie madoff s long island beach house has been sold, the price tag was $9.41 million, that s above the original $8.75 million asking price. the 3,000-square foot house was on the market september 1st. there were concerns that people wouldn t want to bid, but they came in with better than expected results. the proceeds will go to help repay victims of madoff s massive fraud. can you imagine the application for the mortgage on that one? it s for bernie madoff s place. yeah. a little bit of notoriety that comes with that. you wonder if it pushed bids higher. maybe somebody said, hey they definitely had no problem of word of mouth or advertising. no, lots of free advertising. the federal government s probing toys r us over baby products. the wall street journal says the ftc wants to know if they acted to discourage discounting and keeps prices higher than they otherwise might have been. walmart is said to be foc focusing on a new team. the markets are less than 25% of the size of the super centers. the ft says the smaller stores could help walmart make inroads because if you ve seen these super stores, i was in one a few weeks ago up in maine. huge. huge, you ve never seen anything this big. you d get lost in these places for a week. everything from groceries to electronics to everything you normally see at walmarts but there has been some political opposition of land skconstraint. this could make it easier to open stores where they re trying to push out the super centers. asia had a pretty nice night overnight. every index up except for the nikkei. and futures here looking pretty good as we kick off probably a busier week of earnings later on today as beck said with t.i. and apple later on tonight. weak dollar has made oil, obviously a stronger commodity. down just 10 cents now, but $78.43, up about 9% from last week, oil has gained about $9 in the past six or seven sessions. the dollar is really the story as beck said. it has been for much of the past week. against the euro, a 14-year low, and we re still just below that 1.50 psychological level of $1.50 for every euro. i think at last check gold was $1,056. let s get to the futures pit. jason, good morning to you. good morning. a lot of people written over the weekend about friday s trading and bank of america earnings, ge earnings, reaction to those. calling the rally into question. do you think it s that cut and dry? well, last week was friday was options expirations. one of the things was the market had a solid run for the week and a lot of people positioned to the up side with calls as the earnings came out less than expected friday morning, that caused much of the long hauls to go ahead and take the profits off the table before the close. we saw a little more exaggerated downside on friday. do you think we re going to be jostled around as the earnings dribble out? is there going to be an overall dynamic to the season that will drive the market? well, one thing to realize is the market s become much more positioned for up side in equities. the vix down 10 days in a row. intel, the market goes into the earnings long, but the stock s down 5% from the open after the earnings. and if you owned it coming into the earnings, you re down on it now. what you see is i think the market is positioned for the better earnings, but there s more willingness to take profits in that move upward after that. and so and actually the there s a lot of rotation going on. if you look at the oil stocks where the predominant gainers up 4% to 5% on the week. it s really shifting more to the commodity-sensitive names, the crbs commodity index, it s really going back to the dollar index and those multinational companies that are most benefitted from the weaker dollar as well as commodity sensitive names. there s a school of thought that says the market s going to trade the way stocks trade, goldman and apple tonight, and goldman although the numbers were great, the stock, the trading s been erratic. i think it s similar to intel, we get a better than expected number the stock opens up. in stocks in general, we re coming now through the expiration. so for the next five to seven days, probably a window where the market s going to be choppier, downside risk. we re going to head into november and december. my guess is, any downside that we ll get between now and the end of the year is over the next five to ten days. and i don t expect that to be material. you don t harbor superstitions about the month of october specifically? in general, yes, they tend to be filled with a much higher degree of volatility, but given this far into the month without a lot. and the when you look at t the at across assets, every class at a multi-week high. so the dollar at its lows, currencies at the highs, fixed income at a three-week low, stocks at the high. the trends are so predominantly high, i don t see any material to derail that other than a consolidation. would you say anything about the data trend? we saw industrial production, confidence on friday was a little bit soft. i assume uh you think overall the data s been pretty friendly. and i guess the data really points to the prevailing trends in that there will continue to be continued rotation out of the dollar into global exposure outside of the u.s. the u.s. will benefit just from the fact that the rest of the world will do well. but the data we re seeing out of everywhere but the u.s. is extraordinarily much better than expected. and the u.s. data is either at or even sometimes slightly below. so what we re getting is you get a bad piece of data in the u.s., stocks pull back. but still the prevailing trend in the weaker dollar and international data is much stronger. so i think it d be it ll be next year before we d see any change in that type of data trend that would actually change the fundamentals. we were talking about this barron s cover over the weekend. urging bernanke to boost rates to 2%. you can there s not a better compliment you could give the fed or the economy in general right now than saying you were strong enough to withstand higher interest rates right now. correct. and the barron s article did lead to some dollar buying during asia. the euro down quite a bit into the early part of the asian session. and again, the trends are so strong that it reversed entirely. and now we re seeing the dollar back near the lows. so i think the fed is very much concerned with the employment situation. they see the stocks are higher and the data trend getting a little bit better. but we re not going to see any inflation in the u.s. unless we have wage growth. it doesn t really matter what the headline commodities derive. it s really wage growth. and we don t have any of that here and we re still having job losses. so the fed is going to be more patient than some would like them to be. they don t just follow barron s lead. correct. we ll probably see more verbal intervention from finance ministers in the rest of the world. yeah, the uk for starters. it s going to be sbreing, jason, thanks. talk to you soon. if you have any comments or questions about anything we ve been talking about this morning, let us know what you think. e-mail us at squawk@cnbc.com. coming up, will tech be the key to an economic turn around? we ll get the sector s best prospects, everything from industry giant gartner when squawk box comes back. bye. ( in french ) yes, venice tomorrow. i can t wait. business trip? no, just the opposite. mergers take place and banks change names, but for almost 120 years, northern trust has remained focused on providing. tailored solutions to our client s complex needs. northern trust. asset management. asset servicing. wealth management. the gold delta skymiles credit card. from american express. it s the official card. of the world s largest airline. and it s the only credit card. that earns miles on delta. miles that take you. to more places than ever before. over 350 destinations worldwide. so switch today. get up to 25,000 bonus miles good for a free flight. call now to apply. there s no annual fee for the first year. and you can redeem. with no blackout dates or seat restrictions. these are just a few of the benefits. of carrying the official card of delta air lines. switch now and you can earn miles. on delta with your purchases: groceries, gas, entertainment, and more. get up to 25,000 bonus miles. with the gold delta skymiles credit card. call 1-800-skymiles to apply. this is the official card. of the world s largest airline. welcome back. making headlines this morning, gm s search for a cfo has been slowed by government pay limits. the journal says gm s board is pushing management to bring executives in from the outside. usa today reports target will announce plans today to give customers a 5-cent discount for every reusable bag they use to pack up their purchases. and where the wild things are winning the weekend box office, the live action adaption of the beloved children s book delivering $32.5 million. jamie foxx and gerard butler s thriller law-abiding citizen debuted in the second spot. let s get time for a check on news outside the business world. monica novotny is here. we ll start with the headline a lot of people were anticipating. officials in colorado now say police along with millions of americans were duped into believing a colorado boy was trapped on a homemade balloon. after a massive rescue effort and worldwide attention it appears charges are likely on the way for the boy s parents including conspiracy and contributing to the delinquency of a minor. the family s attorney has said the parents are more than willing to voluntarily turn themselves in should charges be filed. officials in iran say a suicide bombing killed five senior commanders of the revolutionary guard and wounded dozens of civilians. a group is claiming responsibility there in what is seen as an escalation of ethnic hostilities. and the government pulling a cabinet meeting 20 feet under water, the president there, president wants to prove a point that rising sea levels and gas emissions are endangering his country s survival. all of this, becky, ahead of december s u.n. summit on climate change in copenhagen. one of the reports i read says they can t afford to send the president but they feel he s so important to this that they re going to sponsor his trip. his trip there. that makes sense. that is one way to catch attention. they say locally this was not a big deal but they know internationally it s going to get a lot got our attention anyway. thank you very much. let s turn our attention right now to the nasdaq and technology. the nasdaq s up more than 35% so far this year. even so 2009 will go down as the worst year ever for technology spending. that s according to a new survey by the gartner group. being released right now on cnbc. however the outlook for the next year does show some improvement. there are some signs of hope. here to tell us the likely winners and losers is peter sanderguard. joining us from the i.t. expo in florida. the numbers for 2009, we knew everything was kind of fouled up last year. but this is the worst spending you ve seen? yes. yeah, this is by far the worst year. it ll go down as the worst year in history for i.t. but we re already seeing the recovery. and actually, fourth quarter starts to mark the first step of the recovery. we think that part of that recovery will come from primarily spending in certain vertical industries, like health care, utilities, and government. in fact, one could even say that government sort of becomes the emerging market of 2010. and when you start looking at the spending, obviously we ve heard a lot about some of the health care spending too, some of the hopes for that. is this federal government for the most part? or state governments getting in the picture, as well? yeah. the recovery really is in federal government. and that s where that s really the primary market. we ll start to really pick up, we believe in the fourth quarter into then 2010. and so it will change the picture from a drop overall i.t. spending in 2009, which was about 5.2% to 2010 representing a global growth in i.t. spending of 3.3%. so the i.t. market in 2010 will become a $3.3 trillion market. obviously that s coming off some very low numbers. which sectors do you think are in the best position to benefit? well, first of all the worst sector is hardware. hardware this year sees a drop of almost 17%. and it actually will not recover in dollar terms until 2012. best sectors are going to be software in service. so what you re going to see is technology providers, for example, such as salesforce.com in the software space, emc with virtualization environments, and also providers in the services space such space, and hp and ibm start to gradually recover at the end of the first quarter next year. peter, to this point it s been consumers really spending in technology. you mention the government s going to step in. but do you expect to see businesses spending on upgrades in the near future? yeah. consumers in some parts of the world are actually part of what s leading the recovery. if we take the far east, spending on pcs through actually stimulus packages, for example, in china and south korea is leading to substantial investments in pcs for home usage. we also expect that smart phones in the mobile space is going to start to lead some level of recovery next year. enterprise spending doesn t really start to recover until into 2010, probably at the end of the first into the second quarter. that s when we will see the spending recover primarily in software and service. we ve been reading some stories today about windows 7, the new launch from microsoft that s coming up. people say that this is expected to be much better than vista. but will launches like that, do you think, help in terms of i.t. spending? yeah. it first helps in the consumer space. enterprises take a little longer to figure out the rollout plan and therefore doesn t impact spending until the second quarter of next year. but it s definitely one of those shifts in the industry that will help. in some areas a brief recovery, in other areas, actually, a more sustained recovery in enterprise spending. okay. peter, thank you very much for joining us this morning. we appreciate your time. you re welcome. all right. and a little later this morning on squawk box, the five-star manni inning & napier pro. earnings after the bell and later this week too, microsoft at the end of the week, apple today, texas instruments after the bell. there was a big microsoft piece in the times about how they in a way lost their mojo but hoping to get it back. windows 7. when we come back, we ll go to the chairs. a weekend of stories to share with you, including part of them will touch on where becky was yesterday. some headlines. and then a squawk box brain trust meeting in the board right now. market maverick s dennis gartman, they re sharing their best ideas with us. you can tell by the music that we re talking football on monday. talk about a great weekend. it was a great weekend in baseball if you re in new york or anywhere else. amazing weekend of football. we ve got to start with just what happened between the saints and the giants. almost an historic game in terms of the number of touchdowns saints made. they haven t done that since 1969. for the giants most points allowed since 99. most yards allowed since 1980. we haven t seen a team do this well and this poorly together. new orleans is a team to watch. they have proven themselves over the first game of the season. tennessee got crushed 59-0. did you watch favre and the vikings. no. 33-31. another amazing game. hard to believe favre is 40 years old. he knows exactly where to put the ball and can do it. they survived fourth quarter 21 point ravens come back but won when the field goal went a little less at the end. yesterday when becky was at the jets. it was cold. a lot of football, a lot for the money when they went into over time. they went into over time. it was cold. then they lost anyway. yeah. interceptions from sanchez. top selling jerseys in new york. in new york? no, nfl. you just mentioned both of them. favre. new jersey with minnesota number one. number two is sanchez. really? good for him. i don t know, but he was doing very well in the beginning. so there s i think two undefeated teams with the nfc, saints and vikings. i want to talk real quickly about a story on the front page of usa today, death and tacks. cemeteries are feeling the pinch of the recession, too. you wouldn t think that s necessarily the case because people are till dying like they always v turns out it s a lot cheaper to be cremated than to be planted put into the ground in a burial plot. the land. last year 68% of arizonans opted for cremation compared to 60% before. burial service can cost $6300. cemeteries are feeling the pinch as well. they say one catholic diocese, 17% decrease in prepaid plots over the last two years. people aren t spending their money. the casket and all that. if you re going to make it respectful, it s a very expensive proposition. when we come back, a lot more on the busy week in the markets. we ll get the top stories plus squawk s very own woodward and bernstein, more like guardman and bernstein. guest host dennis gartman and dennis bernstein when squawk continues. the exchanging world is at the heart of the collaborative economy. and collaboration is good no one has a monopoly on good ideas. we have at least half a dozen relationships, 50 percent of my time is spent outside our company, collaborating with other companies, finding the next cure for the most serious diseases. the global opportunity is a fantastic one. we re able to reach audiences, connect with them in their local cultures and take our brands around the world. nyse euronext. powering the exchanging world. .when you study it s engineering, it s safety systems. .and when you consider who will be riding with you. .perhaps the question is not so much whether you can afford to drive a vehicle that is built this way. .but whether you can afford. not to. the glk. the engineering of mercedes-benz. see your authorized mercedes-benz dealer for special offers through mercedes-benz financial. apple on deck. a rough quarter so i brought in a trainer to get me on the top of my game. you bucket of bolts. ipods, iphones, macs, will steve jobs & company live up to expectations. there is one more thing. mac to pc, apple may start the week but microsoft will wrap it up. beyond the mac, beyond windows for tech stocks ready to move higher. squawk box begins right now. good morning, everybody. welcome to squawk box right here on cnbc. i m becky quick with carl quintanilla. joe is off today. we are getting ready for another huge week of earnings reports, some of the biggest companies and brand names on the planet. apple, texas instruments. they are both on the list today. not until after closing bell. the preview for apple coming up in just a few minutes. first let s get to carl, he s got today s top stories. carl. multi-billion dollar merger in the markets may be in the works. take over the chicago board options exchange. deal discussed a billion dollars, cme large derivative while cboe has widest options market. opening bell apple will be out. we ll have a preview of apple s report in a couple of moments. madoff investors will get another $9.4 million. that s how much madoff s former beach home in monday talk, new york commanded in a sale. it was announced but the u.s. marshall service only now revealed the purchase price, $9.4 million. over to you. carl, let s get a look at the futures. we are talking about futures above fair value. right now you re talking about dow futures above 28 points above fair value. all this coming after the dow fell back below 10,000 on friday. we ll keep an eye on where things are at today. earnings will be front and center. that s what s driving many of the markets this morning. oil prices, they have been touching a new record for the year once again this morning back down $0.45 to 78.12. oil getting major gains over the last week and a half or so for trading as we have seen a weaker dollar. quickly, let s look at the ten-year note. some of the numbers we ll be getting this week, producer prices, coming tomorrow for us. we ll get home sales at the end of the week. yields of 3.447%, below 3.5 for the ten-year note. dollar as i mentioned has been weaker. if you want to take a look on where things stand, down against the yen and euro, up against the pound. right now the yen at 90.79. euro trading 1.493. oil prices above 1,00050 up $5, 1,055.56 an ounce. this morning we have not one but two guest hosts. dennis gartman, founder and owner of the gartman letter. richard former chief investment strategist. two gentlemen we know very well. thank you for joining us. honored. we re thrilled to have you here because there s so many things happening in the markets. we d love to drill down. first of all, what do you think about the dow 10,000 level. below it on friday but an area you expect to see? should we be here? there s no reason we shouldn t be here. 10,000 is meaningless. cnbc pointed out this is the 50th or 51st time. whoever has those graphics in back just keeps pulling them out, i guess, and reusing them. the 10,000 itself i don t think means very much. what i think is important, though, is that it does show that the markets are expecting recovery. i agree with that i think the next question is should we be talking about expansion? that is where people expansion. expansion of overall economy. if the overall accounting mechanism, it s a positive message. deny, one thing we ve been trying to figure out, oil prices. is this a weak dollar, growing expansion? yes and yes. the weak dollar is one of the driving factors behind it. i think the stock market is, indeed, telling you the recession has ended. i m almost certain it has and strong oil are to be derived from a strong economy globally and domestically. we shouldn t be surprised how high, 80 to $85 you bring all sorts of new technologies into place. in terms of new technologies, more oil out of the ground? yeah. we can drill deeper, we do. we do more things with oil than ever before. tar stand. what s astonishing to me is to drill places we haven t and turn the drills to find places in the corner that wouldn t have been taken out. once you get above 85, it all becomes profitable. yeah. this is the situation, if we re looking at the recession being over, global economy expanding is barron s right when it says ben bernanke it s time to raise rates? i think it s an interesting question. politically there s no way he can raise rates. how independent it is legislative, judicial and executive branch. there is no federal branch. how independent will they be. politically they are not going to raise rates. what s wrong with telling b they can get 2% instead not bad at all. i think politicians would rather have lower interest rates in the economy rather than higher interest rates simply because it gives appearance of afraid ability. the fact the three-month t-bill is at six basis points says there s not a lot of credit creation going on in the economy. if there s not a lot of credit creation going on in the economy, the fed shouldn t be under too much pressure to raise rates. you think it s going to be the classic joblessness peaks then the feds. absolutely. rich brings up an important point. i think the fed has to be concerned about the fact they live and die by congressional edict. they can be destroyed by congressional edict. right now you have left of center government that is not going to stand for rising interest rates at this point. they will argue and they will make a very good case historically the fed has not tightened until unemployment has fallen and fallen for several months. they will make that same case. if i were bernanke i would simply say i hear this, i understand this, i m as much a political animal as anybody else. i ll sit tight and do historically what is the right thing. another story when we talk about business this morning, the story of hedge fund trader that blew up over the weekend. this the guy they are saying is the new raj, founder of galleon. this is a crazy story. the idea he was getting inside information from a number of places, a guy at ibm admission to be potential ceo candidate down the road from intel. this is unbelievable to think there were these connections that were going on. what do you guys make of it? you know what happens in the hedge fund industry. this not doing to be pretty. this is but the start, the tip of the iceberg. i m afraid once the prosecutors begin to understand the questions to be asked, and how to ask the next round of questions, this thing moves geometrically. is that good news? if these guys are doing what they are being accused of doing, squeezing information, which i guess you re walking on a fine line. people always move being well informed and knowing what s out there. but these are things that would be violations are regular no matter how you paint it, there s a violation. this will take months. meaning you think this behavior is happening at others. i m afraid it probably is. one hates to say that. i assume you re thrilled they figured out how to wiretap these guys. as a civil libertarian i m not all that happy about wiretaps. this bothers me. the investigation or the insider trading. the insider trading bothers me enormously. what really bothers me is come on, guys. the guy made a billion dollars and he s working with $20 million. he made gains of $20 million illegally. mostly by getting in front of earnings. that s what it looks like. you can put a historical context on this as well. you know, in every financial bubble the heroes on the way up are the villains on the way down. if you think about it, let s go back two years, everyone wanting had this fund managers, the place to be, everybody had to have their money with a hedge fund manager. here we are two years later, the market is down, and we re marching someone out of jail. that is right out of the history books. we talk about some of these gains, 20, 30% better than the market. you can t get those kind of gains without cheating. without cheating. does it every day. i m a hedge fund manager. gee, i don t even know how you go about getting insider information maybe it s that i live in suffolk, virginia which is away from where insider information has gotten. we match what the market is doing. insider information is illegal. everybody knows it. galleon is a fully paid up subscriber to the gartman letter but this is a little sad. this is sad. this is not a good thing for our business. you mentioned historically, rich, this is the type of thing we ve seen. historically we ll probably see a lot more that s right. just from the point of view of how many managers can really outperform. we know in the lonely world, the majority of managers don t outperform their bench marks. for some reason we thought in the hedge fund world everybody can outperform their benchmark. clearly that s not the case. the business pressures that go along with that cause things. you mentioned history. today is october 19th, 1987. i assume you remember that day? yes. i was intimately involved with what was doing on. it was a terrible day for me. how so? personally? yes, personally. i waited for an event like october 19th for a long period of time. had put on a very large i was long kansas city futures, short the s&p. that s what i d waited to do. i had it in my book to do that trade. it was exactly the right thing to do and everybody got so frightened at that time they wanted full 100% margin that day on the entire positions. wait a minute. i ve only got 50 contracts on, that should be $50,000 in margin and they wanted $7.2 million in margin. i got hurt that day. if the rules had been followed correctly, it would have been a wonderful trade. i remember the 19th of october. i remember it very well. i ll just say i was working at a firm called e.f. hutton. it doesn t exist anymore largely because of that day. it was an exciting day for me. exciting to put it lightly. art cashin wrote in saying some similarities to today. it was a monday as it was back then. the previous friday was an options expiration. dollar under pressure. a lot of talk about u.s.-iran confrontation. do the similarities end there? i think so. you have huge inflationary pressures back then. people forget in 87 cpi quadrupled during the year 1.1 to 1.4. ppi went from minus two to plus two. huge inflationary pressures building. you had oil collapse and we were coming off that. prices were starting to rise. fed and to be behind it. fed was trying to catch up. market going up despite the fed catching up. that sounds but you have a credit backdrop vastly different from what we re seeing today. a stock market going down four months prior to that time. that friday before, it s hard to believe we worried about at the time compared to what we do now, the dow had fallen 101 points on friday. i remember this very distinctly because i was going to a football game from old friends chicago board of trade. we were cheering it was down 100 because we thought monday was going to be devastating. we re all going to get rich as it broke. you hadn t counted on the margin part. i hadn t counted on the margin part yet. the market had been coming down months prior to that time. it wasn t as if it had been making a new high then collapsed. it had been coming down for a while. even though your strategy was dead on. spot on. still couldn t make it work. mother nature the market s job is to do the most damage to the most numbers of people the most numbers of times it can and it will do it to you in an incredible myriad number of ways. each time it s completely different. all right. we ve got a lot more to talk about this morning. dennis and richard are both going to be with us for the rest of the show. stick around. meantime, comments or questions. if you have any recollections about this day in 87, love to hear squawk@cnbc.com. when we come back, earnings number of the day will be apple. the reaction will be swift, fell around the globe. our investors expecting too much at a company with whispered number of $1.60. we ll talk bow ipods, iphones, all things trading. the oil, dollar and gold, we ll get ready for a new trading week as squawk begins this monday. time now for today s aflac trivia question. on a global scale, what type of fruit is consumed in larger quantities annually than any other? the answer when cnbc squawk box continues. hey, it s great to see you re back after that accident. well.i couldn t have gotten by without aflac! is that different from health insurance? well yeah. .aflac pays you cash to help with the bills that health insurance doesn t cover. really? well, if you re hurt and can t work, who s going to help pay for gas? ..the mortgage, all kinds of expenses? aflacc it s the protection you need to stay ahead of the game. exactly! aflac. we ve got you under our wing. aflac, aflac, aflac. aflac, aflac, aflac now the answer to today s aflac trivia question. on a global scale, what type of fruit is consumed in larger quantities annually than any other? the answer, mango. all right. i wouldn t have guessed that in a million years. but welcome back, everybody. the futures at this hour have been showing a positive open at least things where they are right now. you re going to see right now dow futures up by 30 points above fair value. we ve seen those gains. a lot is riding on what we hear from earnings reports today as well. the dow futures up by about 30 points above fair value. also making headlines today, google is launching an outdoor ad campaign. more than 2 million businesses use online office software. the new ad campaign is aimed at luring queues away from both microsoft and ibm. the fda wants more information on a new novartis drug to treat so-called smokers lung. the company says it will work with regulators to see if more trials are needed. carl. beck, apple is due to report q4 results after that. some analysts expecting revenues to take a hit. after components kept demand from meeting earlier in the quarter. joining us senior analyst for applied technology at oppenheimer & company. did i get your name right? close. my apologies. with quintanilla, i know how that feels. our expectations steep tonight? the company is very well from a consumer point of view. i think the apple brand is taking over the imagination of consumers. i think more enterprises as well. there are some issues with components. we saw earlier last week nokia undershipped its smart phones, it had a hard time getting components for cameras. we think there s a possibility apple suffered from that issue this quarter as well. interesting. when did that end in the quarter. we don t know, some suggest the second week of september they were still undershipping demand. certainly some of the surveys we did suggested across europe in september it was extremely hard to get their hands on iphones. if you look now i think the constraints have eased a bit. we don t know exactly when those become easier, sometime in september. okay. all that said, even though consensus is 142, you re still looking for it to come a little high at 150? i think on the bottom line in terms of eps, larger than street estimates, margins continue to be very, very strong. iphone is helping the bottom line, has a huge gross margin above 50%. this quarter will be helped by the strong euro, give them more on the bottom line, also higher than usual software sales, big contributor to the bottom line. you think christmas is going to be strong for both the iphone and mac. you say mac sales are doing well. writes t where is the demand coming from? all we hear is the consumer is tapped out. first of all, pc sales, apple and microsoft have seemed to have rebounded from lows. according to a research firm up year after year. apple is gaining share, both with consumers. we re seeing it in all the surveys. look what students are buying, apple. more businesses have been buying apple where they haven t been able to do so in the past. at&t, service issues with at&t becoming a liability for the company? i don t think so. i think at&t that done a good job given how much impact they have had. no other impact in the states have handled this many smart phones demanding this much from the network. i think if any other network in the states trying to handle as many iphones has issues. at the same time what we ve found is apple has a lot more power in the marketplace. whereas two years ago it had no choice but negotiating exclusivity. i think within the next year we ll see apple on additional carriers in the u.s. if we end up being impressed by the numbers tonight, should that be used, should investors use that to extrapolate all sorts of predictions about how tech will perform at least this quarter, or is apple going to remain this outer constellation? i think there s a lot of things that make apple pretty particular here. as i mentioned before, it s gaining share in the in terms of computers. in terms of smart phones. the first iphone came out over two years ago now. i think most people admit none of the competition has really caught up to where it was back then. so i think there are certainly macrotrends apple is demonstrating. there is certainly a trend for people to use more and more wireless data. that s something that s going to be apple s benefit over the next few years but certainly apple has been in a league of its own. it s amazing. you think they have had plenty of time to catch up but it s hard when the leader is running very quickly. thanks for your time. good to talk to you. coming up, we re going beyond mac and pc. if you re looking for tech stocks to buy we have picks from a five-star fund manager coming up in the next half hour of squawk. stick around. squawk box on cnbc, first in business worldwide. in 25 years, global energy consumption will increase by 50%. to meet demand, we ll need to harness the power of sun. wind. waves. and atoms. but that s not enough. today, we need oil. which means before we drill for oil, we drill for data. we can create 3d models of hidden reserves. find new oil in old wells. extend the life of a field. reduce the need for new drilling. smarter resources. to fuel the smarter planet. that s what i m working on. i m an ibmer. let s build a smarter planet. all right. stick around, everybody, dollar in a daze, oil prices approaching $80 a barrel. trading block coming up in just a moment. squawk box will be right back. you re watching squawk box on cnbc, first in business worldwide. i would suggest stock markets are like gambling. futures looking pretty good after a pretty decent session in asia overnight. futures have been climbing steadily this morning and we re going to open up by about 30 points or so. some of the stories, movie themed toys helps hasbro grow profits during the third quarter. hasbro $0.99 a share, $0.07 ahead. verizon upping the ante. adding mobile phones to the mix, tv, internet and land line phones. people shopping for goods remain cautious. luxury goods sales will fall 8% this year and rebound by just 1% next year. that is an improvement from an april forecast in which they said 10% drop in sales for this year. beck. all right, carl, thanks. let s get to the trading block. joining us peter from hanover, forest schlossberg, and of course our guest hosts. why don t we start off, peter, talking about oil. watching oil prices moving back ever so slightly. wur talking right near record levels. what do you think the big driver is. combination of higher equities and lower dollar. of course we broke the new high in dow jones industrial, broke to new lows in the dollar. and in the process, we took oil to its highest level in exactly a year. we now have objectives all the way up to $99, even one thing $107. i don t know if we ll get to the more ambitious objectives, but it looks like we re going higher. we had a big big cut in supplies last week. a huge cut in utilization. gasoline supplies down $1.3 million barrels last week between lower production and lower imports. that s a huge number when you re using 9.4 million a day. sure it is. you know, boris, when we talk about the weaker dollar, one of the things causing the higher oil prices, there s an analysis today in the financial times that says the dollar is down but not out. it also says that, look, there is no route here. you think that s the case, down but not out, no route? yeah. i think chances are better finding a goldman sachs banker than a dollar on wall street. i don t think the dollar is down completely. it s sort of a slow, steady decline. i actually do think we have a chance to bounce. the main reason i think we have a chance to bounce, u.s. data trying to print positive points over the last several weeks. i remember carl a couple of months ago asking a guest, what do you see first, six handle or four handle on jobless claims. at that time looked like everybody thought it would be a six handle, looks more likely a four handle on jobless claims. it s very dollar positive at least against the yen. not the euro. the euro close to 150. whenever we get to big figures, they rough to run stops a chance of 150 onon the euro, within striking range. against the yen we have got to have a better chance of a dollar rally. gentlemen, we ve been talking over the last half hour or so about how this is the anniversary of october 19th, 1987, when we saw the crash. both dennis and richard have been sharing some of their stories. we ve been hearing from a lot of people writing in with their stories. got an e-mail saying he remembers it well because he was employing a naked strategy. he never envisioned the market leading beyond, the downside, sucker punch to the stomach. still talk about the imaginary they had being sunk. peter boris, do you have a story to share for 1987. i sure do. i started my career with drexel vernon. it was my rude awakening into wall street. the 87 crash shocked me so much i left wall street for a couple of years afterwards. you re back. i m back. peter, what about you? i was traveling that day. i remember get out to the airlines and saying, you re kidding me. oil prices made a high that day. that was one of the few days back then when oil prices and equities went the same way. i remember to saying somebody, they went in the same direction and being shocked at that. of course now we have a market where oil seems to follow equities every day. so much different time period. you know, we really went 25 years with oil and equity kind of going in the opposite directions. now we re only over the last 18 months or two years have they been working together? there s a really important lesson. a lot of people right now are just conditioned to believe stocks go up an dollar goes down. that trade or that behavior is going to change going forward. all these change over time a dangerous idea all these will stay in place. richard, 22 years since the crash of 1987. it s exactly one year since warren buffett wrote that op-ed piece in the new york times saying buy stocks, i am. or at least that s what the headline said at the time. what do you think about his proposal to buy american stocks, would you still be doing that? if my perspective i ve been a bigger fan of u.s. markets than emerging markets. i m quite concerned that china has some element of a credit bubble going on right now. we can talk about big or small. i think their growth is very unhealthy growth. i think they are using credit for productive use, building lots of factories, infrastructure, the question nobody seems to be asking is what are they going to make and who are they going to sell it to. when the markets wake up, emerging markets overall not be very well. that may not happen in the next two or three weeks or two or three months, somewhere down the line it s going to happen. it s more conservative and prudent to be in developed markets. it s the reason you should be concerned about inflation. they have this coming on and will keep wage rates and production costs down around the world. that s a real problem. i thought the idea was they would be making stuff and selling stuff to themselves. that s the hope. that s been both the premier s and president s comments. all they have to do is change their entire culture. without a social safety net at all, it s going to be hard to get savings rates to fall. one of the reasons i would argue our savings rates have been as low as they have, not only do people think they could sell their home for a bazillion dollars, they thought there was a social safety net. why save? they have no social safety net. obviously they will save a lot more. you re right. they have to change their entire culture. that s secular not cyclical. you are not confident in the dollar s stance right here, are you? no, not really. everybody you know is short of the dollar, which is somewhat a concern. a great deal of concern to me. at this point given the administration and given what they have done this far, i think foreign investors around the world say, you know, i d rather move my money to canada, australia. i d rather move my money to someplace else because it s not treated very fairly and properly in the united states at this point. so i think that argues badly for the future. yet boris, a piece in the times about small manufacturers that had to lay off workers making huge sales to europe and rehiring workers as a result. you know, i totally agree with dennis. the trade has been going to commodity dollars. they are tiny countries that can t absorb capital flow necessary. europeans have zero interest in reserve currency. they worry about inflation low. last week they had they had no interest in low currency. they have to be concerned about dollar. once 150 you ll see rhetoric more heated, sort of a brushback, a brushback from a pitcher trying to push the markets away from those levels. i mean, you know, the u.s. policy right now is clearly deny and neglect towards the dollar. they are walking a fine line. any hint the fed is going to move some policies, say move away from the mbs market and let the market take some of the mortgage debt on its own books, that will be viewed i think as positive by the market. rates will creep up a little bit. that hope fully will be helpful for the dollar and stabilize it, especially against the yen. that s my trade dollar for dollar bet. at the same time washington has to wake up a little bit here. i think there s a notion if the dollar depreciates, our manufactured goods will become more competitive. that s been the story for a long time. people like paul krugman respect it quite a bit. he s on this whole schtick if you depreciate the dollar that s good for the country. the problem is the dollar has been depreciating for 30 years and we ve been losing manufacturing sale for 30 years. so what it says is you can depreciate the currency, also we have to make dramatic structural changes in the u.s. economy. if washington ever wakes up to that fact, i think we have a story for long-term bull market and dollar. right now that s not happening. send ag signal to potential buyers of american goods with depreciating currency that it s far better to defer. it will be cheaper later. what kind of signal does that send? you hear the argument a weak currency increases export trade. as rich said we ve been waiting for this for 30 years. 30 years. i m sorry. it just doesn t work. i like to use the example make it into a microcircumstance. you re walking by the street and see a sign on the men s clothing store that says suits on sale next week. what s your propensity to buy this week? if you go by next week and it says on sale next week you re not going to buy it. if you keep doing it, you don t walk by and have deferred. that s what you do. dennis and richard will be with us for the rest of the show. thanks, guys, for your stories. if anybody at homes wants to share stories, write in, squawk@cnbc.com. plenty of interesting 1987, this day 22 years ago what you were doing. biggest percentage drop in the dow s history. 504 dow points. peter was right when he got off the airplane and said what? huh? one guy said i was preparing for jv football game and i had no idea the market was crashing. when we come back, we ll get more top stories this morning plus apple and ci turning in their report cards tonight. there are some other tech stocks worth watching. check in with five-star tech fund manager with a few picks when squawk comes right back. welcome to the now network, population 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. 154 are tracking shipments on a train. 33 are iming on a ferry. and 1300 are secretly checking email on a vacation. that s happening now. america s most dependable 3g network. bringing you the first and only wireless 4g network. right now get a free 3g/4g device for your laptop. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com all right. welcome back, everybody. we ve been keeping an eye on those futures. they have been above fair value all morning long. we pointed out on friday we watched the market fall back below 10,000 below the dow but dow futures are up 30 points above fair value. dow futures up 49, fair values at 18. also talking about the s&p a little higher as well, up four points above fair value. toys r us says it is introducing a layaway program for larger ticket items, things like bikes and cribs of the retailer ceo said customers were requesting a program like this because of the tough economic environment. also fda rejecting the use of the drug rituxan, citing a brain disease. earnings begin with apple and ends friday with microsoft. first five names that may be poised for profit despite tech s already impressive climb. jeff joins us today, senior analyst. he joins us this morning. good to see you. welcome to the program. good morning. despite the rise tech had this year and all the outsized expectations people say people have for it, you think we re going to turn out pretty good this quarter? what s your overall view of the sector? well, it seems to be the question everybody is asking nowadays is whether technology is going to continue to outperform. there s a lot of reasons to like the technology sector, very strong balance sheet. great job cost-cutting. very attractive on a precash flow yield basis. beneficiary of the weak dollar. inventory levels still very lean. having said that we had an early cycle betta rally in which technology has performed very much like you think it would. going forward we think technology investors are going to have to be a little more discretionary in terms of the stocks they are involved in, which for us means looking for companies with long-term secular growth drivers gaining market share in the industry, being sustainable competitive advantages and various entries within their businesses as well as well positioned to take advantage of stronger relative growth overseas especially in emerging markets. right. with that said, we ll go through a few picks here. you like emc, storage in general but emc especially. emc is the market leader in network storage. they have unrivalled research and development spending in the storage area. largest direct sales force. they are making a transition for more software and services within their business and that helps margins. they have made some very savvy acquisitions over the last several years, particularly within base, next generation data center environment like cloud computing. and you know, the best example there, large shareholdering in the leader of virtualization software, which is going to be a very key technology within that next generation data center. we think long-term they are a share gainer. we re looking at a ten-year chart of it right now when everybody remembers back when it was a triple digit stock. will it get back to half of that? i don t think it will get that far. we think fair values in the low $20 range. to get there from here you need a better corporate it spending environment. some of these new products they have with symmetrics, high-end storage line, next year generation virtualization product. as long as the corporate it bunlgs loosen up, a reacceleration of revenue growth and that will help. infrastructure, adsk, do you want to talk about that for a second? a defacto industry leader towards architectural, engineering, products design field. the company has unrivalled distribution, over 1700 resellers, which is more than all their competitors combined. we think they are a great way to invest in international infrastructure billed out. you ll see more uptake of software, transitioning user base from two-dimensional to three dimensional software, which is supportive of higher asps and higher margins. you like wireless cell towers. we were just talking off camera about some of the challenges some of the carriers have in just handling the demand if you go into a heavily konts concentrated urban area, crown castle and some others, a play on wireless data, growing exponentially, right? these are companies that own and operate physical structure on which network operators put their cell sites on top of. it is investment based on exponential growth of wireless data in this country. at&t just said recently this wireless data traffic has grown 4,900% since 2007. sbc said they are worried that rate of growth, this country isn t going to have enough spectrum to be able to keep up with it. essentially what that means for wireless cell tower operators, networks need to create denser networks, more power, very favorable economics for tower operators and very cap ex cost to them and very high returns. interesting. although i imagine that s a longer term play but still a good one to watch. jeff, appreciate your time. thanks for having me. jeff donlon. find out which stocks are on the move at opening bell. a hunt for value. a hedge fund manager that thinks he may have a key to value now coming up right here on squawk. stick around. verizon advertising new discounts stepping up efforts to compete with cable. annual savings from 59 to $179. you heard of triple play, discounts for those that use home phones. i got it. broadband and video. now verizon adding cell phones to the mix, a quadruple play offer. you like? no, i like triple play. you re fios. i am a triple play fios. joe is not here. no animal orchestra for you. i m not playing it. we re animal orchestra free today and tomorrow. i don t know, maybe tomorrow. i didn t say that. you re welcome back prentice no animal orchestra. let s look at stocks to watch. we have earnings coming in. hasbro among companies that s reported this morning. right now scratch out that ask. that is a crazy ask, close at 29.52, bid at 29.60, ask 37.83. hasbro did beat expectations. came in with earnings of $0.99 a share, well above what thomson and reuters were looking for, closer to $0.92 or $0.93, depending which estimate you were watching. they talked about, listen to this, if you re looking for signs in the broader economy, this the world s fumble two toymaker. they said full year revenue will rise if consumer sales trend improve in line with recent trends they have been seeing in the current quarter. there s a little good news for you. will talked a little about teaming up, joint venture with discovery they told us about earlier this year. they formed a joint venture with discovery communications this year to create a television network aimed at children. they do say third quarter figure includes $0.03 in the venture, also dilution of $0.04 to $0.05 per share because of that joint venture as well. stock is trading higher, bid ask, eaton. another ask out of whack. eaton came in with better than expected numbers. greedy sellers. when you strip out the acquisition charges that came in with earnings of $1.21, reuters was only looking for $0.92. revenue also beat expectations. came in with revenue 3.30 billion, slightly above 3.2 the street was looking for, raised guidance for current quarter. now talking about 115 to 125 on an operating basis versus 104 from reuters and first call 106. i wish i had a teleprompter. ignore the asks on these things. still you are talking about a stock that s very likely going to open higher. bbt, bank out with its earnings, came out with $0.23 a share, a penny better than thomson looking for. also talked about revenue of $2.8 billion in line with expectations. blah, blah, blah. looking for non-performing assets as a percentage of total assets increasing 2.48% as of september 30th. southwest airlines downgraded to neutral from overweight. have you seen their new ad. the blah, blah, blah was nice. southwest ads are just baggage handlers talking about how there s no bag fee. on the tarmac saying free, free, free. why do you charge? a great commercial. we had last week garry kelly, ceo of southwest. after they reported earnings. he said they will never say never for anything but for now that is a great strategy for them. they will not be changing that. at least your first bags. downgraded. when we come back, dow temporary back over 10,000 last week. where do investors find value? a hedge fund manager says he has the right formula. right for the economy, former chief north american economist at bank of america merrill along with rick bernstein, dennis gartman. for a smarter way to trade online. only fidelity lets you back-test your strategies against an entire portfolio of stocks. plus you ll get advanced, customizable trading platforms. and you get the kind of execution you d expect from fidelity. .with a dedicated specialist to talk about even your most complex trades. they ll even help expedite the account transfer process. trade like a pro. trade with fidelity. well, say you re looking afor it in new places,. like working with a supplier in china and a manufacturer in germany to reach new customers in the u.s. well, ups can help bring it all together with efficient solutions like paperless invoice that can help make customs a breeze. hey, the opportunities are out there. seize them with ups. you know, it s hard drawing those perfect circles. don! what? we don t need these minutes anymore. we got that calling circle thing everybody else has. it s at&t s a-list, don, and it s not the same. we get unlimited calls to any 10 people on any network, but unlike everyone else the minutes we save, we keep. so? so why save minutes with your calling circle if they just expire at the end of the month? you re using that one. (announcer) introducing a-list with rollover. unlimited calling to any 10 numbers on any network and keep the minutes you save. only from at&t. there is an unabated pace of continuous communication 24 hours a day. technology drives communication. allows people to collaborate giving them stimuli to think in different ways. having a foundation of innovation is the way that you differentiate yourself from the competition. it s the lifeblood of growth. making businesses richer, stronger, more resilient. nyse euronext powering the exchanging world. searching for value. there s a sale at penneys. not in retail but on wall street. yeah? money never sleeps, pal. go to work. we ll talk to a hedge fund manager who says he has the magic formula to beat the market. ready for takeoff after a rough ride for corporate jet business, are smoother skies ahead in 2010? squawk box begins right now. good monday morning, welcome back to squawk on cnbc. i m carl quintanilla with becky quick. joe off today, back later in the week. the market ready to deal with another big week of earnings. 27% of the s&p reported this week alone, asia mixed but largely up overnight. europe in the grown and futures here having its open back above 10,000. we ll see what happens later today. first i want to get to becky with some of this morning s headlines. beck. carl, thank you very much. apple reporting its latest quarterly numbers of a the bell. apple has a history of beating expectations in recent times. but this time around some analysts are saying apple may have trouble meeting the whisper numbers out there. one problem apple has had meeting demand for popular products, iphone because of a component shortage. a subject you don t hear very often, a call for higher interest rates. an article in barons calls for the fed and ben bernanke to do just that. current low rates are fueling expectations, sparking undesirable outcomes. barron s says boosting rates 2% wouldn t be out of line. even with this down economy would be something that could be handled. citigroup may have to sell it s mexican subsidiary because of a mexican law that prevents governments from owning stakes in foreign banks. citigroup, taxpayers are big shareholders. mexican supreme court said to consider this this week. prompted by u.s. bailout, including taking a stake in the company. carl. dow up 50% since the low back in march as we begin another major week of earnings. talking to david rosenberg, economist and strategist. former chief north american economist at north american merrill lynch. with us guest host richard gartman and dennis bernstein. dennis, we were chatting during the break about commodities, long-standing commodities we ve seen, are we entering into a new chapter starting now. currently moving commodities from lower left to upper right. i don t see that changing any time soon. what s interesting to me, i watch the grain markets a lot. what s interesting to me, despite a huge crop coming at us, enormous, 13.3 billion, curtailed a little bit, 13.9 billion. still upward. that s fairly impressive taking into consideration crop at you, still prices going up. that s impressive. oil, gold? oil, gold keeps going up. gold i ve been bullish in gold. i don t like bullish in gold. i don t like people bullish in gold. they are kind of strange. none the please as the dollar is week gold will go higher. the reserve currency at the periphery. dollar weakness links all these things? i think so. there s a couple things here. one is commodities used to be a diversifying asset class. i m not sure that s true anymore where you find commodities are moving more and more with stocks. the other thing we have to watch carefully, commodities are late cycle investments. we re still in the early cycle. the reason why we had to worry about that is that commodities will start squeezing profits if we re not careful here and start squeezeding purchasing power of the consumer. so i mentioned before are we going to move from recovery into expansion. i think that s very important, otherwise commodities will work like a tax on the economy. if you re worried about a double dip i m not particularly worried. worried about double dip, i think that s something to worry about. somebody that is david rosenberg, joins us from new york this morning. david good morning to you from toronto. good morning. good to see you. nice to have you an rich together, compadres. reunion. i wish i was in new york now so i could give them both a bear hug. you mean that literally i imagine. how are you feeling right now, david, as we go crazy over dow 10,000. are you getting a big chuckle out of it? is it doing anything to alter your long-standing bearish stance? well, you know, this is what the 26th time that we ve crossed over 10,000. so my view is that we re still in the secular bear market. we ve obviously had a very significant cyclical bull market in that context. my big concern is that the markets have gone ahead of the economy. i m not going to debate the economic outlook with rich or dennis, obviously improve more than it was in march. i don t think it s improved to 60% return on the equity market. valuation i got s&p 500 pricing at $85 in operating earnings, which would ab double of where we are now. usually takes four to five years to double corporate earnings off a recession low. i just think the market has gotten ahead of itself. i m not as bearish as i was six to nine months ago. the market has shot fundamentals in my point of view. you say you re not as bearish. can you talk to us about when or how you altered your view? at the lows, rich, back in march, i basically turned agnostic. telling folks getting down on the s&p 500. we got down there. i basically turned agnostic. i was actually hoping and praying that we would actually get to an egregiously oversold low like we did in 1982, 6% dividend yield, pd multiple of eight, grievously oversold. shed the status, associates in toronto and become the marlboro man and become bullish. never had the opportunity. by the time i joined them, the market was up 950 from 666 at the low. so you know, i take a look at the data, take a look at what earnings are priced in. i think the markets are trading somewhere between 850 and 900. all deference, nine months ago an outlandishly bullish view. the bottom line, no matter how better the fundamentals are, quote, fundamentals, most of this recovery premised on dramatic incursion in the capital markets and economy. the bottom line is the stock market like other markets have a tendency to overshoot and undershoot fundamentals. i can understand bullish case. prices overshot fundamentals. looking for fundamentals to play catch up to pricing or pricing catch down to fundamentals. the catch i have for you, your great call the last several years was consumer sector. you saw things in the consumer sector nobody saw. if you were advising washington, you re a canadian, so you re completely objective about this i m sure. if you were advising the government about the consumer sector, what would you tell them to do and look at carefully? i d be trying to get tem to think about saving for their retirement. consumer spending to gdp. we want the economy to revive. we re doing cash for clunkers and home buyer subsidiaries, even though home ownership rate is above the norm. we re trying to encourage them to save for retirement and spend money. we re almost conflicted right now. mine is focus on skills, education, productivity, capturing export share globally without relying on a weaker u.s. dollar. rich, we have a 25% youth unemployment rate in the country. we have a problem where the savings rate is still too low to finance the future increases we re going to have enterms of health care and social security. we ve got bigger issues right now than trying tonight sure that we re going to maintain the cycle of overconsumption, you know. this is a 25-year credit cycle. it was a 25-year period of not ten-year but 25 years period of living above our means. now we re going to have to live below our means. that means a rise in savings rate. i think the government should be promoting more of a savings culture. instead of promoting consumption, let s embark on policies that will foster capital spending and productivity. as a strategist who worked hand in hand with david, how do you play off that? does not working in the same place allow you to disagree? we always disagreed or not. over the past several years we did agree. probably right now is probably the time david and i are most in disagreement than any time i ve known dave. i m more on the bullish side than dave is. i still agree with dave completely on the secular problems. i think the united states and what dave just outlined is absolutely correct. i think washington is misaligning policy for what we need for long-term goals in the united states. but i think the short-term here, by that i mean the next 12 to 18 months, we could have a pretty good cyclical pot. because of we ve had a cyclical pop already. between the time the market bottoms and the recession ends, you re up 20%. we re up 60% right now. usually in that interval when you re up 60% we re up 60% on the last cycle, rich, already in on the fall 2005. things are so hot the fed was halfway through its tightening cycle. the matter on bullish economic cycle, the question is what s embedded in equity evaluation right now. the two of us went through, not like we re bearish, it was speculation and valuation. back then, this is what i m trying to get at is that maybe you re right the next 12 to 18 months. i m not so sure about that. so much is priced in. let s look at the fundamental outlook, the trend line. how many 12rks 18 montreallies in the 1930s or japan 1990s. let s focus on the trend line. i have a tough time believing you can destroy $14 trillion of net worth in the united states. bank lending is contracting 15% annual rate and who is filling the void. the fed, fha, fannie, freddie, with all deference to what the stock market has done, it was hitting highs in the fall of 2007 on the eve of the worst recession in the past 70 years. respected what the stock market may be telling us. the stock market doesn tal get it right. hard to believe with the amount we ve seen and private sector credit that s come out of the system this is going to be a straight line up even for the next 12 or 18 months. he s always persuasive, is he? he is. and he rarely takes a breath. we ll get richard s reaction to that in a little bit. we have to run, david. we look forward to seeing you on set next time. great, thanks. david rosenberg, thanks very much. i want to show you shares of amgen, stocks under pressure. the company is talking about how the fda has sent out something called a complete response letter. that means it s requesting additional information that s needed to complete the review of an application for prolia, treatment and prevention of postmenopausal osteoporosis. doesn t allow complete review but fda has requested a new clinical program for approval. amgen under quite a bit pressure. this is separate for treatment and bone loss due to hormone depletion when you have breast and prostate cancer patients. they are expecting a separate response from that from the fda. am gn says they are confident they can respond to requests for treatments and are fully committed to working with the fda on this. keep an eye on shares of amgen this morning. coming up more headlines of the day, more earnings and more on the market. first the search for value. hedge fund manager joel green blat makes it his business to find value in the market. he may just have magic formula for your portfolio. we ll talk to him about his secrets when we come back. you re watching squawk box on cnbc, first in business worldwide. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 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interview. joel green blat, managing partner of hedge fund, professor at columbia business school and author of a new york times best seller, the little book that beats the market. this book has had a very strong performance. if you re following what was laid out, value investing formula laid out in this book you d be doing much better if you had been investing in the s&p index fund. joel, thank you for joining us. thank you. let s talk about the model portfolio and secret for this book, how it s fared over the last ten years, if you put money into this model portfolio it would be up 291% over last ten years versus down 2% for s&p 500 index. similar results for five years, three years, one year. what is the secret that s laid out in the book. the secret is pretty simple. it s really basic value investing with a little buffet twist. we re really looking for cheap companies, companies that trade cheaply relative to earnings. we re actually looking at last year s earnings. the other things we want to buy good companies, high return on capital. that s also measured by last year s earnings. if you combine those two, good and cheap, you end up buying portfolio of companies on average do well over time, at least have when we ve looked at these over the last ten years. sounds like such a simple strategy. what trips people up when they start investing. the great thing about the formula, if you had a formula that worked every month, every day, it would soon stop working. everyone would use it and you would push stocks back up to regular value and it would be ruined by people on wall street. the great thing about this formula, it s not that great meaning there s period of time, could be two or three years sometimes, sometimes longer where it underperforms the market. people usually give up on a market that underperforms the market for that period of time. over the last ten years it s almost quadrupled. if you invested in this formula holding your securities for over a year each time, it still quadrupled the market s return over the last five years since i wrote the book, returns for formula been up 73% versus the market up 5%. over the last year, up around 14% versus the market down 7%, ending september 30. it s still doing pretty well. people let their emotions in and say, okay, i ve been down six months, a year, two years, and they step away. it s done incredibly well over ten years. during that ten years there were two periods. practically a three yee period, then another period of over a year. over four years and change. usually people give a money manager one year or two years and then they say forget about it. so a lot of people would have quit on the formula even during a period where it did very well. as soon as i wrote the book five years ago a lot of people have asked me, gee, thank you for the formula but can you just do this for me. so we actually set audiotape firm just recently, actually laumpling it today, formula investing.com and we ll follow the formula. would you call it is it buy and hold? is it that simple? the way we do, buy portfolio of securities, usually between 20 and 30 securities. they are each held for a year, if you have a gain you get a long-term gain. if you have a loss we ll tell you a little before a year. that s sort of the strategy that it follows. so it s not a fast trading strategy. it may not work like i said for a period of years, even during a period where it works incredibly well. it may not work. that s why it will continue to work over time. that s the basis for value investing. two questions. how did it do last year 08 and, two, what s the best stock out there right now. well, the answer tow your first question it lost a little less than the market. the market was down 37%, the formula bowden 36%, not much better than the market. over the last 12 months, up 14% for the market ending september 309. there are periods where it doesn t do as well as the market or loses money, you re 100% long on the market and subject to how the market goes. if you have a long-term investor and you need, affirm, invest in the market, you should be long terp, value investor you really have to be long-term. you re going to buy stocks that don t work out for a period of time. if you have a long-term horizon you ve quadrupled your money over the last ten years when the market was down 2%. that s not going to happen every ten-year period but shoes you what can happen by following a very strategic unemotional systematic investment strategy. joel, can you run this in a hedge fund format? value strategies work then don t work. what do you do in the drawdown period as hedge fund manager. how do you protect that? isn t a great strategy for hedge fund manager. hard to hedge out. out of favor companies, don t know when they work out. buy a portfolio. on average they do well over time. not sure which ones do well. that s why if you re following a statistical formula like this you have to buy a basket of securities. it s not really good. there s a lot of reasons and we can go into them not really appropriate for hedge fund managers. that s why i think it will continue to work even though i m giving away the secret. back to dennis s question, one stock that stands out? i don t want to pick one. there s a lot of stocks. you could look through 20 or 30 and you d know a reason why you shouldn t by any one of them. i know why i shouldn t buy that, that s cheap, this isn t good. if you buy them as a basket in general they will work out. they are out of favor companies at the moment but still selling cheap relative to their companies. good companies, high return on capital. that s what we re trying to combine. joel, we want to thank you very much for joining us today. appreciate your time. thank you. when we come back, taking flight, corporate jet business flying turbulence for quite sometime. are smoother skies ahead in 2010. we ll get the flightplan in the next hour of squawk. don t go away. (announcer) what the world needs now is energy. the energy to get the economy humming again. the energy to tackle challenges like climate change. what if that energy, came from an energy company. every day, chevron invests $62 million in people. in ideas. seeking, teaching, building. fueling growth around the world, to move us all ahead. this is the power of human energy. chevron. is at the heart of the collaborative economy. and collaboration is good no one has a monopoly on good ideas. we have at least half a dozen relationships, 50 percent of my time is spent outside our company, collaborating with other companies, finding the next cure for the most serious diseases. the global opportunity is a fantastic one. we re able to reach audiences, connect with them in their local cultures and take our brands around the world. nyse euronext. powering the exchanging world. coming up, take off into earnings central. fly by chicago to find out what will drive this week s trading action. land in orlando where the corporate and private jet industry will talk about the future. keep it here. squawk is coming right back. welcome back to squawk box on cnbc, first in business worldwide. we are just one hour away from the opening bell. amgen shares pushed lower. the company says the fda wants a new clinical program to support approval of it s prchlt rolia, part of a complete response letter amgen received of it s significant drug in the pipeline. as a result of you can see what s happening to the stock, down 2.8%. amgen says it will work with the fda on whatever further steps are necessary. hasbro shares called higher after the toymaker earned $0.99 for the quarter. that was $0.06 better than the street expecting. bid ask is trading higher. it s profits up from a year earlier thanks in part to new movie themed toys out there. a lot of the hot new movies that are happening. cme group is reportedly in talks to take over chicago board options exchange. a deal which values the u.s. options market. get a jump on trading. futures as we said a couple of times already looking pretty good. asia had a decent session and europe has been mostly green. a lot of earnings on the way. bernanke at 11:00 a.m. cme john brady, rick santelli also in chicago. rick, we were just talking about how nice chicago is with gartman here. you guys, you and grady are the luckiest men on earth to live in that city. rick, barron s had made waves. a lot of people chatting about this cover story over the weekend, that the fed needs to raise rates to 2%. have you got a view on that? i would think it sounds like a terrific idea. i just wouldn t look for it any time soon. i think the notion of raising rates would be great. it would be a positive for some of those investors that are using some of the current conditions to have strategies that don t necessarily dove tail with the normal behavior in or post a recessionary environment. john? well, you know, rick points up strategies. i would suggest to you that the fed s strategy is exactly what they are doing. they are punishing savers. carl, the fact of the matter is the fed wants to see spending, strong consumer spending, not just a relationship between consumer spending and employment. also strong relationship between consumer spending and asset prices. fed battles disinflationary trend with prize need consumer spending, punish savers keeping interest rates lower than they would be. have fed speakers 17 times between yesterday at 9:00 p.m. and friday s closing bell. our accepts is federal officials will simply reins force the idea they will keep interest rate policy lower than they otherwise would, financial markets complete their healing process. until the unemployment rate tops out somewhere around 7.5% early part of next year. that argument this is all on purpose. they know people need to save but they know they need to spend more if we re going to bring the economy. that s one side of the equation. the other side let s understand, know who the fed s constituency is. the banks in the country, not big banks, city banks, banks of america, bb and t, people s bank and trust of rocky mountain north carolina if there were such a place where the positive to the curve is a wonderful benefit. a positive a slope as possible so they are the beneficiaries. the loser is the consumer. the winner, small banks. the bank earnings we ve seen so far, goldman giving bonuses to the tune of 700 grand a partner is not enough. there needs to be more financial rehab. for the smaller banes in the country there has to be a lot. they are looking at very bad loans made. some problems with commercial real estate. with home loans around the country. we re not ready for it. i think the notion of the fed tightening is really misguided. as i said before the three-month t-bill rate is a fixed basis point. the markets are not that stupid. the market will be way in front of the fed. there s no reason for the fed to tighten money other than if you re concerned about the dollar but that s probably not going that s not the main issue in washington s mind. rightly or wrongly? rightly or wrongly. i m just telling you the fed cannot there is not a lot of credit going on. cannot tighten. rick, why would the t-bill market be at six basis points? you re a market guy. you think investors are very aware of the government s presence, the fact that they are in the marketplace is a huge distortion. so to look at t-bills or look at the yield curve and draw any logical conclusions as to the way the markets used to work versus the way they work today i just think is whistling in a graveyard. we re logical and the market is not. of course the market is logical, come on? what s more logical having barney frank dictate where mortgages should be? that s logical? you re not letting risk take root in the marketplace. how can you price it? the real risk for the inspectors and what fed will do is rather than go ahead and raise overpass rates and perhaps face the political backlash from congressional members, they will start to withdraw their presence in the market soly, at least they suggest it to us during the course of 2010 and thus you may see a natural rise in longer-term yields as both perhaps the deficit increases on deficit financing as the economy continues to stay weak. likewise, too, as fed would draw support from the mortgage market, perhaps would benefit consumers. that s where the fed will toledo the neil needle. if they want higher rates they will withdraw spor in the markets rather than using the main tool, raising overpass rates. $360 billion of that mortgage agency buybacks to go, so you re going to have a little bit of a wait, mr. brady. a wait, rick, but you re also going to have reserves going into the fed, fed affect will continue to drop. the libor effective rate will most likely stay stable. is libor making a difference in anybody s life, jim? john. john, i m sorry. nobody is lending. small business is still not finding the same or close to any type of environment to be in the mode to actually add jobs, are they? well, rick, i think that would go back to my original point and that is the fact even though there s very little lending taking place the fed does not want to see retail america saving, they want to see them spending. of course not. i agree with that. asset prices. they are don quixote fighting disinflation. i got it. we re going to get to earnings but that s going to have to wait for another session because that was so much fun. john, rick, nice to talk to you guys. dennis and rich will hang around. one more look at the futures. we have been getting earnings in this morning. after the bell we ll be getting plenty more. right now dow futures up by 47. that puts the futures about 30 points above fair value indicating we will see a positive open at least if things stay where they are right now. remember, opening bell is less than an hour away. up next, though, time to take off with phil lebeau. he s going to tell us why he s in orlando. i wanted warm weather. that s why i m down here. i get it. why else? i thought i d rub that in. we re down here because of these babies behind me. business jets. what s the future for one of the most interesting sectors when it comes to corporate america? are executives flying more or less than what the outlook? we ll have the story when squawk box returns. you re watching squawk box on cnbc, first in business worldwide. s s s s s s sz s s sz s s s welcome back. take a look at futures. they have been pretty steady all morning low, close to the session highs so far today. you already know earnings season continues, apple posts tonight. we re a few hours away from the chairman of the fed speaking at 11:00 a.m. eastern. a senior iraqi lawmaker has a warning. the firm investing billions of dollars for the country, consider the risk behind the contracts. the next iraqi government is likely to alter the oil deals. the leading media agencies says global advertising could be spending more than expected the first half of the year. last few years rough ride for corporate jet sales. question, are there smoother skies as we head to 2010. phil lebeau joins us from the business aviation meeting where he went only because he s interested in finding out more about the story. not interested in the weather. this is a story, glass half empty, half full. a report out for honeywell suggesting may get better. look from research, jet use, not sales but use, look how things have changed over the last six months. slowly it has picked up. business jet market business up 20% since january. at the same time business jet prices, used market firm up a bit. new jet sales stabilizing for somemakers. expected to erode but are stabilizing as more companies are realizing maybe, maybe the best use of the time for our executive is to have a corporate jet and have them fly that way. companies cut back to such an extent the key people that are left in these companies, their travel schedules are horrendous. it s nearly impossible to manage travel schedules by traveling bay commercial air carrier. that s the optimistic case for why business use is going to continue to pick up over the next year. perhaps we ve seen a bottom. on the other hand the honeywell report, just came out down here national business aircraft association convention. that report indicates that things are going to continue to erode. any strength in the future is going to come from the european and asian market. what you have here, guys, is a case where the business jetmakers, they realize, a boom and bust business, cycle has always been like that, it s likely to be where we re still on the downside for a little bit. it is clear that the use of these business jets, the ones that are out there, that s starting to pick up by companies. guys. i guess one of the big questions, phil, what kind of stigma associated with private jets like this. for a long time anybody, especially in banking businesses or any companies bailed out by the federal government were saying forget about it, the car companies off-the guys were driving themselves to washington rather than fly. it comes down to this, becky. the use of business jets, that stigma has been erased. most people realize these ar tool for executives. however, many companies do not want to have a business jet on the books. so they don t want to buy one. the result is you have more and more companies say we re going into a fractional ownership program. it s a little easier when shareholders look at this and say they spent x amount to flying executives around. rather than, what, we have three aircraft on the books? the time share, net jets, they are seeing an increase in business. they have numbers that can t be traced back to anybody. tmz was chasing these guys, walking around the airport as you were landing. that s a big part of it. shareholders looking at the balance sheet and saying why do you have five corporate jets. may need two if any at all. let me think, so the corporate leasing is cheaper than owning one. yeah, right. i believe that and i ve got a bridge to sell you. you make a very good point. these are tools. end of the day, these are tools for executives. they are not used on a luxury basis, yet the public looks at these and thinks these guys are leading the life of luxury flying to meetings in jets. all you have to do is fly usair and figure out you need an airplane. bag fees, you don t want those on the books either. no bag fees. thanks a lot, phil. fill lebeau joining us from orlando. we have 25% of the s&p expected this week alone. 25%? we re only a quarter of a way through if that so far. a few names tonight, big ones. we ll check those out when we come back. first a check on the dollar below 76 on the dollar index and 14-month high for the euro today or awfully close to it. be right back. you re watching squawk box on cnbc, first in business worldwide. [ bicycle bell rings ] [ bell dings, kids cheering ] [ cheering ] [ female announcer ] sharing. that s video on the human network. cisco. welcome to the human network. welcome back. stocks to watch at earnings central. shares at hasbro likely to get a bit of a boost at the open. shares of $0.99, key catalyst toys related to movies. revenue did fall a bit short of the mark. posting earnings and revenue ahead of consensus, the company s largest newspaper publisher benefiting from cost cuts over there, gannett. eaton beating expectations on the bottom line. revenue right in line. current quarter good. apple is the name to watch after the bell. according to first call tech disbint expected to post earnings of $1.42, revenue of $9.2 billion. whisper numbers floating around the street greatly surpassing those estimates. the last we heard in the journal is $1.60 for apple. see if they actually get that far. talking about gannett numbers, dennis is buying that, right? have had one. shouldn t say thatp not comi business as usual for alleged insider trading suspect. that is next on squawk. first, though, gold prices this morning. we ll be right back. (announcer) we call it the american renewal and at ge it means innovating, inventing and building things. it means everything from shipping a new wind turbine every 4 hours to creating some of the world s most advanced healthcare technologies. manufacturing is part of ge s belief that the american renewal is making things right here in america. the american renewal is happening right now. all right. let s take a look at the futures. you can see, that s right, the futures are up by 42 points right now. oil above fair value. leslie nielsen, abc was at early 80s? classic, absolutely. guest hosts today are dennis garmin. the reason we re play that music is because of the big story about hedge funds out there, specifically gal i don t knleon founder raj paste rajaratnam is accused of insider trading for how he made some of his fantastic hedge fund returns. it s a crazy story because it goes back to the days where you had high-level individuals wh l allegedly were feeding him information. in fact, one guy at ibm considered a potential candidate of ceo. high-ranking officials, mckinsey and company consultant feeding him information for all of these things. a little bit ago we got an e-mail from a business insider saying that raj is out going his offices this morning. he was released on record-breaking $100 million bail. and he s back in business today. they say it s business as usual. as usual. what do you guys think about that? i would imagine probably not business as usual. i suspect there s probably things to be cleared up and taken care of. this is america, he made bail. he needs to take care of things. should we be surprised by this? no. $100 million, though, you can kill somebody in the united states and your bail is going to be $20,000, $50,000. billionaire, he s got a lot of money at his disposal. a bill ision is a big number from what i understand. you talked about how if you looked back historically it s not all that surprising to find a scheme like this being charged at a time like this. you called him ivan, and there was michael milken, it s a cookie-cutter mold that heroes on the way up are very often villains on the way down in the cycle. that s part of a financial bubble. it goes back in time hundreds of years that you will find this happens. not that i m condoning what happened, don t misunderstand the point. but when you re in a bubble and when you re in that kind of an environment, people tend to overlook some of the oddities that might go on or illegalities. john law during the south sea bubble, hero on the way up, goat on the way down. investigators have on these reportings, wiretappings. these people knew f. people knew, if they were found out, they were in trouble. the young woman said if i find out, my career is over. let me think, i m toast? come on. i will say though as one who has been very critical of the oversight of the financial markets, i am happy that the s.e.c. and everybody else involved is cracking down on this type of operation. i mean, my argument has been that we ve been too loosy goosy in a number of financial regulatory areas, and, you know, from my perspective, we want the cleanest, most transparent markets in the world simply because we can t compete with the rest of the world on growth. so we have to be the highest quality financial markets in the world. from that point i would argue this is good. interesting you say that because the s.e.c. has gotten grief for taking this former goldman person and making him the head of enforcement. saying, how do you expect regulators to regulate a market that they are steeped in, that they are i want somebody there who knows what s going on. i don t want to bring somebody from outside who has to go through the entire schooling to understand, he s not going to know what s happening, he s not going to know the buzz words or the questions to ask. although i m skeptical of government intervention at all times, if you re going to do it, at least get somebody who has been there who knows the language. we need a good referee on the playing field, right? football doesn t work without a referee because, you know, big guys beat up on small guys. for the jangiants, it doesn even work then. i m a dallas cowboy fan, i don t care about the giants. let s beat up on them anyhow. rich, what do you think about the early read on earnings so far. surprising thing is a few companies came in with revenue lines better than expected. remember, my argument is as we go through 2010, into 2011, i think the operating earnings operating leverage, rather, in the economy is going to be much bigger than people think. we are booming and busting in the profit cycle in the united states. you know, when we had rosy on before, she said could we see a doubling in earnings, i m not sure that would be as outrageous as he would think. you might see that. let me break in quickly and show you something off the wires regarding cit and carl icahn. are you seeing this? no. i looking through reuters. icahn has made an offer to underwrite a loan. for cit. cit s restructuring has been a huge focus. carl icahn, when we spoke with aim just about a week ago, sat down with him and he said be on the lookout for other potential teals, things he might be involved in. said he was looking at a lot of different things, didn t tell us why. carl icahn says he has offered to underwrite a $6 billion loan to cit. cit says that under indenture notes, under exchange offers, were provided guarantees. looking threw the headlines. again, this is just hitting. but again, carl icahn offering to underwrite a $6 billion loan to cit. it s been a huge question because cit makes loans to small businesses. that s been an arena where we have not seen a lot of loans that have been being made. people questioning this. they go back they go back to their core businesses that could be a very, very good business right now. remember, all the t.a.r.p. money didn t go to smell business lending. it went to currency swaps. small business lending is very important. that could be a great business. cit, if your view, something to keep your eye on? yes. if they were taken out, that would be a great problem. if carl, great stand-up comedian, by the way, were to underwrite this, positive circumstance. no question. i m sure they ll keep an eye on that during squawk on the street. speaking of which, we appreciate you guys being here. rich bernstein, dennis garmin, join us tomorrow. squawk on the street is coming up next.