Transcripts For CNBC Squawk Box 20091120 : vimarsana.com

i m carl quintanilla along with joe kernen. becky is on assignment front door. that key congressional panel voting to audit the fed and cap spending at $4 trillion. the house financial services committee approved the measure by a vote of 43 to 26. this is a big deal. legislation was introduced by congressman ron paul. who? ron paul, have you heard of him from texas? i ve heard the name. well known name and now on squawk because he joined us on this program last friday. there s been a national poll, which i m surprised that even there would be polling on this subject. i would have never dreamed it a couple years ago. but 75% of the american people say, yeah, we should know what s going on in the fed. so that s 75% of the electorate saying we should do our job and look at the fed as the reason why there s well over two-thirds of the members of congress supporting this bill. fed chairman ben bernanke, treasury secretary tim geithner, others have vigorously opposed this, saying it would hurt its ability to protect the financial system, it might ostensibly interfere with your ability to regulate monetary policy if you know congress is going to be looking over your shoulder and taking away things like supervision. are they just looking or do they have some say in what happens? i like the comments, there s only one thing worse than a secret fed and that s the fed that is under the influence of these guys, of congress. did you watch again yesterday? do you watch the guys when they we re going to have kevin brady on the show today. the texas congressman who grilled giet fler. he says the entire public has how does does he speak for what, his district in texas? yeah, his district in texas. that s like the e-mails that we get that say, it s time for you to go. the public says, it s time for you one man s opinion, and we know what that is worth, right? but you know, people will say about the fed, where is in the constitution is it that this group ooh individuals in a small room in d.c. gets to decide how so much money gets spent in this country? it s not in that document, at least is not not the way it s being practiced front door. probably true. but a lot of these people, once again, it reminds me of not worrying so much about a terrorist attack because it s been nine years. here we are a year after the commercial markets froze up and everybody is now saying, what were you doing? that was geithner s point yesterday. why don t you let the free market work and see what happened. who knows where we would be right now. i don t know. nobody knows. part of you wanted geithner to say, you re welcome, by the way, guys, for allowing us to even have this hearing today? i don t think geithner has done a poor job. i ve listened to him, i ve looked into his soul, like w did. and you saw a good man. i did. so i disagree. what about the argument that he was at the new york fed when all of this was going on? but these guys get elected every two years. their whole role is to be bombastic and show their constituents they should get elected again. but after watching it again and again, the way the house acts when they have these government officials, i m embarrassed most of the time. and it s funny to see the senators say at the same time, this never happens in the senate, so we apologize. anyway, here we go with the house, the house fj services committee postponing a pivotal vote to financial regulation. chairman barney frank unexpectedly announcing the delay blaming concerns raised by the congressional black caucus. and without caucus members, this law would likely be defeated. congressmen have now left the capital for the christmas and thanksgiving break. take off until oprah retires. that would give us about two years. so the earliest measure will now move into december 1st. do we have to talk about that later? will it be in the script, in the teleprompter? yes. that is a huge money will be lost and made on that move. september 2011, carl. i m happy to would you want her to say, my last day is today? yes. lou dobbs told his staff 15 minutes before he went on, oh, today is my last day. congressman kevin brady calling for treasury secretary timothy geithner s resignation in this heated exchange. it really is time for a fresh start and i would urge to consider that. if you look at any measure of confidence in the financial system, it is substantially stronger today than when the president of the united states took office. and we would have had a stronger fiscal position if we didn t have eight years of paying for our commitments, not bar roaring against them. at some point your time as expired. you have to take responsibility for your decisions. i take responsibility for anything i m part of doing. i would be happy for that. what i can t take responsibility for is for the legacy of crisis you ve this is your bailout. this is the gentleman s time has expired. the obama administration defending the secretary. in a statement, the white house says geithner has helped steer the economy back from the brink and is leading the effort on financial reform. but you heard him say, what i can t take responsibility for is the legacy of crisis you have bequeathed this country. i don t know who he meant. i m not sure, either. there s the countdown clock right in front of him. does that mean his time was up or he s a big zero? no. the guy s time was up. but what is the journal trying to say by putting geithner in with the oh, that s a subliminal message. and we just saw it. representative maloney kept saying over and over again, your time is up. i don t want to mess with texas and i never would, but i mean, some of those guys want to succeed down there, don t they? they ve raised that issue. there are some not mainstream ideas down there. do they want to go with mexico? which way do they head? you re not talking like a new york fancy no, i m not. i m a hick. i m with them on most things, but on geithner i don t know. and to say you re responsible for the bailout. i know bailout might have a negative connotation, but it has a connotation that you were in big trouble and we bailed you out of the big trouble into not so big trouble. rescue is another word. rescue. you re responsible for the rescue, thank you. so you re going to challenge brady when he s on? no. probably not. you re leading the interview, aren t you? okay. i m afraid. he s from texas. i expect you, though, to hold his feet to the fire. the treasury says it will no, i will. auction off warrants it holds from jpmorgan, captain one and etf financial as part of the government s bailout. the treasury was unable to reach an agreement over the value of the warrants. now it s going to modify a dutch style auction. we had two down days. we did have two down days. asia has had some difficulty overnight. and we ve had the nikkei, joe, down for four weeks. it hasn t done that in a year. and we ve had the longest losing streak in asia since july. four straight for the overall asian markets, not to mention the worst day for the s&p markets here in three days. we re going to trade close to value today. not a lot of data or news coming out. let s take a look at oil. this is one of the rare morningings that oil is not down sharply lower. the 10-year note, have you seen what the yield is doing? down to the lowest of the year. people are beginning to see that portfolio managers moving into bonds to window dress before the end of the year. 3.342%. the dollar, as we mentioned, had a good day yesterday. relatively strong today up against the euro and the pound. and with the stronger dollar, ordinarily, you would expect gold to be lower. not much. down 10 cents to $1,141.80. it is time, as always at this time to trade the globe. let s get overseas this morning. chloe cho is standing by in singapore. but first to london where we ll check in with steve sedgwick on this friday. hey, steve. good morning to you. europeans have always looked jealously as the fact that you ve got a president. we have one too, now. the trouble is, most people don t know who it is. it s herman van rompuy. he is now the first president of the eu following the ratification of the lisbon treaty. we have a new foreign minister, as well. her name is baroness catherine ashton. there was a lot of horse trading behind the scenes. these two are going to lead us in terms of state visits and foreign policy. back to business, gdp in germany may not sustain its growth rates. in the second quarter, it was up .7%. but the german ministry of finance said, we all know, really, this can hit going forward and the dreaded double dip is something we worry about on both sides of the atlantic. they had through to 2011, volkswagen and porsche will be merging. elsewhere, deutsche bank s boss, joseph ackerman is saying it s unrealistic for people to expect the financial sector to reinforce itself. it s going to have systemic problems and would need more support going forward. that s the european indices which are pretty much trading around the flat line. now over to chloe in singapore. thank you very much. a very weak picture, i should say. it was certainly happy that it s friday but the markets weren t looking so happy today. not surprising. a lot of risk positions coming off the table. and plus, certainly some a lot of selling going on at the resources space. and then the tech space is not protected. and the earnings that we got out from dell. take a look at japan, of course, the big story out there is the japanese government citing worries about deflation. but the big talk out here was why is the jab niece government focusing on ways to tackle deflation when the figures all along have been suggesting deflationary pressures for the past seven months or so? but they can be on a crash course with the boj because the boj after leaving interest rates unchanged today they talked up the state of the economy. the boj has said time and again that they are not interested in doing so. the nikkei trading lower by .5% today. over in the south korean equity markets, pretty much trading along the flat line. the number one and number two chirp maerpmakers did pretty well, closing down only .5%. the south korean markets one of the better performers today. china, hong kong slipping for four days in a row down about 0.8%. on the shanghai composite, there were reports suggesting that the pboc westbound on the mainland could lift banks reserve requirements next year and that took some steam off some of the banks and some comments just after the bell citing the government economist saying asset bubbles could become a serious problem for the chinese economy and australian market quite weak today, off 1.3%. so a pretty weak picture out here in asia. let me send it back to you. chloe cho in singapore, let s get a check on the news. before we do that, we ll point out that we re talking about congressman brady. i think he was scheduled at one point to be on the program today, but he will not be. and that didn t happen because of a scheduling and it didn t happen after our discussion. it actually had happened late last night. and you and i were just made aware. and we go to bed because i mean, separately, but different beds. yeah, but at 8:00, 8:30. i ve got to to look like this and to be this bushy tailed. let s get to the markets. fred dixon or like nesto, i just won t get up. that s true. lakshman acheson, good to see both of you. lakshman, i know you love looking at the leading indicators, and although they were good again for the recent months, light of expectation easy. couple that with all the other stuff, are we at a turn here where the rebound is not going to be as rebound issue as some anticipated? no, no, we re not. and we re looking at a lot of others esoteric. but these leading indicators, we re in actually a textbook cyclical recovery. the issue about a double dip, it means what you want it to mean, but in my world, it means are we going to slip back into negative growth this quarter, next quarter, and if that s what you mean, the answer is no according to these leading indicators. and that is not only for the u.s., but in these countries around the world. they re all recovering. i know there s angst about the recovery or things like that. they had a pop because they fell harder than a lot of other ones. but i think you have a more textbook global recovery in a cyclical sense. the u.s. is really the engine. china is helping a little, but you cannot replace the power of the u.s. economy and recovery. that is what s going on here. all of these worries notwithstanding. now, at some point, there will be another downturn. that is the whole reason equity exists because they re a turning point. so it s going to happen, but it s not here yet. fred, loshman, what do you think of the nikkei doing a double peak in september and now down four straight weeks, others calling this whole thing as ans bubble like bill gross or the chinese. is the debate becoming more forced? carl, we pretty much agree with lakshman s assessment. i look at the same indicators, come to the same conclusion, and we re working our way through an economic bottom. wefz et globally synchronized. we concur with that. i would probably put more weight in seeing southeast asia at this point taking the lead because china is drawing a lot of investment flow. as we look out ahead, i think what we re doing is looking at consolidation. we ve had big moves in commodities, stock prices, bond market is on a tear and i think we re in a little zone right now of taking and getting breathing room. but what we re looking at is favorable equity markets out for at least two or three quarters. there would be angst indicating the economy is probably going to test the patience of wall street investors. bottom line, we re cautious, but we think people are more cautious and looking for opportunities. we re seeing big players come in at corporate levels. and that message is getting out to main street where i travel. and there s a lot of talk that main street could double. do you think this move into the two year recently is the rum of money managers trying to lock in safety as we get to the end of the calendar? absolutely. banks towards the end of the year and banks and financial institutions tend to go for liquidity. they re having big gains, moving money. trimming profits up putting it into short-term treasuries. we were surprised yesterday when we saw the three-month treasury bill dip down into negative territory. but it doesn t surprise us to see profit taking here at year-end. i think there are going to be people on the other side waiting for this dip to come in and put money to work. so, you know, this is a great time of the year. november through february, usually good market conditions. lakshman, morgan stanley had this call yesterday on chips, talking about the idea that maybe some of the big players there might have been some overstocking, at least in the short-term. can we use that and extrapolate it to the larger manufacturing sector that maybe if these inventories are getting heavy here and then are not met by final demand in the first quarter, that we could have half of the economy working, but the consumer parts still falling short? you know, i mean, i see the argument, but it s not really backed up by what we re watching. look, tech is a key part of the manufacturing sector or the industrial sector, either of the economy or of the world. and so goes that sector, pretty much so goes tech. and this is much more. i think what you re reading there or what they re saying there is this inventory restock is over and so what else do you have? first, the inventory restock isn t over and there is consumer demand. and so that is going to probably challenge the view that, you know, we ve this is as good as it gets in terms of that sector. now, having said that, there will be a peak in global industrial growth. now, i m sure that will be misunderstood. i m not calling for anything, any big new downturn over there. but global industry growth is likely to peak anywhere in 2010. that will impact the manufacturing sectors around the world. but it s not here yet. and what we re going to get for the next few months is probably stronger and stronger activity which basically bodes well for the secretary techer. we ll see. that s all well and good. i think people are still worried about an impaired consumer. we ll see what the jobs number brings the next time. the consumer, gdp, income, all of these things are tracking faster already in this recovery than in the last two recoveries. the last pieces jobs, i agree, and i think we re going to get them in the next few months early next year. lakshman, fred, have a great weekend. thanks, guys. dell, we talked about yesterday with this gentleman who is here now shows they re under pressure this morning, weaker than expected results after the bell. david garrity is here to analyze the numbers. we needed, david, to matched hp s stellar results. i guess we needed more about it business spending in the ender price area and wems said yesterday that the company needed to improve margins. neither happened. i think from what we said yesterday, we said dell was going to be lagging given the fact that they re more in developed economies whereas hp is stronger in emerging market. hp came out and said quarter of quarter, revenues are up 12%. dell was up only one. but to the extent you look at where companies are positioned, you should have expected that. but we were expecting them to lag in the recovery. that said, we re still in a situation where dell on the call last night said this is the first in seven quarters, almost two years, in which they su a sequential quarter over quarter revenue growth for both their large corporate business as well as their small and medium sized enterprise business. and they think small and medium size enterprise is a indicator because typically small and medium sized business globally, those tend to leave large businesses. so from that standpoint, november might be a bad time to talk about green shoots. but this certainly is an indication that says that we are going into a refresh cycle, built around windows 7. dell came out and said look, over the next 18 months, you ll be in a situation where this is a rolling refresh cycle. this is basically going to drive pc volumes above the historical baseline of 10% that you ve seen on an annual basis to something more like 15%. which goes back and says if anybody has been thinking there is too much inventory being put into the semi conductor channel, they may be wrong. it may not be something that reflects the economy, but it reflects their business. well, merrill said that about intel. that hit the techs over the last two days. what you just said seems good for overall tech. let s get back and specifically talk dell. they benefit from overall tech getting stronger. the knock on all these boards, they can t do cost cutting. they were unable to boost margins. it wasn t reflected in margins and it wasn t reflected in their bottom line. so even with cost cutting, dell wasn t able to keep up. is there a problem with the strategy at dell now? are people asking that question? you ll find from the standpoint of revenues, there was a shortfall. but the biggest item that was taking place in costs was happening below the income line. it was more due to the tax rate. the company expected somewhere at about the 30% level. so you had a hit as a result of the share. now, granted, still the company is in a situation where they re not very happy with consumer margins. the km, though, is still out about $1.6 billion. so we re not really now at the halfway point. the company was indicating as they get better operating scale, you should see margins unfold over the next two quarters. the tax issue, did that take down margins? with respect to the operating margins, that would be pretax. well, you can t blame it on that, then, right? but people are coming back saying there is shock and display. but yesterday, we said even if enterprise doesn t recover as much, if they can raise their margins, it might not be as bad. that is true, but essentially what you saw in the quarter for dell is prewindows 7 being launched. they saw order activity during the end of september, beginning of october, consumers pulling back and they said that volumes are coming back in november. well, you can buy the stock instead of that 15 and exchange, you can buy it at 14 and exchange today. that s is true. would you? i would buy it at 14 and change. i had a feeling i was going to say that. paper portfolio. yeah. why don t we have another comp? we should have a blind trust. a blind trust must be good. who is it for? for the children. all right. thank you. when we come back, we ll get headlines lighting up investors this morning. the results for gap are out. first, though, as we get to break, take a look at yesterday s winners and losers. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you re busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity. you want time to enjoy the holidays. good morning. welcome back to squawk box here on cnbc. i m joe kernen along with carl quintanilla. becky will be back monday. she was on assignment yesterday mop toring the faa situation because she was trying to fly to san jose. she was trying to fly out of new york as that computer glitch was snarling flights all around the country. new york has a spliet situation every flight. it was even worse yesterday, apparently, and you re stuck in newark while you re being delayed. she got out of there. she did finally. futures were down, but only 14 points or so at this point. a lot of people say that s the upper end of the band. don t look at me weird. that is not dirty. ooilts it s diddling in the middle. i looked at you and i know what you re thinking. and i know wa you re thinking. gap s profit rose 20% from a year ago thanks to improved results at old navy. robert is oppenheim s executive director joining us here in becky s seat. good morning. good morning. nice to be here. highest margins in a decade? yes. and the company has done a fantastic job bringing costs down. we had almost a 400 basis points increase in price margins. how did they make that happen? the last couple of years since glenn murphy took over, a big focus on cost cutting. they ve become incredibly lean. number two, they continue to take the costs out of the product, even though they re not substituting much in terms of quality. number thee, same-store sales like the old navy chain continue to get better. is that a reflection of marketing strategy or people just want to buy cheap? you know, i think it s a combination. i think old navy has gotten back to their value message attracting moms once again. i would think that old navy has gotten better. it s a combination of a few different things. that said, they are going to boost marketing spending in the quarter to come, the year to come snm. the quarter to come. now it s time for the about it business to start pulling its way. more television advertising. they want to basically translate traffic into sales and that is what this marketing is about. is that a smart strategy? do you think it will pay off? is it a matter of stealing shares from someone? who? well, gap has been taking shares from the likes of target, walmart, they need to reblame their piece of the pie. they haven t been on tv since 2006. they believe the merchandise is there. put the investment behind it. a little share buyback action in there, too. yep. what about the stock? we think the stock we re neutral rated on the stock. i think we have a positive guyace on it, though. the big question mark is can gap start to drive sales? that s what is core is looking for. i think that is what investors are looking at now. to the degree they have been challenged by anyone, has it been direction ler and j. crew? j. crew has done a fantastic drop job. they have been a donor of shares to everybody, the department stores, off prices, speciality retailers. everyone has taken a piece of the gap. a week from today, we ll be taking a live shot of these stores, trying to piece together the attitude of the consumer going into black friday. i think it could surprise on the down side. people are shopping less. the last couple of weeks, business has been debt out there. people are waiting for the promotions. housing is still an issue. unemployment is still an issue. i think people will continue to be cautious in terms of the way they spend. we keep hearing headlines that they re going to continue to spend less cash. so there s some reason to maybe be cautious. absolutely. robert, thank you. making headlines this morning, the ft reports that general electric and vivendi are $1 billion to $2 billion apart in the valuation of nbc universal. ge and comcast are said to want an announcement before thanksgiving. $1 billion to $2 billion is we tried to figure it out. if it s 20% of 30 billion, that s 6 billion. we heard in the past that it was 6.3 was what vivendi was valuing it at. so i don t know whether someone is putting the zeeb on somebody else. it s a larger number than you one to two is big perpendicular now that it s in the being sold and they re in the position of being a spoiler, it s like when you re going to put up a railroad and there s some crummy looking house sitting there. there is no eminent domain here. if you want the railroad to go through that property, what are you going to do? we ll see what happens. vampire fans are lining up at theaters across the country last night. the latest installment of twilight opening at midnight showings. and i think about this. it s mostly romance, i was reading. it is. it s not like your vampir vampire/werewolf blood. you know a lot about this. have you read just the first book? i know what a fan you are of oprah winfrey is going to end her talk show in september 2011 after 25 years on the air she ll make an officials announcement on her show today. this is what is interesting about this is the way it s going to affect networks. cbs, which distributes it, abc, which carries it, and she s going to move to her own cable network, a joint venture between oprah and discovery, which was announced back in january 2008. so once again, the networks are taking it in the it s not a good thing. for networks and cable is benefiting. it s not a vote of confidence for network television. it is a huge vote of confidence for cable. and for discovery. and at this point, ad sales for oprah have not weakened at all. that s like the only place in network tv. 40 million viewers a week. that s the only place where they continue to charge whatever they want for ads. so i guess the fete works need until december of they ll be scrambling as it is. and the early comcast that has to do with cable and jewels that are doing better than network tv. so i think when this story, we need to look at abc, a quote on cbs and a quote on discovery. maybe all the cable players. thank you. are you with me on this? oh, sure. okay. when we come back, this is normally the time of morning when we go through the futures pits. but today, we re bringing the trading action right to our set. no way! jessica hoversen you re kidding me! wow, have you been here before? wow. all right, when you look at the future of your business, what do you see? is the glass half-empty or half-full? well, with ups, you could eliminate warehouses. streamline your supply chain, and even reach new global markets. so your business is more adaptable, more efficient and more profitable. hey, the opportunities are out there. seize them with ups. is anybody else thirsty? (announcer) here s hoping you find something special in your driveway this holiday. ho-ho-ho! (announcer) get an exceptional offer on the mercedes-benz you ve always wanted at the winter event going on now. but hurry - the offer ends soon. been putting our clients first. according to a leading independent research firm, in 2009 clients rated wells fargo advisors the #1 u.s investment firm for doing what s best for them. with advisors nearby and nationwide, we re with you when you need advice and planning expertise to meet today s challenges. wells fargo advisors. together we ll go far. welcome back. we have a special visitor today that you saw as we went to break, jessica hoversen with mf global. she s taking a day off from the trading pits in chicago. i m sorry about the global. you get some of that in chicago, right? i actually brought the rain with me. just don t bring the wind or the performance of the sports team. i ll leave that at home. i wouldn t want to cast that upon anyone else. how are you viewing these last two days in the context of the 60% move that we saw? i think that a correction is obviously likely in a situation. let s look at the economic data over the past week. it has been subpar. outside of the philly fed, the housing starts, the industrial production data, the retail sales data, all those numbers did point towards slower economic growth. i think in this cycle, the market has started to reprice where the economy is going. and i m not saying that the complete upward trend has been compromised, but the market is now taking a time to sort of reconsider the base of growth potential. funny to watch how things ebb and flow. it wasn t from, wow, this is going to be a weak recovery to wow, the stock market is indicating it might not be so weak. you get a few good numbers and then the minute you get a few bad outliars, then we re back to questioning the double dip scenario or at least a depp i didn t tell yid recovery. and the government helping out. the government stimulus. but didn t they have to step didn t the government need to provide what the private sector was not providing for a while? definitely. the public sector, if you look at the history of recession, the public sector has a tendency to step in and fill the sector that the government has left. the public sector doesn t necessarily pardon me, the proportion of reduction isn t necessarily equivalent to how much to the amount that they actually accept in. so baifkly we see the public sector take a larger portion than it did before. in 2001, it was 17% of gdp government expenditure peps now i m not sure if we ll ever get back to that level. in one fell swoop tomorrow night, we re going to take another 17% of gdp. yeah, and that sounds like a lot of fun. the government was instrumental in getting the economy back on its feet. but the question going forward is how much more do we need it? and with $12 million in debt hanging over our heads, i m not sure so when geithner was in front of the economic committee yesterday and was getting grilled is not even the word. it was like a haze. what was the reaction of traders in chicago? did they cheer that on or how did they react? they re frustrated, most definitely. but we recognize regulation is on the horizon. but you don t want to see regulation that is going to challenge the capital basis of these banks. if they do, i think you ll see the financial sector continue to lag and i think that s one of the reasons that it has lagged going into the past couple of weeks. is oprah in chicago? oprah is in chicago. so you could be an expert on this, too, while we have you here. i m not sure about that, but i ll give it a go. initially, i didn t care. it was in september 2011. i ve got time to deal with my feelings about losing oprah. but we re not really losing her. in chicago, does it matter whether she s cable or network? not really, right? what does xhefter think? are they still together? i would have to no. who is chester stead? i have no idea. i think i spend last time reading people magazine and more time reading the economist, so i don t know. i do have a mug on her show. you went to a taping? i did. do you have a mug on this show? i don t. i love your merchandise. that is fabulous. there s your holiday novelty gift right there. if you watch squawk box in the morning, you need to be drinking coffee out of that mug. you do. you need to have one. thank you for coming in. thank you so much for having me. when we come back, millions of people are getting ready to hit the roads this holiday week. please help me welcome a long-time friend of glencoe baseball. a man who played second base here some 45 years ago. actually, 47. ladies and gentlemen, mr. larry mccarthy. amidst today s financial turmoil, our sophisticated wealth transfer strategies. and philanthropic expertise ensure your legacy. is passed on to family or your favorite pastime. northern trust. wealth management. asset management. asset servicing. coming up, tgif. we ll get ready for the weekend with a trip to the chairs. and later, follow the monkey. there s millions of investment newsletters i m sorry, was it follow the monkey? did i read that wrong or did it say follow the money? anyway, but we re going to follow the money. don t worry about following all of them. mark hulbert does it for us. he s tracking the important trends and joins us at the top of the hour. i need contacts. you all want to run your businesses more efficiently, so we ve brought in a team of experts to help. one suggestion is to make your shipping more efficient with priority mail flat rate boxes from the postal service. shipping s a hassle! weighing every box. actually, with flat rate boxes you don t need to weigh anything under 70 pounds. if it fits, it ships for a low flat rate. call or go online for a free flat rate box shipping kit that includes free boxes and our helpful shipping guide. do it today, and we ll ship it all right to your door for free. ok, but i ship all over the country. you can ship anywhere in the country for a low flat rate. ship international, too. and remember flat rate boxes come in four sizes and shipping starts at just $4.95. call or go online for a free shipping kit with a full supply of free boxes, plus the shipping guide. act now, and you ll get them all delivered right to your business free of charge. priority mail flat rate boxes only from the postal service. a simpler way to ship. call or go online now to get started. travel sector fighting turbulence in the economy. a new survey suggests cautious optimism. adam wiseberg u.s. tourist hospitality and leisure leader. he joins us in the chairs. good morning, adam. good morning. 45% of people are going to take some kind of trip between thanksgiving and the end of march. right. is that number historically weak or strong. this industry has been beaten up. finally good news saying looks like people will take a trip. this is staying in a lodging facility. wasn t just taking a trip. i m sure if we re looking at people traveling it would be higher. staying at a lodging facility between now and march. kind of good news, maybe we re getting to the bottom of the cycle. gas prices haven t actually been gas prices are down low, which i think has been helping. if you look a year ago, labor day, memorial day, prices were much higher. people were afraid to go out and buy gas. now we re seeing gas prices lower, people taking more trips. this was talking about people traveling and staying overnight. in general that is good news. hotels have been aggressive enough on discounting. if this is not dpraggressive i don t know what is. leisure traveler is looking and saying prices are low i m going to take advantage. business travel, that still has not come back. that s the rate. not going to see increase in rate until business travel goes up. a lot of that is congress s fault. they have made it unfashionable to stay certainly at the high end. you know, i think that s kind of come and gone now. i think what s happened, people are watching their money. it s difficult to justify expensive vacation or trip for business. there s a little, okay, we can do the same trip last year for less money, so let s do that. a lot of companies cut out internal travel and that drove a lot of business travel. we keep hearing about beefed up security, all these surcharges on bags that used to be built into the fare. that is going to depress levels of travel, do you think, for the coming quarters? generally look at the airline industry, what s happening there is they have cut back significantly on capacity. you wait until the last minute to make an airline reservation you re not going to find good deals. if you plan far in advance you can find them. i do think cutbacks in capacity clearly the airline is under pressure. are nice hotels the one carl would four seasons, ritz carlsons, will they be the last to come back, or are they okay now? people in a certain economic are they willing to spend now, people that have the money, even we wi well heeled people not splurging. the upper end was the last to feel it. so i thought they were the first with aig guys. that came at the tail end of the industry starting to hurt. discounting. unfortunately everybody has big price wars. first incentives, stay for the weekend get a spa package, a coupon for the restaurant, now everyone is in a price war because businesses are putting pressure on them. i m renegotiating my corporate rate. i want 20% off from what i had last year. do you travel? are you traveling? between now and march i will. when you travel, you travel big, right? that s high end. it s an entourage. that s good. we need more people like you traveling. 30, 40 people. adam, thanks. when we come back, bond guy back in tonight. tony made his name before heading to pimco s california headquarters. he s back in the studio, guest host for the next two hours. don t go away. for over 150 years, wells fargo has been putting our clients first. according to a leading independent research firm, in 2009 clients rated wells fargo advisors the #1 u.s investment firm for doing what s best for them. with advisors nearby and nationwide, we re with you when you need advice and planning expertise to meet today s challenges. wells fargo advisors. together we ll go far. secretary geithner under fire. this is your budget, your bailout, your stimulus i take full responsibility the white house backs the treasury secretary after his grilling on the hill over the costly bailout. some lawmakers urging him to resign. field shield from congressional audits taking hits. congressman ron paul s proposal to examine the central bank moving ahead. moon river thank you, doc. the state of states. we re on the ground across the country to find out how local and state governments are handling the economic downturn, some better than others as the second hour of squawk box begins right now. moon river wider than a mile i m crossing you in style good morning and welcome to squawk box here on cnbc. i m joe kernen along with carl quintanilla. becky is on assignment. in just about 30 minutes the state of the states, we re going to go around the nation for some economically stressed out states to find out how they are dealing with unemployment and plunging homes and find out about states doing much better. that s right. first, though, we begin with a look at some of the top stories, carl. joe, thanks. you re welcome. two top stories to watch. shares of dell under pressure after avoiding weaker than expected results after the bell last night. the pc maker s quarterly profit plunged 50% on lower than expected sales the as it continued to lose market share to competitors budding price war. gap having a 20% rise in profit with its old navy chain. apparel will boost in an attempt to increase market share. they will see if gap stores can catch up to old navy. we ll move on to that big capitol hill clash. fed, house, voting to let congress carry out sweeping new oversight of the federal reserve. some calling for treasury secretary tim geithner to resign. cnbc s steve liesman joins us now with more. i was commenting to carl, in this country at this point, steve, geithner is not only getting it from the far right, he s getting it from him, he s getting it from the far left. he s done too much, not enough. i think he ought to go to goldman. cognitive a guy that saved the nation getting this kind of treatment. i like a guy that says you re responsible for the bailout because it s a pejorative. if you re in jail and someone bailed you out, the person responsible for bailing you out, you could be in jail or out. remember how angry you got at me when i came back from a conference and said the big cost of this whole crisis is going to be what we figure out what we do afterwards. no. you got angry. you said that all day the day before on kudlow. no, you disagreed with me. were you repeating yourself. this is one of the things i was talking about. are you saying i flip-flopped. i m saying that time you were wrong and i was right. here is my report, joe. i have a report, long report. then we can talk. i just want to get details out to folks who haven t been listening. the federal reserve probably considering how to respond after passes of the amendment to the regulatory reform by offered by ron paul. by the way, 300 co-sponsors that would allow the government accounting office to audit central bank s monetary policy. officials declined public comment but expressed deep concern in hearings and privately during the last several months. they argue audits threaten their independence through high rates and could result in higher inflation. we ve learned that opposition to the amendment included both former chairman of the fed, alan greenspan and paul volcker. in a letter signed by both of them we can assure you reaching decisions is in dispensable to the federal reserve s monetary policy. came from an exclusion from congress bard from monitoring the monetary poll sichlt the paul amendment which passed overwhelmingly males that exemption. you remember last friday ron paul came right here on squawk box and defended his bill. 75% of the american people say, yeah, we should know what s going on. that s 75% of the electorate saying we should do our job and look at the fed is the reason why there s well over two-thirds of the members of congress supporting this bill. the fed fierce when it comes to the bill. first intimidate rate hikes, market concern out there the fed s ability to raise rates in a timely manner. other concerns include early disclosures, including rules allowing for disclosure is five years. this bill would disclose in 180 days not including what s disclosed at the audit. number three, the borrowing stigma, disclosure of the discount window would deter banks coming to the fed in a crisis. it stems in part from the failure of the central bank to respond adequately to the conventional wisdom they failed to raise quickly was the primary cause of the credit bubble. if it was wrong, has it done anything in the interim to get it right now? it hinges on a simple proposition it gets monetary policy right. popular perception it did not. is paul amendment the natural congressional response. the only thing worse than secret is a fed controlled by congress or overseen by congress. i believe maybe tony crescenzi our guest host. would you like to guest host. ladies and gentlemen, tony crescenzi not from the other company but pimco. was that good enough? one question for you first. you say the big criticisms by, joe. he walked out because i introduced tony. you cut the turkey. if the question is whether or not the fed got monetary policy wrong joe, come back. he ll be back on his own. is the criticism they got policy wrong or they are taking on powers now that they don t legitimately own. i think you re right to add that to the criticism. the use of the authority which, by the way, was grant freddie congress, okay, that was one. but i think also this idea if you notice, was it newsweek said ten biggest mistakes of the decade, the fed s monetary policy. i don t buy that that was the huge cause of the credit bubble? why? i don t think it s fair to say if the fed gets monetary policy wrong decisions made by the market are necessarily excused. just because the fed had interest rates of 1% doesn t excuse liar loans, a whole bunch of lousy underwriting and went crazy. you think 30 years of change caused it, you could say, the debt buildup we had in the country. it wasn t the federal reserve pt it might have accelerated it perhaps. the fed needs to be printing a lot to get out this accumulated over 30 years, this type of behavior of consumers. it could exacerbate. can i push back, if you look at a 30 year chart of cpi and unemployment, there are two unmistakable trends, they both come down. in the fed s mandate from congress is maximum employment and low inflation, the inflation charts like this will flip up in 03 and 04, pretty much a downward trend where we revise what we thought was full employment in this country. over that three decade span you re talking about, i think it s hard to say the fed got it generally wrong. i agree. the fed broke the back of inflation expectations in 93, 94. 1989 it was 6% year over year. 94 ten-year treasury was over 8% in part because the bond market felt the phillips curve fen on no one would come back. greenspan by raising rates broke the back of inflation expectations and that led to a good period of prosperity. there was a time he did a couple of insurance raises because of gold. 75 in november 40r. there was a time he was wrong and came back down. when was that? both directions to try to maintain a stable environment. also if you talk to anybody in the bond market we have a guy from the bond market here, most important determine ate, if you ask a guy, if i was on a desert island and i needed one piece of information to help me buy bonds, it s what the fed will do. all the way out on the curve. extraordinary development five, seven, 10s and 30s are so tied to expectations. so in that sense the fed is more powerful and has done a better job in that regard. there s this popular anger. there s an empty seat here. who is that seat for? ben bernanke anyone the fed wants to come on and be part of the argument without that. that s one of the reason they lost, they never really put their case forward in a meaningful way. long rates reflect what short rates will be. the fed is still having an impact. i thought they just followed where markets led them? i don t think that s exactly right. i think it s kind of that does make me uncomfortable, then, that one or ten guys can decide in a vacuum what s best for me. maybe that s what ron paul is saying, right? tell me if i m wrong about this. the fed makes a judgment and the market follows that judgment as essentially the right judgment, and only in a very few situations does the market become unhinged and disagree dramatically with what it believes is the right thing to do. the market says that. tips can do it. tips market today, ten-year price for 220 cpi. that goes into the fed s thinking. it does. 3% cpi, the message would be resounding and very strong. that would go back on the fed and the fed would change. it s not right. it reflects the markets. uses market-based signals. 220 signal strong inflation? it s the ten-year range, at the lower level. it does show r higher than it was. along with gold and the dollar. not enough to override other two conditions the fed gave in his november 4 statement. running out of time. do you think federal is getting policy dramatically wrong right now? forget what i think, look at the market. the tips market would send a strong signal, bond market would send a strong signal it s getting it wrong by moving yields in such a way that would indicate. but gold, what about gold? what about the dollar. oil is a better signal than gold. how do you know the fed going in the bond market. not doing it anymore. going from referee to referee player. you can see the fed has been a price setter in the interest rate markets for sure. referee, referee player, has been influential but it had to be because of the would audit severely impair their ability to do their work. it certainly would. i think it s frightening you could politicize the interest rate process. having the geo look at their books? i think it s a scare tactic. what it will be narrowed down to is something different to look at the books of the security purchases not interest rate decision making. at the end of the day that will happen. back in 15 minutes, we ll do the geithner thing. it s the same thing, of the same ilk. popular anger in different ways. i m not you try to put me in with santelli. no. i m somewhere between you and harwood and then santelli. you re putting me with harwood, i m putting you in with attila the hun. he s not even here to defend himself. when harwood s name is mentioned and he s not here, he loves it. he lsu people talking about him. you can talk about me, i ll leave. comments or questions, drop us a note at squawk@cnbc.com. when we come back, outlook for 2010. state of the states, how local states are handling the downturn. we ll look at the hardets hit areas and some of the bright spots. time now for today s aflac trivia question. when did the dow jones industrial average first close over 10,000? the answer when cnbc squawk box continues. (sneezing): ah-choo! hope i don t miss work this christmas. yeah, how will you pay for things like food.electricity? dental bills. gazooks. you need a back-up plan ho, ho, ho. that s why we have aflac! so i ll have cash to help pay bills! great.but what if you re still not better by christmas? hmm. afllaaccccccccc!!!!!!! (santa): aflac. we ve got you under our wing. rudolph s better. but now blitzen s sick! now the answer to today s aflac trivia question. when did the dow jones industrial average first close over 10,000? the answer, march 29th, 1999. debate waging on wall street whether the bulls will continue driving markets higher into 2010 the rest of this year. the dow lost a percentage of a point of its value over the last two sessions. tony crescenzi is our host for the next hour. mark, i was surprised to see there s pessimism around. was that before the last two days or does it include the last two days? it does include the last two days. believe it or not if you look at the average exposure to the equity market among 2900 advisors we track, it is about the same as it was last april, sort of amazing. if you would ask me in april to imagine 60%, 70% rally in the market, wouldn t have any net impact on the net equity exposure, i would, of course, predicted it had an increase in exposure by a huge margin. we just haven t seen it. at least for the short-term and contraryian analysis only works in the short-term it suggests an upside ahead. a couple months ago, maybe three months ago you were starting to see signs of complacency. did that reverse itself? it s twice this year we ve seen that creeping up of that bullishness or complacency. interestingly enough in the face of market weakness, what happened it exits quickly. hall marks of a market top or end of a rally is for bulls to hold on to bullishness whachlt we ve got in each case, even though early warning signs of trouble then and face weakness ran for the exit suggests underlying scepticism to work off before we declare from a contraryian point of view it s over. sounds like one foot out the door, some classic bull market breaks that are a lot less than 100 points. that s right. we ve seen that in the middle of the summer. of course in october we saw the market start to break and thought that must be the end of the rally. in each case there was such a run for the exits it at least provided the sentiment foundation for the market to recover, and each of those occasions it did. tony kres anne s from pimco. credit spreads suggest optimism. they have been tightening consistently. how do you reconcile the corporate market with what you re seeing with your stock market signals? it s a great question, of course. the contraryian analysis i have to always qualify and say at most it s a one to three-month predictor. in our research we haven t found it has much more explain, atory than that. we see a lot more optimism in the bond market than the stock. i suggest a greater convenient rab vulnerability there. gold at an extraordinary level of bullishness now. that may be the most vulnerable asset class now. historically, mark, how far do corrections go with this much pessimism still around? could we do 15%, or is that unlikely given the amount of pessimism? five to ten percent, still be in the bull. i ll back off, analysts try not to make those predictions. they look each step of the way how analysts react to the decline. they say only a 5% decline yet you see advisors holding onto bullishness which we ve seen before, then you say that s a bearish sign. only 2 to 3% correction, what we saw in the latter part of october, then if you see people running for exits you say it s unlikely to go much further. we ll look in realtime and try to assess where the market is going. i ve seen bears sort of take a quasi victory lap about four or five times since march and they have gotten 3% every time. they look stupid every time. that s right. that s exactly that s a great illustration of how contrarian analysis can work over time. you see how they react to weakness. each time such a premature, in fact, eagerness to declare victory naturthat the rally is we ve seen highs for the year. i m even messaging. this is definitely the last time. no, no, no this we ll definitely see the last high by december 31st. be right about that. eventually right. contrarian analysis suggest the final top will come when people are no longer saying it s the final top, it s just a correction as the 3% has been. when you see people start predicting that s happening that s when you take money off the table. good to see you, mark. coming up america enters the twilight zone. got your tickets. hoping you were going to take. you re what they look for. they go again and again for these romance type things. i don t want to say with you people will wonder who is that guy, what s he doing. right. right. state of the states, how local governments are handling plunging home prices and rising rates. more squawk box right after this. hi, ellen! hi, ellen! hi, ellen! hi, ellen! we re going on a field trip to china! wow. [ chuckles ] when i was a kid, we we would just go to the the farm. [ cow moos ] [ laughter ] no, seriously, where are you guys going? ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! [ female announcer ] the new classroom. see it. live it. share it. on the human network. cisco. for over 150 years, wells fargo has been putting our clients first. according to a leading independent research firm, in 2009 clients rated wells fargo advisors the #1 u.s investment firm for doing what s best for them. with advisors nearby and nationwide, we re with you when you need advice and planning expertise to meet today s challenges. wells fargo advisors. together we ll go far. lost a fair amount of ground on futures, guys. have you seen this? down 77 points. dennis garvin wrote in to say someone fat fingered the dollar index, error in the trade. that caused the dollar to spike. people were trying to hedge that trade by selling gold, which is down $4. we re being told it s an error at least according to gartman. either way it s had an effect as people are scurrying to respond to the trade. there is gold down six. we ll see if that evens out as the morning goes on. vampire fans lining up at theaters across the country to catch the latest installment of the twilight phenom. the twilight saga: new moon opened at midnight. they are expecting $100 million weekend, biggest for non-summer film. i d be embarrassed if i was that one guy sitting there. can we see him, just to out him. what a loser. shown in 4,000 theaters in the u.s. and canada. one guy. normally it s 3500 theaters mostly women. there was one guy. i don t see a guy. are you sure it wasn t a woman that looked like a guy. i m positive it was a guy. takes a while to get to him. coming up, coming up. right there. you loser. oh, my god, how can you look at yourself in the mirror. we ve got maybe he likes robert pattis pattison. coming back, overhauling regulatory system, liesman wrap up yesterday s smackdown in just a moment. all day cnbc will be looking at state of the state from new york which has been hit by financial crisis to utah which has fared better than fellow states. reporters on the ground ready to go. california jane wells, skalt la salt lake and in utah. the economic earthquake keeps sending aftershocks. we ll get jobless newspapers for october. september topped 12%. california faces a $21 billion deficit as one-time gimmicks to close the budget gap expire maneuvers that didn t close the gap anyhow as prison spending running a billion over budget. state controllers, yeah, i.o.u.s. they see no improvement in california in the next two years, expects unemployment to hit 14% and that will be higher, but so many jobless are taking their jobless to other states. we forecast in other places, for instance, central oregon, it has a higher unemployment rate than loss of jobs indicate, in part because people leave california without jobs and it s cheaper to live there. according to top states for business, california ranks 49th with the fifth highest wage costs in the country and second highest workers comp. we re in the middle of number 23 in the workforce, an abundance of available workers but how well educated will they be? being hyped at 32% at the state s university system hiked at 32%. some will leave california for a lower cost degree. they may not come back. businesses complaining about restrictions how much tv can use. goes on and on. what is this doing to california s bonds. they are waiting for yields to top 6%. look what s going to happen. you ve got $21 billion projected now. you know because it happens time and time again that number is going to get larger not smaller. every time california has to come to the market they are going to pay a penalty on that. now he says california s general obligation bonds are not at risk. the possibility of california being the first state since 1840 to did he fault and become insolvent it is a possible. let s go to scott cohn in salt lake city, utah. thanks, jane. we re here because it s a bright spot but bright is relative. take a look at downtown salt lake city, sure enough there are people doing work, business, hustle and bustle. even a fair amount of construction, commercial and residential of it does appear on the surface to be very busy. health care is strong. the state has a very strong and robust health care sector. it is adding jobs. that s one of the things that s keeping things stable. when you look at utah by the numbers, it gets a little more muddled. the unemployment rate here just released for the month of october, 6.5%. well below the national average. utah a perrenial favorite, topped five. education and health care jobs up 4%, information up 1.9%. government is hiring at all levels thanks to the stimulus government employee up 1.5% yet the pick is the worst since 1987. year-to-date, 40,000 jobs lost in the last year in utah and people are dropping out of the workforce in huge numbers. workforce participation down 5%. that s much worse than the national average. construction jobs statewide down almost 16%, manufacturing jobs down 9% and foreclosures, it s a bad foreclosure state, up 32% in the last year. you talk to salt lake city s mayor, he is a mayor, a civic booster. he says people are, indeed, optimistic but sure enough they are not turning cart wheels. my sense is that people feel it s stabilized. i don t get the feeling that insectors where folks are hit hard they see a big upturn at this point, but things are getting worse. they are not getting worse, but there s some problems on the horizon. the city alone faces a $4 million budget shortfall. the state faces an $800 million budget shortfall, and the governor here has vowed not to raise taxes. that means that utah, while it s still stable, is coming into a bit of a squeeze but not nearly the squeeze they are facing back east in new york, new jersey and connecticut. that s where we find bertha coombs in new york. bertha. thanks, scott. in the communities that make up wall street s backyard, as far as the securities industry, it s a critical industry for this area. we re here again not continuing to see things continue to deteriorate, they are not bouncing back either. in wall street s hometown new york city the unemployment rate remains above the national average at 10.3% for the second month we saw that in okay. as far as new york state s unemployment in october, we saw it also below the national average but rising 0.2 to 9% with 15,000 jobs lost statewide nearly 13,000 of those from the private sector. after a hopeful rebound in securities jobs back in september here in new york, finance jobs fell again last month by nearly 2,000. that number, though, not seasonally adjusted so it could be advised. year over year, 35,600 finance jobs have disappeared here. across the river the unemployment rate ticked down to 9.7% in new jersey despite a net loss of 1800 jobs in the garden state, the lion s share also in private industry. notable gains in construction jobs up 1600 in october, offset by an equal number of real estate job losses. securities jobs held steady from september though down 3500 years over year. in connecticut, despite a bump up in jobs of about 1,000, unemployment rate also ticked up nearly half a point to 8.8%. and that after september s number was revised higher by 0.3. the home state of the insurance and hedge fund industries saw financial services decline for a seventh straight month. for more on today s job numbers, be sure to check out our coverage on cnbc.com. carl at 10:00 a.m. eastern time bureau of statistics releases full tally of all 50 states. we re going to see where unemployment rose the fastest to bring the national level up to double digits last month. we ll have that live on squawk on the streets. thanks, bertha coombs in new york. our thanks to the others as well. more before we get to this. in a slide presentation procter & gamble hasn t moved the stock really. i see the ask has moved higher. the company says it s in the mark, thinking about it, in the market for share repurchases that the company says we re targeting a meaningful level of repurchase but likely below $8 billion worth and it s $181 billion market cap company. so you can do the math. i thank you viewers, our viewers are great, the best in tv. only get responses when we say something worth responding to, and there has been a flood that says the smartest guy the twilight screening last night. he s the only guy with all these young cute girls and he s sitting there just looking around. all the girls are watching robert pattison. or as art cashin said, maybe he s a father who drove his daughter and all of her friends. he did not look like a dad. i m a dad of three. that s got to be it. you look twice as old. the guy was too young, he had a baseball hat. white house defending secretary geithner after he came under fire after the joint economic hearing yesterday. administration said geithner helped steer the economy back from the brink and led the effort on financial reform. steve liesman back with more on what was an amazing day in television that s for sure. do you remember a time when a congressman asked a sitting treasury secretary to resign. no, and i can t recall anyone in the chair to not push back a little. that was interesting. we talked about it the last hour. the fed coming through this ron paul amendment allowing audits of monetary policy, secretary of treasury in that congressional testimony. congressman grady, republican from texas, he argued that the treasury secretary should resign. there really is time for a fresh start and i would urge you to consider. i think almost nothing what you said represents a fair and accurate perception of where this economy is today. if you look at any measure of confidence in the financial system, it is substantially stronger today than when the president of the united states took office. we would have had a stronger fiscal position if we had eight years of paying for commitments not borrowing. time has expired. you have to take responsibility for your decision. i take responsibility for anything i am part of doing. i ll be happy to. what i can t take responsibility is for the legacy of crisis you ve bequeathed. this is your budget, bailout, your stimulus. i take full responsibility for those with great honor. time has expired. white house in a statement obtained first by cnbc yesterday defended the treasury secretary spokeswoman said so while some say a sign of political weakness, president obama stepping up to geithner s defense. we ve seen the grandstanding these guys elected every two years. they do it every time they have a chance to grandstand. they do. if you were running for office and had four minutes to be on national tv, you d make the most of it, too. unfortunately the public servants that go before congress, they have to be deferenti, al. they got to upon tiff date and say the guy should resign. who is he to tell him to resign. you know what, this undermines the treasury secretary s ability to go overseas and make deals, is this something of concern to the market. i think the banditering is to be expected. we d like some more balance of power, perhaps. washington like a divided government. think about it, though. congress should actually go to the top on this one perhaps. fdr when he was looking at unemployment would say about it they should approach the same way, same intensity we should a war. where are the measures to directly help jobs. where is the measures to help small businesses, for example, which is where a lot of weakness is emanating from. congress should look in the mirror and decide are we doing enough like they did during the great depression to help jobs more directly. $8 billion in the economy, did they really think about what they did? on the other hand $780 stimulus, that tied their hands, everybody screamed about the deficit. really thought through in the intensity of fdr. it wasn t. they did it as fast as they possibly could. that is the tradeoff, all of these things, the fed did back in december and october was get it done quickly rather than perfectly. all of these things stabilize markets, take measures to stabilize the economy more. you think the bond market needs to take from all 450 individual guys and that could somehow undermine the confidence. the only thing i ask myself is if there are certain rules of the game, and those rules are violated, what does it say about the treasury secretary that a republican congressman would go further than most congressmen go and ask for resignation. is a sign of no republicans in this case have been a little more over the top. a democrat in the white house. did they say lie? they were worse. the idea the first time we saw a nazi reference was to obama. there were eight years of nazi references to obama. maybe the other side obama doesn t give it back the way bush did, right? remember waiting for obama to become the hulk and get angry? i think that s part of what s out there now. they don t respond. another criticism for some of obama, too cool for school. joe should resign for the country. would you do it, joe? a picture of obama that s a cool picture. you see this where he s showing off martial arts in south korea. he doesn t do that in the united states. no. when we come back, bond man jim bianca joins the conversation. we ll talk fixed income in the economy in just a second. welcome back. our next guest says the days of buy and hold are bind us. today it s a renter s market. jim joins us with tony on the set. jim, good to see you. you re catching us at a morning dollar at a two-week high, a little spike earlier this morning. we ve got the two-year to talk about. which of those two things strike you as most interesting. two year front end of the yield curve, treasury bills at zero, even negative, there s been a tremendous rush of money that s gone into the front end of the yield curve especially bills. it s been a lot of what i call chicken money. it s afraid of what it sees in the markets. that money has been growing as we ve gone throughout the past several months of risk markets moving higher, hasn t been diminishing at all. it s the greatest it s ever been now. tony, everybody talks about sideline money but they fail to point out often that a lot of it, more is going into bonds. yeah. jim, when you talk about the two-year, we see of course at 0.7, do you think it s overvalued in the sense the feds might raise interest rates or another sense. usa know, purchase a two-year averaging about 0.8%, one-year is 0.4 in that a year the two year becomes a one-year. rolls down the curve. for investors that think it will keep it low, it gives awe good profit because the yield will roll and fall down the curve. is it too low the yield because of what you think on the fed or some other reasons. no, i think it might be too low because of the fed. that s code word for it s becoming a bubble. a lot purchasing the front end of the yield curve, two-year sector, borrowing the money at zero. the fed s words extended period, saying 2012. they think they can finance the entire thing for free until it matures. it s creating a tremendous rush at the end of the yield curve. it s a rational trade, makes a lot of sense. we shouldn t be surprised they are doing it. the long end, it s not doing anything. ten-yore note is the same range it s been for the last five months although the front end is moving down quite a bit. is that what you heard bullard say, 2012, did you see that much clearance. i don t think they are giving that yet. in 2010 the fed gave three conditions november 4th for raising interest rates, one being unemployment, second inflation, third inflation expectations. what we have to ask in 2010, since first two conditions unchanged, enough to cause the fed to change commitments, will inflation expectations move enough to compel the fed to say concerns about unemployment and inflation are not big enough, that they are overridden by inflation expectations. you want to watch tips mark particularly oil, not gold, this is not a liquid market and watch signals for the yield curve inflation expectations are powerful. are you as focused on tips as tony. i would add, what you have seen with inflation expectations, economist surveys, there s a spread between who thinks highest and lowest is the widest in 30 years. no consensus on inflation expectations. you ve got people that think deflation, hyperinflation and everywhere in between. if the fed is going to wedge the tips market, an average of a wide range right now. i don t think they will see that number come in much higher than expected unless all the deflationists kind of give it up. i don t think they are. even that can be muddled. it s going to be very difficult for the fed under conditions to find a reason to at least move for an extended period let alone raise rates. is there a level you say tips might be compelling enough for the fed to say the third condition we laid out november 4th will override the first two? the tips market of the last couple of years has kind of peaked around the ten-year break even, ten year less tips yield, versus where inflation will be around 2.8%. if we get up into that 2.83% year again, that would be near a ten-year high. that would be eequivocally saying that and i don t see that in the near term. have a good weekend. we ll talk to you soon. thank you. when we come back, ceo of fortress, former president and ceo of fannie mae will talk to us. talk about real estate and more. busy friday. we ll get back to the dollar index as well. # but only malibu has onstar. big deal. i ll just use my phone. let s say we crashed. whoops, you lost your phone and you re disoriented. i m not disoriented. now you are. onstar automatic crash response can call to see if you re ok. onstar emergency. is everything ok howie? you don t answer, they can automatically send help to your exact location. i think i ll ride with you. the award-winning malibu. from chevy. hi, may i help you? yes, we re looking to save on car insurance, even if that means we have to shop all day, right, honey? yep, all day. good thing you re starting here. we compare your progressive direct rate to other top companies , so you can save money! look! we saved a lot! and quick, too. and no more holding her purse! it s a european shoulder bag. it was a gift. mm-hmm. shopping less and saving more. now, that s progressive. call or click today. i just want to be clear i bought led zeppelin when it came out now 40 years ago. but 40 years of listening. let s take a look at some stocks. i like him. you know what i don t like. procter & gamble, has not moved stock, say there will ab significant amount of stock but less than $8 billion. d.r. horton, a loss of $0.07 but included items, revenue number slightly below expectations. jm smucker, recommended yesterday by one of our guests, second quarter was $1.22. that was $0.08 ahead of expectations. full year guidance goes up to $3.95 to $4.05. you remember when they bought a peanut butter company. yes. they buy the jiff brand? they bought the jiff brand. of all the mergers that were ever done for synergy, for whatever reasons investment bankers try to line their pockets with idea, that was one that i understand immediately. what about hp, 3com, dell perot. smucker s and peanut butter. you can get the jar with peanut butter and jelly. only thing would be tuna to buy mayo or get the tuna to eat the mayo. i don t know if you can. aflac upgraded to overweight. principle financial downgraded to equal weight from overweight at morgan stanley. carl, what s coming up. senator will tell us why the true cost of health care reform is well over $2 trillion. lucrative world of private equity, daniel mudd, former head of fannie mae making his way to the set. we ll start the conversation with him in just a second. with fidelity, you can take your trading around the world, because now you can trade u.s. and foreign stocks online, in 12 markets, 24 hours a day, all from the same account, and settle in u.s. dollars or the local currency. plus, we ll guide you with international research and realtime quotes, so you can diversify your portfolio, wherever whenever. and we ll be on call around the clock, while you trade around the globe. fidelity investments. turn here. you know why i sell tools? tools are uncomplicated? nothing complicated about a pair of 10 inch hose clamp pliers. you know what s complicated? shipping. shipping s complicated. not really. with priority mail flat rate boxes from the postal service shipping is easy. if it fits, it ships anywhere in the country for a low flat rate. that s not complicated. come on. how about.a handshake. alright. priority mail flat rate boxes only from the postal service. a simpler way to ship. (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. front lines of commercial crisis to big bets. ceo former ceo of fannie mae. from too big to fail, america s health care crisis, senator judd gregg signs off on issues facing wall street, main street and capitol hill. the state of the states. united states of whatever unemployment topping 10% for the first time in 26 years. and the president of the peter g. peterson foundation has had enough. david walker will tell us how he would put us back on track. you re probably asking, how can we get back on the right track. not about bulls and bears today, try werewolves and vampires. squawk box begins right now. snoets welcome back to squawk box here on cnbc. that s a guy, chris farley. i m joe kernen with carl quintanilla, becky quick is on assignment. fat guy remember that tony crescenzi. let s check out markets and futures. they have gotten did they come back a little? they are down 10, 15. dollar trade. blaming on an error. some were saying there was noise ukraine somehow defaulted. kmepts out of chinese physicians saying their economy was growing slower than some people think. either way we did see a spike in the dollar index. if in fact this turns out to be an error, some people lost a lot of money. gartman says the wrong trade was for 2500 contracts. pretty big number. right? 2 trillion plus a day, wouldn t blame it on that. well, we re down 60 now three straight days. shares of dell under pressure. tech giant unlike hewlett-packard posted weaker than expected earnings and revenue after the close, lost market share as well. also red flagging a decline in the company s gross margins. world s number three pcmaker said demand picked up substantially following the launch of microsoft s new windows 7. you were not impressed by the numbers. after because i studied up on them yesterday and there were a couple of things that people thought they would see that did not come to pass, which once again you are sort of waiting for things to get better. your question about the margins. right. and the consumer. david garrity tried to explain it away using taxes, heavy, pretax margins that wouldn t have been part of that. to cut cost and not have it reflected on the bottom line, we ve disparaged companies for cutting costs, that s how they get to take bottom line. cut costs. companies country wide, if you will, have been cutting costs. productivity in the third quarter, 9.5% rate. they are doing as much as they can, companies are, cutting unemployment, top line growth eventually better profit growth. mvp time key congressional panel voting to audit fed cap central bank s spending at $4 electrical. approved the measure by a vote of 43. legislation introduced by ron paul who actually joined us here on squawk box last friday. there s been a national poll, which i m surprised there even would be polling on this subject. i would have never dreamed it a couple years ago. 75% of the people say we should know what s going on. that s 75% of the electorate saying we should do our job and look at the fed is the reason why there s well over two-thirds of the members of congress supporting this bill. the fed chairman treasury secretary geithner and other members of the white house have vigorously opposed that move saying legislation would weaken the bank s independence and hurts its ability to protect the financial system. we got the fed under fire and geithner himself, you saw this on the hill yesterday, joe, making the pitch for financial regulation before joint economic committee and getting grilled in the process. republican congressman kevin brady called for his resignation in what was an awfully heated exchange. it really is time for a fresh start. time has expired. if you look at any measure of confidence in the financial system, it is substantially stronger today than when the president of the united states took office. we would have had a stronger fiscal position if we had eight years of paying for our commitments. time has expired. you have to take responsibility for your decision. i take responsibility for anything i am part of doing. i ll be happy to do that. what i can t take responsibility is, is for the legacy of crisis you bequeathed. this is your budget, your bailout, your stimulus, your act. gentlemen, time has expired. he kind of gets talked over there. his line is what i can t take responsibility for is the legacy of crisis you ve bequeathed this country. those were geithner s words. we ve got e-mails from guys in his districts, constituents in brady s district saying this is red meat for his constituents. this is exactly what they want to here in texas. he s playing to constituents. his campaign coffers will fill up from that. i would just pose the question to him, if you need to resign after the public has lost confidence. in geithner. in geithner. how many congressmen and congresswomen should resign, given how much the public has confidence in how they are doing? congress. yes, congress. the pot calling the kettle black. yeah, that s like an understatement. let s go up logo rhythm. the white house defending the secretary in a statement saying geithner steered the economy back from the brink and steering the effort on financial reform. the white house, joe, is having to throw life preservers to both the fed and to geithner this morning, two fires to put out. i m playing linda douglas, anita dunn, they are the same person. i can t believe i m on that side of things. nice to see you defending the white house for once. thank you. i am in this case, i think. i think geithner i don t know. if you think you can do better, congressman brady, take the job. he s a man putting his money in the scariest and riskiest sectors and those areas include real estate. daniel mudd ceo. investment group that manages $32 billion in alternative assets, ceo of fannie mae from 2004 until last year. i was thinking you re still there. you re putting your assets in the scariest places. sounds like you re still at fannie mae, because some people will say fannie mae had some scary. i assure you i m no longer at fannie mae. still scary assets on the book so there s opportunities there. assets have a clearing price. the prices are pretty low right now. we re seeing opportunities as we kind of go through this mess. so it s a question of can you value things, can you find a price that will survive value destruction, hold it for a long-term and make some money as the economy recovers. that s where we are. have you heard the term you know where the bodies are buried? you should do very well in this position right now? i ve heard that term, and i don t know where all the bodies are buried. some of them. some of them. there are some movies that i ve seen before. in this movie you ve got a situation where the financial system was just about broken. it started to heal itself and it started to heal itself without a lot of direction. you have the opportunity to get in there and find those assets. it s going to be bumpy for a while, a little bit of good news, a little bit of bad news. what we re hoping for is no major upsets, continued ability to trade, continued liquidity and we ll work our way through this. do you think the criticism of geithner was just pid. politically motivated, politically driven, i think it all is. i give the guy a break. this is a tough job in the middle of a called ron. people are making judgments at the time with the best information they have got. i give him a break. it s a slam-dunk on certain populist the outrage over aig and i guess 100 cents on the dollar paid to goldman is what geithner is probably held responsible for, right? do you think that s it? no comment. let me ask you this, daniel, with the markets seeming to work better, of course, with distressed assets doing better, the government program that was announced where the government would have helped private investors purchase securities from the books of banks, does it seem like market forces were enough or do we need any government involvement here to get those bad assets off the business of the banks. market forces were they sufficient? is it a bad idea to have government involved in this? no, it s not a bad idea to have the government involved, the question is how do we get the government out of it. for some period of time we re going to have the government in the economy keeping rates low, giving a market for toxic assets. and they will keep pushing and pushing and pushing and pushing. once you see unemployment numbers start to break, then they are going to have to put the lid on it very quickly. that s the big bet that s out there right now. i think there s a place where some of the early programs, p pip, the jury is out whether it s going to work or not. some programs were experimental. i think hemp has some promise but one of the things we need to make sure to do is keep the markets working by kind of honoring the seniority of securities that get handled, modified in the process. and with what s happening in the fha now, the low down payments, are we inflating another bubble? tough story. it s a tough story. fha has always run a high level of delinquencies. we as a society were concerned when fha was probably 3, 5% of the market, it s now 30. we were concerned when fannie and freddie were low, now it s high. what we have to watch with fha, talking average number of delinquencies and average amounts of write-offs. the thing that really gets you in these things is the timing. if it all comes in one year or two years, you have a serious problem, not going to make it. stretch it out that s what modifications and foreclosures are about, then you may be able to pay as you go. there s a big piece in the times about fha profiled one guy broke in january with two friends recently bought a two-unit apartment building for a million bucks using a mortgage guarantee by fha. his quote, kind of crazy we could get this big a loan. if a government official came out here i would slap him a high-five. he went to a different college than we did. does that remind you of a different time? it s there are cracks in the programs. people will slip through the cracks. that s what you have here. clearly, one thing to watch closely, subsidy straight from the housing market. the question is how can you extract it without having the market fall flat on its back. what s the market going to look like. still government run essentially? we need a debate. seems crazy we had this extended debate about health care, talked through both sides of the issue, now a program coming out that, you know, represents some broad debate in american society. we haven t had that. since world war i. a lot go back to world war ii but since world war i we have a consensus about housing. we want you to own a house. now we ve backed into a world where the government is supporting 96% of the housing market and we haven t really talked about it. my view, let s go back to fundamentals, 20% down, 30 year fixed mortgage, pay it off and burn the mortgage. skinning the game is an important component. government promoted home ownership, i liken it, you don t want to live in potterville, you want a nice house that george bailey builds. that s the american dream. how much of what happened is enable by congress, frank saying i don t think there s a risk in fannie mae. there s one group blames it on governments enabling people to own a home. others say greedy bankers off loading risk based on putting people in houses. whose fault is it? those are exaggerations of all the tensions. any of these jobs you ve got 100 different tensions pulling at you. more housing of this type, more profit, dividend, capital, more new programs, all those things. when you run one of the companies, you ve got to keep a balance. so the business model was a great business model as long as housing was going up 6, 8, 10% a year. when it goes the other way, the business model doesn t work as well. that s why we need to reconsider and have this debate to say what it needs to look like. the loans might have to be paid back instead of the theory where houses go up, up, and up. what happened at fannie mae? was it doomed from the start because of the implicit government guarantee or was it franklin rains? you were there. fannie mae was an instrument of this government policy in place a long period of time to do something the private market do. they didn t provide a market for mortgages today, right? in a market like today if you recast it backwards 20 years there wouldn t have been an ability to refinance your mortgage when it came due. fannie mae and freddie mac were put in a position to provide the service. not do it on government balance sheet but for profit. you have these two tensions, more housing, more profit. market goes up. basically it works. market comes down it doesn t. now it brings into question how do you want to do this next time around. the answer is sure, i think the whole market got too frothy. the story you re pointing out in the newspaper is an example. not enough money down, not enough income history, all the rest of it. when is dac reform, next spring? when do you think? it should be but it should be a subcomponent of this discussion where we want housing to be. i think there s going to have to be a fundamental restructure. if you look at the best years fannie and freddie ever had they made on the order of $10 billion. the expectation may have been the government for $100 billion. takes a long time to pay that off before they are in the position to pay definite denied. no way your management or prior management could have known, probably, the demise, forecast the demise of fannie. although barron s wrote multiple articles about fannie was worth at the time. any way anyone could have really how are you going to predict the future? for every opinion that said it s going to go down there are five or ten that said it s going to go the other way. by the way, your job is to manage through it come hell or high water. we ve certainly got both. praying in a political conteco conte context, too. i think that s fair. how much fraud and mismanagement and accounting fraud was responsible for what finally happened, the way the accounting was done before everything hit the fan. we ve been through that and worked through it. there was a major restatement there that was, you know, really a signal achievement for the company to have got than done and gotten back in the market. i guess the whole idea of having an implied government backing when you re a private company. you ve got to think about why you want to do it. so now we re going to move from this sector and start to move into the commercial real estate sector which you re talking about what we worry about next, that s kind of one of the next shoes to drop. there what i watch carefully, not just commercial real estate but multifamily housing, right? multifamily you ve got both things, commercial real estate and housing aspect. that to us is the next challenge to watch. we ll talk about it next time, you re alive, $0.77, eight times from that level at this point. we ll get you next time. we won t even mention fannie mae. i appreciate it. i d love to talk about that. we re in a great position for what we see coming up ahead. all right. next week or the week after come back. but we can t have someone on in the middle of all this without at least trying to figure out what happened. top of mind. thank you. when we come back this morning, meet the squawk, president back from the asian tour, senator reid turning up the heat on health care, secretary of treasury getting grilled on the hill. what a week it s been. we ll try to break it down with meet the press moderator david gregory. also senator judd gregg will tell us why the true cost of health care reform is like $2 trillion. senator gregg coming up after a job break. thanksgiving is this coming thursday. already the tree that will light up rockefeller center has been cut down, put on a flatbed and moved to manhattan. scaffolding up in advance of the lighting of the tree. the holidays are right around the corner. president wrapping up the first physician trip to asia. big news from capitol hill where the treasury secretary enjoyed that grilling from the joint economic committee. mean while majority leader enjoying health care reform proposal. david gregory moderator of meet the press joins us this morning. good to see you again. what a week. asian trip, palin book, khalid shaikh mohammed. top of mind because of the schedule, majority leader will sweat out every detail including does he have the votes to get the debate started because he has a fractured democratic process. they want the conservative option in the bill, conservative are worried about cost, options, have real concerns moving forward. this the balancing act, it s more than harry reid that gets involved. from where you sit, when people say it has momentum are they right? yes, i think they are right. the fact it s move to the nor for debate is momentum that it s passed the house. undeniable. doesn t mean the end won t be very, very difficult. ultimately the president on the public option, they have an opt out clause right now, that s the public option where states can opt out of it at some point. that s probably not good enough for conservative democrats or olympia snowe. this is a balancing act that will come down to the wire. no one said it would be easy. that s the facts of the game. how much damage did the federal chairman and treasury secretary sustain this week? it s an ongoing narrative. on cnbc you re going through the fine points of debate over the past, the present and the future. the political narrative is this. wall street is healthier, the american worker is not. 10.2% unemployment, ballooning debt and questions about whether the government can run this thing can adequately address the problem and effectively govern. these are the problems and frustration reflected in questions directed toward secretary geithner. what, then, is the rational most effective argument from the white house when you have a treasury secretary who is clearly under fire because joblessness is so high. how do you explain to critics it might have been higher had we not done what s put in place. we ve been making that argument. the could have been worse argument only takes you so far. rooted in fact, falt factual to say what they have got was inherited in terms of financial reform package through t.a.r.p. and all the bailouts that made wall street safer. it s difficult in a political context to get past this argument about fairness when you get into a discussion about if the financial system was not operating correctly, not made healthier, then nobody could prosper if you can t get capital. that debate is one the administration wants to v they want to provide that explanation. it just seems to ring hollow with 10.2% unemployment. again, stimulus, whole point of stimulus, $500 billion of stimulus money yet to be paid out, got geithner as he said on our program a couple weeks ago, look, it was always designed to pay for fully in 2010, 2011, that s the kind of sustained stimulus you ve got to have. david, why wouldn t the criticism be when this is job one, not to use a pun on the word job, but when you re fixated on changing health care, the biggest change to 17% of the economy in history and things like cap and trade, why isn t that the criticism? if you re so worried about jobs, why make your single most important first initiative health care? i think it s a good point. i think it s a good point of i think what the white house is saying in response is the economic fix is health care. now, they have struggled to have that message actually break through. do you buy it? covering everyone doesn t bring the cost curve down necessarily. no. as a matter of fact it doesn t address the core problem. if you have expanded access, more expensive, are you making up for it on the cost containment side. they will argue and have argued you go some of the way down this line. most people looking at this say, no, you don t. you re not getting to the core issue of cost containment. this criticism about the agenda, you know, is one that has a lot of resonance right now. if anything else, we re going to have this debate over the war in afghanistan which in part is an economic debate, part of the consideration is national security in the situation room, how much will it cost over time. a million dollars a guy. as you well know, i ve been looking at nulls from the reagan recession, how when it peaked at 10.4%, within seven months down below double digits, within a year down three points. that s interesting. that was morning again in america for 1984. does obama have an opportunity for morning again in america or will job loss and high unemployment be something that s so sustained it s a huge political problem. with all that in mind, david, what are you choosing to put on the program? we ll talk about it all, senators durbin, lieberman, feinstein and kay bailey hutchison to go through all these issues. texas, there s a state that s made news in the past 24 hours with brady. absolutely. david looks forward to seeing you on sunday. thanks. be sure to tune in to meet the press sunday. we re neff going back away from politics, never going back. can t. there s too many things going on. this is the the salad days for political coverage. it is. yeah. it s been like that for a while people would argue. state of the states david walker, president and ceo of the peter g. peterson foundation up next. meet the press business is changing all the time. 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. last year s investing strategies still work today. starting now, i ll make decisions based on facts, not feelings. starting now, i m not going to let myself. get caught off guard again. it s time for investools, a comprehensive program that combines financial education, and the tools to put it all to work. with investools, you ll be equipped to make more confident, informed decisions. it s good, i learn when and where i want. and i move at my own pace. start with the fundamentals. then continue on to more advanced topics, like spotting opportunities the way the pros do. even in a down market. if i have a question, i can get live one-on-one coaching. and i can even join their online community. of other student investors. start your risk-free, 30-day trial today. and you ll get immediate access. to our investing foundation online course. where you ll learn to pick and evaluate stocks. the investor toolbox. plus a certificate to attend a hands-on workshop in person. starting now, i m taking control of my financial future. your future starts now with investools. making headlines, oprah winfrey plans to end her talk show, her syndicated talk show on network tv in 2011 in september after 25 years on the air. she ll make an official announcement on her show today. she s going to say she s going to have a show on her network, her network, which is 50% owned by oprah and 50% discovery. own. yes. what s interesting here is this hurts abc and cbs to some extent because that s the one show that hasn t really lost any clout with advertisers at this point. it s arguably a net loss for the broadcast model period. and as talking heads, to see someone on tv become a multi-billionaire, it s possible to do, huh? that s why we get up every morning at 3:00 achlt we re on our way. i heard she s worth about 2, $3 billion. we ve got a ways to go. on your way. started. we re about an inch over the starting line anyway. let s get a quick check on the markets from the trading floor of cme group in chicago with rick santelli. rick, what s happening? you know, we re flirting with certain negative t-bill rates. investors want to own short-term safe instruments that just happen to not mature before the end of the year. i should rephrase that. so they do mature after the turn or the end of the year. interest rates, a two-year note under 70 basis points. that s got to raise a few eyebrows. i just think the general state that the equities for better, for worse, for correlation, logic or not, are going to have a tough time today. because even though i think, you know, the dollar is destined to more the type of trade from 01 to 07, it is stabilizing here. if it can get a close in the next couple of sessions about 76 it could get a several week reprieve to its downside activity. all right, rick. keep it short today. thank you. have a good weekend. keep an eye on all that, two-year, dollar, health care debate about to open on the senate floor. senator judd gregg says the true cost of the bill is at least $2.5 trillion. he s going to telling us how he s getting to that massive number when squawk box comes back. yeah ! ( cluck, cluck, cluck ) oh, wowww ! that s fun ! you didn t say i could have a real one. well, you didn t ask. even kids know when it s wrong to hold out on somebody. why don t banks ? we re ally, a new bank that alerts you when your money could be working harder and earning more. it s just the right thing to do. nestle. our next says the true cost of the health care bill is $2.5 trillion. senator judd gregg from new hampshire, senate banking committee member. senator, good to have you back. thanks, carl. we ve become inured to some of these numbers. you throw out $2.5 trillion, you get our attention. it s an accurate number. in order to pull a bait and switch, the democratic leadership has set a ten-year window where they have scored this bill. in that ten-year window they don t start the spending until the fourth and fifth year. so you re matching ten years of revenues in this bill and medicare cuts against four to five years of spending. if you do a fully phased in bill, start when all the costs come on the books, start from day one, it s 2.5 trillion. that s what it costs, new entitlement programs cost the american people. going to end up being put on the debt because clearly we ll never pay for that with the massive tax increases it would take or massive medicare cuts it would require. are you including are these federal dollars? that s cbo, not my score, second ten years when it s fully phased in. add on top of that whatever states pick up and what they put on cities. you have to add in doctors not included, another $300 billion over that ten-year period. you re close to $3 trillion of new government. new government. we can t afford the government we ve got. this is new government. who is going to hear that? are you yelling this in the wind, senator? elections have consequences. i ve said it before. fact is democrats won the election, they want to put in place this massive expansion of government the there s a genuine belief on the other side of the aisle you create prosperity by growing the government. i find that to be absurd. the way you create prosperity giving government below the rate, create jobs. that s not this government. the government believes you create prosperity by growing the government. you also grow the debt and tax burden and both will suffocate the economy in my opinion in the long run and reduce our standard of living. this is tony crescenzi from pimco. as you know they may have to use senate reconciliation process in order to get this passed through the senate. it takes 60 votes. with the reconciliation process they would only need 50 votes in the senate basically using the house version to reconcile the bill. how do you see that for the process, what message does it send to the american markets, the use of a reconciliation process. i don t think they can use it. it would have so many holes in it. there are many holes that are technical but would punch holes in any type of policy in the bill. in the end i think it would produce a bill i would call a piece of swiss cheese. i don t think they want that. so i don t believe reconciliation will be used. i think they feel they can get 60 votes in the end. they are going to make this bill reasonably benign in the senate, pick up 60 votes shopping around what they need in order to get those votes, take it to conference and load it up with san francisco philosophy, pelosi philosophy, expansive government, government plan where the government takes over health care five to ten years from now. that type of language will occur in the congress. it only takes 51 to pass so they can let some people go. if they are going to turn it into a bill that passes the senate, seems like it will have to please a lot of business in particular. small business seems to be worried. what are you hearing from the sector? they are scared. i go back to new hampshire every weekend. last weekend a guy came up, 15 employees, he asked his accountant how this would affect him, he said $200,000. instead of growing, i m going to have to lay people off. there s a penalty, significant penalty for the small business person. if you re at all successful as a small business person, there s a sur tax on you. you combine those together and end up with a fairly pricey event for a lot of small businesses. that means a lot of growth that occurred will be stifled because they will have to pay new taxes and penalties. senator we had one of your colleagues on yesterday, senator corker. good guy. he was raving, ranting, this is the worst bill ever put before congress in the history of the republic. then i said what are the chances that it just falls by the wayside, because i thought he was getting to that. he said 20%. so i quickly deduce that means there s an 80% chance this actually going to become law. i didn t know you were that good at math. i am. a greater than 80. is that your view, what you just described, where basically a san francisco-type government takeover of health care, there s a 80% chance that s going to happen before the elections in 2010? what happens in 2010? well, unfortunately i think bob is probably right. the fact is the president has invested his presidency relative to domestic policy in passing something. house leadership is totally invested and democratic senate leadership is invested in this. they both have super majorities. i think the likelihood that something very significant that s going to expand the size of government dramatically and have a public plan that is fairly robust as it moves out into the out years so that you ll end up with a system where the public plan basically crowds out private insurance and you end up with price controls and rationing and things like that is likely. that s just the way it is, because the votes are there. senator, we ve got to go. we can t let you go without at least getting some comment on the ron paul measure. it s an outrage. you know, it s like that old pogo cartoon, we met the enemy and he is us. the congress, for the congress to get into monetary policy is just absolutely inexcusable. we can t handle fiscal policy now we want to manage monetary policy. one of the great strengths of the nation is independent fed. this idea, which is populist fervor, ending populism is absolutely wrong and we do fundamental damage to the to our system of fiscal policy monetary policy. 300 sponsors. can they all be wrong? yes, they are all absolutely wrong. there s no question about it, because they want to get reelected. it s great pr. you go home and you beat up the fed. the fed is this dark group that everybody dislikes. this comes right out of the william jennings bryant philosophy of government which is a fairly strong stream of populism but we can t allow it to be successful. if we do we ll undermine great strengths, an independent fed which maintains the soundness of the dollar. that is absolutely critical not only to us but the world. not doing much of a job with that. you ve got to come on when we have ron paul on. i d be happy to any time. really? absolutely. ron and i would have an interesting discussion. ron, i like ron as an individual and i hope he likes me. but you know, his philosophy on this policy got to do it on cable. we have to do this. senator, appreciate your time. good weekend to you. same to you guys. this is what we live for if we could get those two guys. next state of the states. unemployment deficits, health care reform, david walker pulls no punches. he s nonpartisan and he pulls no punches. president and ceo of peter g. peterson, former u.s. controller ready to sound off on all these topics. he ll be next. playing ) - ( thunder rumbling ) - ( rain pattering ) ( tinkling ) with 12 world s first innovations, the lexus ls doesn t simply lead an industry, it inspires one. peter g. peterson foundation is partnering with mobile.org to put on their first national youth summit this week in chicago. the summit seeks to bring young people together to discuss rising unemployment and deficit levels. joining us now david walker, president and ceo of the peter g. peterson foundation, former u.s. controller general. we ve got to start them young. obviously we didn t start them young enough in the past, did we, david. we didn t, david. it s mobilized.org, rather than mobile.org. we ve got 150 plus leaders from all around the country focusing on how to create a better future because right now their future is being mortgaged big-time. yeah. and list the ways. count the ways that s happening? well, judd gregg, for example, who was just on before, i had dinner with him. he won economic patriot of the year. he s right. government can t afford promises it already has and now wants to make new promises. people have absolutely lost touch with reality in washington, d.c. do you agree with him, david. you re watching. you know how washington works. this is going to there s going to be a huge insertion of government control into the health care system. there s no way around it at this point? look, there s one thing that could bankrupt america it s health care cost. stay tuned to 60 minutes sunday night and you ll hear about it. responsible health care would do four things, par for i have set over ten years, not add to deficits over ten years, make a significant reductions to unfunded promises we already have and result in total health care cost as a percentage of the economy being less than it would be under the status quo rather than more. none of these bills make that test. do they satisfy any of the four things, any of the bills? yes. they could satisfy one and two. senate finance do. we re having the new bill analyzed. the way they satisfy one and two are based on unrealistic assumptions. for example, we re going to get tough on cracking down on provider reimbursements or that we re going to create an alternative minimum tax-type mechanism we stick with when we haven t done either one of those in the past. are you getting frustrated yet and ready to just say nothing that i m doing is having any affect? it s not working? it actually is working. where? with the people. we have done statistically valid public opinion polls showing american people increasingly concerned about escalating deficits and debt and increased reliance on former lenders. we ll get results of the new one next week. i fully expect the concern will increase. the problem is not the american people, problem is elected representatives. we have a dysfunctional democracy, we have a republic not representative of the public. we have people that can t add very well. i m glad you can, joe. i was really impressed with your mathematical ability. maybe they add too well. they can t subtract, just add. they don t understand the defense between a trillion and a bill, it s a thousand billion. this is tony crescenzi of pimco. on your site you say the true government debt is $56 trillion. we know the treasury market is about $7.5. can you explain where you got that number? absolutely. also something about teenager unemployment. the figure now is at 25%. what do you think we should be doing about that? well, first, let s understand that there are several numbers. there s debt held by the public. there s debt that we owe to social security and medicare and other so-called quote, unquote, trust funds. if you look at the national debt clock, it passed $12 trillion within the last week. and then to those amounts you have to add unfunded promises for civilian and military pensions and retiree health care and unfunded promises for medicare, $38 trillion and social security about $7to $8 trillion. when new over $60 trillion, which is about $10 trillion more than the combined net worth of all americans. i think, you know, either it s taking too long for a lack of fiscal discipline to become a political liability, david. i mean, they re not being voted out of office for having voted for these things. and if they one day do, it might be too late. all these programs might have been passed. well, 2010 is going to be a critically important year. 2009 was about turning the economy around, at least trying to. it was about trying to do something with regard to the financial institutions, housing, the non-business cycle challenges. 2010 we have to focus on the future. we have to focus on our structural deficits. with regard to teenage unemployment, that is a huge problem. but one of the reasons it s so high is because we have overall high unemployment, so people want to be able to have people with more skills and knowledge. secondly, our education system is not top 25 in the world in k-12, especially in math and science. and it doesn t do a very good job with regard to financial literacy and civic responsibility, either. all right. david, thank you. good luck with t. your efforts. we just begun to fight. we re going to turn up the heat and pump up the volume in 2010. stay tuned for comeback america. there are solutions in that book. you re going to come on here and tell us more about them when you get back from little rock. all right. all right. see you later. take care. be good. busy morn for e-mails, whether it s been about treasury or the guy at the twilight screening. he s my idol now. i don t know what i was thinking. we re going to pick out a few e-mails that have come into the squawk inbox that caught our eye. what a crazy morning it s been for the dollar. there was a lot of talk about potential error in trades. now the nyse spokesman said they canceled trades above 76.50. so whether or not the spike today has been due to an error or rumors about ukraine or what have you, it has happened and it s had an affect on commodities and futures, we could argue. when we come back, parting shot with our guest host and our favorite e-mails of the day. check out the squawk box inbox, reacting to the video of midnight new moon. this one guy is not a loser, he s a genius. that guy right there, we just passed him. i don t think he is a dad. perhaps he is a dad. one person writes in, please tell joe the guy in line for new moon is as my 13-year-old daughter would put it is not a guy, he s a dad. not a guy, he s a dad. maybe that s true. or p.j. says i ve been married too long. no comment. he s the only guy with all those women. exactly, p.j. chinmay tells us this exactly why i told my girlfriend i was not going with her to watch twilight, i knew that cnbc was going on on it. dick predicts that goldman is trying to contact the one guy in the movie line. he clearly can identify opportunity and understands percentages, or as tom cruise would say in top gun a target rich environment. other people wrote in about the hormones are probably by tend of the movie the hormones are raging. yes, girls will be thinking about robert and and there he will be. although maybe he is a dad. i thought he had his hat on backwards the first time. it s on straight. guest host is pimco s tony with us all morning long. you guys have been focused on the idea of an impaired consumer, unemployment, structurally damaged for a long time to come. yes. how do you square with it the market and those at least headed for a corporate recover rnlg leverage with good margins and wait for top line? we love, for example that productivity numbers after the third quarter, 9 1/2 rate of gain, it tops out the last 50 years around 10%. clearly shows companies are stressed to the limit. doing as much as they can by cutting the workforce. so to go further, we need top line growth. let me quickly say though oh. i don t know if we have time. we ll get to it next time. we don t want a positive. pimco, we don t expect it. tony, thank you. always good to have